Following the Biden administration’s efforts to cancel student debt, progressive lawmakers are moving toward canceling medical debt as well, with new legislation filed on May 8.
The legislation, led by Senators Bernie Sanders (I-Vt.) and Jeff Merkley (D-Ore.) and Representatives Ro Khanna (D-Calif) and Rashida Tlaib (D-Mich.), would eliminate $220 billion in medical debt held by millions of Americans, wipe it from credit reports, and limit collection of future medical debt, according to a press release from the lawmakers.
“No one in America should face financial ruin because of the outrageous cost of an unexpected medical emergency or a hospital stay. The time has come to cancel all medical debt and guarantee health care to all as a human right, not a privilege.”
Mr. Sanders, while running for the Democratic nomination for president in 2020, made the policy on the campaign trail, saying at the time he wanted to relieve consumers of an estimated $81 billion in medical debt.
The lawmakers say there is a medical debt crisis in the United States, which has exploded in recent years, “decimating Americans’ bank accounts and deterring them from seeking health care.”
Medical debt cancellation on the scale the proposed legislation would bring is untested, but smaller state and local government medical debt relief programs—where the governments purchase the debts for pennies on the dollar and wipe them out—offer some insight into what could happen.
Initial results of a study released in April by the National Bureau of Economic Research (NBER) found that such programs offered only limited benefits.
The Legislation
The federal Medical Debt Cancellation Act would amend the Fair Debt Collection Practices Act, “making it illegal to collect medical debt incurred prior to the bill’s enactment and creating a private right of action for patients.”It would further amend the Fair Consumer Credit Reporting Act to wipe medical debt from credit reports by “preventing credit reporting agencies from reporting information related to debt that arose from medical expenses.”
A new grant program would also be created within the U.S. Department of Health and Human Services to cancel medical debt by “prioritizing low-resource providers and vulnerable populations.”
Billing and debt collection requirements would also be amended to limit future debt from being incurred.
“Canceling medical debt is a common sense position overwhelmingly supported by the American public,” the lawmakers said in a press release. “That support is nonpartisan with 84 percent of Republicans in favor of canceling it. In fact, when polled on which types of debt Americans would like to see forgiven, two-thirds of Americans pointed to medical debt.”
Data Behind Legislation
The legislators point to a health care affordability survey conducted by The Commonwealth Fund, a nonprofit private foundation that supports independent research on health policy reform and improved health system, which found that “many Americans, regardless of where their insurance comes from, have inadequate coverage that’s led to delayed or forgone care, significant medical debt, and worsening health problems.”Specifically, the legislators point to the survey findings, which show among all working-age adults in the United States, an estimated 27 percent have medical debt of more than $500, and 15 percent have medical debt totaling $2,000 or more.
The report further found that while unexpected events and emergency situations leave people with ample medical bills, the source of much of the debt is for care related to chronic health conditions. The survey found around half of U.S. adults with debt stemming from chronic health problems and treatment.
“Patients should be able to get the care they need when facing illness or injury without fear of financial ruin,” Mr. Merkley said. “America’s medical debt crisis continues to harm millions, and Congress must do all it can to relieve patients of this tremendous burden. Our Medical Debt Cancellation Act sets up a grant program to cancel patient medical debt. This bill is a common-sense step forward that will help families in Oregon and across the nation.”
They also point to several other facts and figures, such as 2018 census data, which showed 8 million Americans were pushed into poverty due to medical expenses, and another that nearly 75 percent of adults in the U.S. say they are worried about being able to pay for unexpected medical costs.
“Medical debt can ruin credit scores and make it challenging to get a loan, take out a mortgage, or buy a car,” the legislators said in a press release. “Today, nearly four in ten American adults report having health care debt, and one out of every 12 American adults report having significant debt. Women, Black Americans, people with disabilities, and those living in rural areas and the South are hit the hardest. As a result of the broken U.S. health care system, one in three Black Americans have past due medical bills, as well as nearly half of American women, and nearly half of adults living in the South.”
Prior Research Shows Limited Benefit
A working paper released in April by the National Bureau of Economic Research (NBER) found less than positive results of experiments that relieved medical debt. Working papers are circulated for discussion and comment purposes but have not yet been peer-reviewed or been subject to review by the board that accompanies official NBER publications.NBER and RIP Medical Debt conducted two randomized experiments that relieved medical debt of $169 million for 83,401 people between 2018 and 2020. The team then tracked the outcomes using credit reports, collection data, and surveys.
“First, we find no impact of debt relief on credit access, utilization, and financial distress on average,” the NBER report stated. “Second, we estimate that debt relief causes a moderate but statistically significant reduction in payment of existing medical bills. Third, we find no effect of medical debt relief on mental health on average, with detrimental effects for some groups in pre-registered heterogeneity analysis.”
