Medical debt plays a role in a majority of Oregon bankruptcy filings

The Oregon State Public Research Group has released a report on bankruptcies and medical debt within the state. The findings show that in counties with bankruptcy filings, such as Multnomah County, 52% of them had some form of medical debt involved, while others like Linn County have up to 69%. We hear from Francis Wong, Postdoctoral Fellow at NBER, on his research regarding the state of U.S. medical debt.

This transcript has been created by a computer and edited by a volunteer.

Dave Miller: This is Think Out Loud on OPB, I’m Dave Miller. New research published this summer found that $140 billion in unpaid medical bills had been sent to collection agencies. It was nearly double an earlier estimate of medical debt in the US. That debt can lead people to delay or avoid medical care altogether. It can also result in bankruptcies. A recent study by the nonprofit Ospirg found that in 2019, more than 60% of Oregonians who filed for bankruptcy had unpaid medical bills. I’m joined now by Francis Wong. He is a postdoctoral fellow at the National Bureau of Economic Research, and he is a part of the research team that showed the extent of medical debt in the US earlier this summer. Francis Wong, welcome to Think Out Loud.

Francis Wong: Thank you for having me.

Miller: So I mentioned this startling number, $140 billion, and that it was way higher than the $80 billion that had been estimated in a study just five years earlier. What was different about what your team did?

Wong: Well our efforts were to put together the most up to date and comprehensive picture of medical debt in the US. So we put together a really large data set of nationally representative credit reports from TransUnion, one of the three major credit bureaus. And as you said, we found that there’s currently $140 billion of medical debt out there, and that’s much more than previously thought. Not only that, but since 2009 the amount of medical debt in the US has exceeded medical debt and collections from all other sources combined. So that’s credit cards, auto loans, utilities etc. Most of the debt and collections out there is now medical debt.

Miller: I missed that in the reporting. What I’d read, which I guess is also accurate, but an underestimate of the way to think about this, is that it was the largest form of debt. But it’s not just the largest. It is greater than all the others combined?

Wong: That’s correct. In 2009, it was the case that there was more non medical debt in collections. But since then, medical debt in collections has become the largest source of debt in collections.

Miller: This is an important distinction though, because if we’re talking about debt that has already been sent to collections, meaning someone didn’t pay say a hospital bill, maybe they got it a second or a third or a fourth time, and then at that point the hospital sent it to a collections agency saying, if you, if you can recover a small percentage of this, you can have it, we’re done. Is that the way it works?

Wong: That’s correct. So what we’re seeing is debt in collections that has been reported to credit bureaus. So if you end up in the hospital and are unable to pay the bill, for a while the hospital will try to get you to pay that bill. And if you are unable to do so they might move that bill to collections. Now the collector can report that debt to credit bureaus such as TransUnion, but they don’t always do so. So there are some debts in collections out there that aren’t part of the overall number that we’re reporting. So this is the number that we’re reporting, the $140 billion dollars in medical debt, is debt that has been sent to collections and has been reported to credit bureaus.

Miller: Isn’t it fair to assume that there could be a much, much, much higher number of unpaid medical bills that haven’t even been sent to collections yet, where the health care providers or offices or whoever, they’re still trying to get those bills paid?

Wong: That’s exactly right. Medical debt can take a lot of forms. One form that we also haven’t talked about is whether medical debt gets paid, say, with a credit card. So, for instance, if you go and you break your leg and you end up in the hospital and you have a bill that’s been sent to collections, you might try to pay that bill with a credit card, and we don’t count it as medical debt if you end up not being able to pay your credit card bill as a result.

Miller: So it seems like there are a lot of forms of effectively medical debt, unpaid medical bills, that would be hard to even track. Do you have an estimate for how much more is out there?

Wong: As much as we’d be really interested in that number, unfortunately the data limitations don’t allow us to put a number on the total amount of medical debt, including the debt that’s not reported to credit bureaus. That data source simply does not exist at the national level.

Miller: We asked our listeners about their experiences with medical debt and unpaid medical bills. I want to play a couple voicemails that came in over the course of this conversation. Let’s start with one right now. This is Brawny Griffin who called in from Portland.

Brawny Griffin: I used to know people who have declared bankruptcy, and I always prided myself on, if I got a little further in debt a couple of times, I called those consumer credit agencies and I would consolidate everything. I did that twice, once in my 30′s, once in my 40s, paid off all my debt. And I used to pride myself on, I would go to my grave never declaring bankruptcy. And finally, in 2018 because of medical debt exclusively, and it wasn’t like I had cancer, it was just like a hysterectomy and then I had to have surgery on my foot, I had to declare bankruptcy because there was no other way for me to catch up.

Miller: Francis Wong, can you give us a sense for just how common it is for Americans to have medical debt?

Wong: Well, over one in 6 Americans has delinquent medical debt on their credit report. So medical debt appears to be an incredibly common source of financial distress in the US. As we’ve heard in this clip, financial distress associated with medical debt can have a number of important impacts, bankruptcy being one outcome that can result from financial distress associated with medical debt.

But of course medical debt is likely to have a lot of impact outside of just the financial impacts. In some ongoing research with the same research team that published this initial study, we’re studying the impacts of medical debt on mental and physical health. We have a hypothesis that medical debt may negatively impact patients through both medical or mental health, the stress of the collections process. And it might impact their health in other ways, for example, by deterring them from seeking valuable healthcare.

Miller: We actually got a voicemail I want to play later that gets to that. But I want to go back to some of the the systemic issues at play here, because one of the things that I want to make sure I understand is that, if I read this correctly in an article in the New York Times back earlier in the summer, overall medical debt sent to collections agencies actually declined between 2009 and 2020. Did I read that correctly?

Wong: That’s right. So what you see if you look at the last 20 years, is that since the end of the Great Recession, there’s been an overall reduction in medical debt. Now one of the important things that underlies the overall trend is a lot of differences from place to place. So in our study we find that medical debt tends to be concentrated in the South, and particularly in socioeconomically disadvantaged communities. In many of those communities, since 2009, medical debt has actually increased. But the rest of the country has benefited from the positive economic momentum from the recovery of since the Great Recession, and as a result, overall levels of medical debt have declined.

Miller: What did you find about the effects of the Medicaid expansion that was a part of the Affordable Care Act that I guess has turned into a kind of nationwide experiment. You can look at states that expanded their Medicaid rolls with, initially, federal money, and those who, for political reasons said no, we don’t believe this is a good way to to actually spend taxpayer money. We are not going to offer Medicaid to a higher percentage of our residents. How did that impact medical debt in the different kinds of states?

Wong: Well, we found that the states that expanded access to health insurance through Medicaid were the ones that saw the largest declines in medical debt. So we compare these different groups of states and how they performed after 2013 when the Affordable Care Act allowed for these states to expand eligibility for Medicaid. And we see exactly that. Underneath this modest national decline in medical debt, there are these states that have these large declines in medical debt, specifically because they expanded eligibility for insurance.

Now, one of the striking findings in our study is that the states that chose not to expand Medicaid, many of which were in the South, actually were the states that had the highest levels of medical debt before the Affordable Care Act. Which means that, standing in 2009, you have states that have large amounts of medical debt and states that have smaller amounts of medical debt. The states that expanded Medicaid after the Affordable Care Act already had low levels of medical debt. So we see that, since 2009, the geographic and socioeconomic disparities in the burden of medical debt has actually worsened.

Miller: Medical debt, from what I’ve read, it can be less likely to be paid off than other kinds of debt, like home or car loans or utility bills. Is it as simple as that people don’t want to go into foreclosure or lose their car or have their lights and water turned off? But a bill to a surgeon, you’ve already gotten your surgery?

Wong: That’s right. Medical debt certainly differs from other forms of debt in that there’s not this asset that serves as collateral for the debt. So I think that the process by which people choose which bills to pay off is probably a complicated one. So certainly when you’re deciding whether or not to pay your auto bill or your mortgage, and you’re short on cash this month, you’re going to be thinking about the risk of losing your home or your car. But they’re going to be other considerations when you think about whether or not you pay your medical bills. So we know that if your medical debt gets sent to collections, that will have negative impacts on your credit score and you’ll have less access to credit in the future. A common consideration might also be the extent to which you want to interact with this hospital or provider doctor that generated the medical debt in the first place.

Miller: Let’s listen to another voicemail. This is Brandy Balas who called in from Salem.

Brandy Balas: I wanted to share an experience I had in 2004. I got a phone call from my dad saying he was experiencing shortness of breath and cramps, asking if I would take him to the doctor the next day. Of course I agreed. Got off the phone, and then later that day talked to a friend who was a nurse, who got very serious: “Your dad wants to go to the hospital. He should go right away, call him and tell him.” So I called my Dad, “Dad, you should go to the hospital, this is serious.” And my dad says, “I can’t afford to go to the hospital. This has been happening for a week. One more day won’t kill me.”

I will always always remember those minutes because, unfortunately, it did kill him. He had blood clots in his legs, that was what was causing cramping and the shortness of breath. And the clots, before I was able to get there to take him to the hospital, one had broken off and gone to his brain and killed him instantly. What he had was treatable. If he had gone to the hospital, he would have lived. He left behind four kids. It’s of course completely changed our lives. So that’s my experience with the medical system being too expensive. And to be clear, my dad did have insurance, he was on Medicaid. But even with that, he couldn’t then go to the hospital and pay his rent and electricity and buy food. He was 69 years old.

Miller: Francis Wong, I should say, we got another voicemail this morning from someone saying you’re asking the wrong question. We’d asked about people’s experiences with unpaid medical bills or medical debt. And he said you should be also asking about people not getting care because they can’t afford it. How much research is there into the way that medical debt affects people’s decisions about either delaying or simply not getting potentially life saving care?

Wong: Well, first, let me say that these tragic stories are illustrative of the impacts that medical debt can have on patients and have on families. There’s a lot of research that shows that when you place a higher financial burden on patients, they consume less care. And they consume less of a wide variety of care, not just the low value care. They also consume less high value care. Now when it comes to medical debt specifically, we have some new research that shows that access to financial assistance policies, among the population of largely insured patients, also increases health care utilization in the months following a health event. And what this means is that insurance itself is not enough to financially insulate patients from the consequences of receiving care or experiencing a health event.

Miller: Is that tied to super high deductible plans, or plans where yes, technically you have health insurance, but your out of pocket costs could be just prohibitive?

Wong: Well, I think that one important distinction is what you want to call a high deductible health plan. The fact is that many Americans are financially fragile. So even a couple of hundred dollars can make a real difference and can have ripple effects throughout a family’s finances. You wouldn’t necessarily call a plan that just has a couple hundreds of dollars high deductible. But the fact is, if patients are financially exposed to even modest costs, they might be deterred from seeking valuable healthcare.

Miller: Let’s listen to one more voicemail that came in.

Caller: I am a cancer patient with a cancer that does not have a cure. And so I have monthly medication, annual scans, and many, many surgical side effects that I’ve lived with for nine years, and will live with for the rest of my life, since there’s not likely to be a cure. What that has meant is that I’ve been forced, because of my medical bills, to put them on credit cards, because I have no income or ability to pay for them because of my disabilities. And as a result, I’ve had to refinance my house twice just to incorporate the debt and pay it off. So basically I’m paying my medical debt by taking more and more liens against my home, the only asset that I have, as long as I can maintain it, and that’s how we’ve been dealing with it.

Miller: Francis Wong, there’s a lot in this comment. But I want to turn to the financial questions first. Earlier we were talking about people putting medical bills on credit cards. Here, Alice is saying that the way she’s been able to get by for nine years as she’s been managing a chronic illness is essentially by taking money out of her home. What have you learned about the various ways that medical debt can affect somebody’s finances?

Wong: So you can imagine a number of different channels through which medical debt has negative financial impacts. The first is through the access to credit that a patient can face. So if you as a patient end up with medical debt on your credit report, that’s going to negatively harm your credit score and you’re going to have less access to credit in the future. Now, even if you don’t send the debt to collections but instead take out a loan to pay those debts, or just put the debts on an existing credit card, well then you’re going to have to deal with that debt in the form of the new loan or the new debt on the credit card. And failing to pay a credit card bill or failing to pay a mortgage bill can also have negative impacts on credit access through your credit score.

This is only one part of the overall impact of medical debt on households, are these financial channels that are important. But equally as important as these financial channels are the mental health and health care utilization impacts, some of which were touched on in that quote that you just played.

Miller: My understanding is that for an upcoming paper you’re right now looking into the effects of debt forgiveness. Can you explain what you’re looking at and what you’ve learned so far?

Wong: Sure. We’re working with a terrific nonprofit organization called RIP Medical Debt. RIP was started by former debt collectors, and they raise donor funds to go out, purchase, and forgive existing medical debt. As a non profit organization, they’re able to offer this as a tax exempt gift to recipients. One way, as researchers, that we can pursue to understand the impacts of medical debt is to study what happens when an individual’s debt is relieved. RIP has an existing body of donor funds that it distributes in the form of debt relief. We’re able to compare the outcomes of individuals whose debt was relieved by RIP Medical Debt to individuals for whom RIP did not have enough funds to relieve their debt.

And so by comparing these two groups of individuals and seeing how much better or how much worse the outcomes of one group were relative to the other, we’re able to understand the impacts of medical debt. And we’re particularly focusing on those impacts that are hard to quantify numerically, that is the impact on mental health, on health care utilization. Unlike the impact on financial outcomes which can be readily seen on credit reports, like in our existing study, we’re asking people about their levels of anxiety, their experiences with the health care system, and our hope is that this is going to offer a more comprehensive picture of the burden of medical debt in the US.

Miller: You’re actually talking to us from Germany right now, ahead of an appointment that’s going to start if I understand correctly next year at a university in Munich. I’m just curious what the entire world of medical debt looks like when you’re talking to us from a Western European country where, I imagine it’s not really a thing?

Wong: That’s correct. The idea of medical debt is baffling to most Germans who face a universal health care system with very little financial burden placed on patients. And so what that illustrates is that the existence of medical debt is a choice that we as a country have made to design a healthcare system that places large financial burdens on patients. As the existence of the German healthcare system shows, that does not need to be the case. In our paper, we show that expanding insurance is one way to reduce the amount of medical debt. But of course, in order to fully eliminate it, we need to rethink the way that we’ve set up our health care system, and we need to rethink the extent to which we make patients financially responsible for their care.

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