In the United States, is Medical Debt is Truly Hospital Debt?

By: Ranier Simons, ADAP Blog Guest Contributor

Medical debt continues to be a crippling financial burden to many Americans, with most of the debt being owed to hospitals in the United States. Approximately 100 million adults have medical debt ranging from $500 to over $5,000.[1] Despite changes credit reporting agencies made in 2022, 15 million Americans still have more than $49 billion in unpaid medical collections on their credit reports.[2] Medical debt is a financial hindrance to many aspects of people’s lives and can even result in poor healthcare outcomes and denial of care. The evolution of medical debt relief efforts continues to move forward on the federal and state levels in hopes of unsaddling Americans of debt that they had no choice in incurring.

Photo Source: Rhode Island Currant | Getty Images

In response to a 2022 report conducted by the Consumer Financial Protection Bureau (CFPB), three nationwide credit reporting bureaus - Equifax, Experian, and TransUnion – voluntarily made changes to reduce the number of reported medical bills in collections. They increased the time span that trigger reporting of medical bills in collections from 180 days to one year, stopped reporting and removed bills less than $500, and stopped reporting bills that were previously bad debt in collections but had been paid, thus resolved.[2] Despite these actions, 15 million Americans are still plagued with unpaid medical collections on their credit reporting.

In an attempt to further help Americans, CFPB proposed new rules in June 2024 that would be significant if finalized. The rules would eliminate the special medical debt exception, establish guardrails for credit reporting companies, and ban repossession of medical devices.[3] The CFPBs intent is “to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe.”[3] These rules would help close existing loopholes that leave medical debt accessible to creditors. Additionally, since much of the collection activity reported is inaccurate, it would prevent predatory collections on false claims. Most of the people who have medical collections on their reports do not have any history of other types of credit problems.[4] It is unfair for creditors to block people from the things that they need when the CFPB found that a medical bill on a credit file is not a good indicator of the likelihood a person will repay a loan.[3]

The Urban Institute has done a great deal of work aggregating medical debt data. They created an interactive mapping tool, which shows the geography of debt in America and the debt differences that can reinforce the wealth gap between white communities and communities of color. Nationwide, roughly five percent of Americans have unpaid medical debt based on their credit reports.[5] However, the South and people of color carry a disproportionate amount of that debt. For example, in North Carolina, 8.5% of the population has medical debt in collections compared to 5% nationally. In terms of demographic distinction, 10.5% of communities of color in North Carolina have bad medical debt in contrast to 7.8% of white communities.[5]

Photo Source: Carolina Journal

Following the trajectory of other states, the administration of Governor Roy Cooper in North Carolina created a plan to alleviate medical debt in the state. With the federal government's support, Governor Cooper created the model for a plan that would link Medicaid expansion dollars to patient debt. Medicaid expansion provides billions in funding for hospitals through state-directed payments that states use to pay hospitals to care for low-income patients.[6] Governor Cooper created a plan that penalizes hospitals, reducing the Medicaid expansion funds they would receive if they do not agree to his debt-relief plan. 

Hospitals would have to expand financial aid criteria to allow more patients to qualify for aid to stave off a future of debt, in addition to eliminating old debts of low-income patients.[6] Eliminating debt would occur via debt buy-back in the manner non-profits such as Undue Medical Debt have succeeded.[6] In essence, bad debt is purchased at extreme discounts and then written off. By agreeing to the plan, hospitals would gain almost twice as much funding as they would if they did not. Atrium Health would receive roughly $1.7 billion by participating, compared to $900 million if they did not.[6] Atrium Health has been historically very aggressive with debt collection efforts against patients. In agreement with Cooper’s plan, Atrium Health announced it would nullify all existing judgments and liens against patients for unpaid bills, some going back as far as twenty years.[7]

Numerous reports have showcased how some large hospital systems have practiced aggressive collection and billing activity against vulnerable low-income patients in conflict with their fiduciary requirements to exercise charity care and institute patient financial assistance. Most of the medical debt is specifically hospital debt.[8] According to a report published by the Robert Wood Johnson Foundation, nearly 75% of adults with medical debt owe some or all of it to hospitals.

Photo Source: Urban Institute | RWJF

Brenda Miller with the Lown Institute previously argued in a blog, "Hospitals have the choice to offer robust financial assistance, set reasonable prices, not sue patients, and pay their fair share in community benefits if they are nonprofit. By adjusting their policies, hospitals have the power to alleviate the long-term financial suffering caused by our broken healthcare system."[9]

As a part of the continuing examination of the burden of medical debt, this week, ADAP Advocacy launched an online survey to collect data on patient perspectives and experiences with medical debt. It is available nationwide for anyone in the United States to participate. It is also anonymous with the option of providing personal information if you wish to be contacted for additional follow-up.

The ADAP Advocacy-sponsored Ryan White Grantee 340B Patient Advisory Committee commissioned the study to support patient-centered reform. Many hospitals, as recipients of drug rebates under the 340B Drug Pricing Program, are notoriously bad actors. Data from the survey will add color to patients’ lived experiences with medical debt’s whole-person effect on their lives.

Many types of consumer spending are voluntary. Most medical spending is not. When one’s health and well-being are threatened, potential financial ruin should not add stress to decisions nor influence them. Capitalism-driven financial toxicity has no place in healthcare. Hospitals should be institutions of optimal healing for all. As Jen Laws (he/him/his), CEO of Community Access National Network, points out, “...equity-minded persons and entities prioritizing impact over intent is a very real thing.”[10]

Read our related blog, Are Nonprofit Hospitals' Community Benefit Tax Breaks Truly Serving Communities in Need?

[1] Vankar, P. (2024, January 31). Medical debt in the U.S. - Statistics & Facts. Retrieved from https://www.statista.com/topics/8219/medical-debt-in-the-us/#topicOverview

[2] Consumer Financial Protection Bureau. (2024, April 29). CFPB Finds 15 Million Americans Have Medical Bills on Their Credit Reports. Retrieved from  https://www.consumerfinance.gov/about-us/newsroom/cfpb-finds-15-million-americans-have-medical-bills-on-their-credit-reports/

[3] Consumer Financial Protection Bureau. (2024, June 11). CFPB Proposes to Ban Medical Bills from Credit Reports. Retrieved from https://www.consumerfinance.gov/about-us/newsroom/cfpb-proposes-to-ban-medical-bills-from-credit-reports/

[4] Pollitz, K. (2015, Jan 8). Medical Debt Among Insured Consumers: The Role of Cost Sharing, Transparency, and Consumer Assistance. Retrieved from https://www.kff.org/health-costs/perspective/medical-debt-among-insured-consumers-the-role-of-cost-sharing-transparency-and-consumer-assistance/

[5] Urban Institute. (2024, July 10). The Changing Medical Debt Landscape in the United States. Retrieved from https://apps.urban.org/features/medical-debt-over-time/

[6] Levey, N., Alexander, A. (2024, September 23). How North Carolina Made Its Hospitals Do Something About Medical Debt. Retrieved from https://kffhealthnews.org/news/article/north-carolina-hospitals-medical-debt/?utm_campaign=KHN%3A%20First%20Edition&utm_medium=email&_hsenc=p2ANqtz-9_BieSj5YKhMJyyO8tuHpBuD1MMqvTUIH1qbLMpxBqXd2wLyVlWUhNZuMd1TjH99Epf8GJEgAie1fXAtiopyrJGRkkQg&_hsmi=325818163&utm_content=325818163&utm_source=hs_email

[7] Crouch, M., Ledger, C. (2024, September 20). Atrium Health cancels thousands of past medical debt judgments

[8] Karpman, Michal. (March 2023). MOST ADULTS W ITH PAST-DUE ME DICAL DE BT OWE MONEY TO HOSP ITAL. Robert Wood Johnson Foundation. Retrieved from https://www.rwjf.org/en/insights/our-research/2023/03/most-adults-with-past-due-medical-debt-owe-money-to-hospitals.html

[9] Miller, Brenda. (2023, March 28). Are Hospitals Driving Medical Debt? The Lown Institute. Retrieved from https://lowninstitute.org/are-hospitals-driving-medical-debt/

[10] Laws, J. (2023, June 19). The Necessity of Patient-Centered 340B Reform. Retrieved from https://www.hiv-hcv-watch.com/blog/june-19-23

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.   

Fed-Up with Medical Debt Owed to Hospitals, States and Municipalities Respond

By: Ranier Simons, ADAP Blog Guest Contributor

Medical debt is a significant financial burden in the United States. It affects both insured and uninsured adults. Medical debt encompasses the high bills consumers are saddled with, in addition to the credit card and other personal loan debt incurred while trying to pay the medical bills.[1] Approximately 100 million Americans hold $195 billion in medical debt, with most owing less than $1,000.[2] A previous ADAP Advocacy blog discussed how patients are even being failed by what is supposed to be charity care by nonprofit hospitals. Nonprofit and for-profit hospitals send patients into financial ruin using predatory collection agencies and other tactics.[3] Medical debt is unavoidable debt, often from singular emergent occurrences, dissimilar to other consumer debt incurred by choice. Realizing the need to help communities, cities have taken innovative measures to relieve their citizens' medical debt woes.

Photo Source: Urban Institute

According to the Urban Institute, over 74% of medical debt is owed to hospitals.[10] Hospital debt has become big business. Noam Levey, senior correspondent for KFF Health News, explains, “Our healthcare system is now generating medical debt on an industrial scale…And a good part of that is coming from not-for-profit health care.”[11] About two-thirds of hospitals will take legal action against outstanding debt, including collections, with some even denying non-emergent care for unpaid debt. Patients’ best interests are not at the forefront when a hospital denies access to needed care due to bills in arrears. Some hospitals have even placed liens on patients’ homes. Liens are an additional financial burden and affect generational wealth since one cannot sell or pass down a property saddled with liens.[3]

One route being utilized by cities is to take advantage of the existing system. Patients' unpaid medical debts are sold to collection agencies as bad debt for small fractions of the actual amounts. Customarily, collection agencies buy this second market debt cheaply and then try to collect as much as possible as profit. Several cities, including Washington, D.C., New Orleans, Louisiana, and Toledo, Ohio, have used funds to buy patients medical debt and forgive it.[2] A large portion of the funding municipalities have used to erase the debt is pandemic relief money. Some municipalities, such as Cook County, Illinois, have partnered with a nonprofit named RIP Medical Debt to purchase medical debt.[2,4]

Photo Source: KFF

Since 2014, RIP Medical Debt has abolished over $11.8 billion in medical debt for over seven million people.[5] With donations, they have purchased large bundles of medical debt at pennies on the dollar and then canceled the debts instead of trying to make a profit. They are contracting with cities and counties to do the same. RIP Medical Debt helps municipalities analyze their hospital systems' medical debts. They identify those with medical debts that are five percent or more of their income and or patients who are at or below 400% of the poverty level.[6] People cannot apply for assistance, nor do they have to. Once it is verified that criteria are met, qualified purchased medical debts are canceled, and beneficiaries are sent letters notifying them of their debt forgiveness. Over 16 cities, 12 counties, and seven states have expressed interest in collaborating with RIP Medical Debt.

Utilizing medical debt erasure is a significant relief to many. However, funding is limited, and it does not address the deeper issues. Many Americans are uninsured or underinsured. Many people with insurance have high-deductible plans, which place them in the guillotine of runaway medical expenditures. Additionally, many people can’t afford their high co-payments or coinsurance payments when they are stuck with receiving out-of-network care. Allison Sesso, President & CEO of RIP Medical Debt, expressed, “Across all health care services, the pricing is just way too high for people to afford, and we need transparency on pricing to make informed health care decisions.”[7]

Legislation is another avenue states are using to help with medical debt. While it’s not debt forgiveness, Maryland has laws that raised the income threshold for hospital care and prohibited wage garnishment or home liens in certain medical debt judgments.[2] There is a current bill being considered in Maryland, HB328, that “expands the number of patients receiving free and low-cost hospital care by ending arbitrary asset and geographic tests used by 27 hospitals to bar patients who were eligible for low-cost care’.[8]

Photo Source: CNN

States are also working towards preventing medical debt from ruining individuals’ credit. California Attorney General Rob Bonta is a sponsor of Senator Monique Limón’s bill, SB-1061, which would block healthcare entities and associated collections agencies from sharing bad medical debt with credit bureaus. If it becomes law, California would be the third state to remove medical bills from credit reports, following Colorado and New York, which enacted laws in 2023.[9] Hospitals and collection agencies have used credit reporting to force people to pay bad debts. However, credit reporting can result in the denial of housing and job applications and disrupt families’ financial lives with repercussions that lower quality of life and social mobility.[3]

Medical debt is not going away in the foreseeable future, nor are the high costs of medical care. The challenges of medical debt disproportionately hinder the lives of the poor, ethnic minorities, and other marginalized groups. Creating solutions to shield consumers from the ravages of medical debt is essential. However, dismantling the root causes of unregulated and disparate medical services pricing is paramount. Band-Aids of temporary relief do not override the foremost requirement of systemic change.

[1] Lopes, L., Kearnet, A., Montero, A., Hamel, L., Brodie, M. (2022, June 16). Health care debt in the U.S.: The broad consequences of medical and dental bills. Retrieved from https://www.kff.org/report-section/kff-health-care-debt-survey-main-findings/

[2] Biron, C. (2023, July 21). Americans owe billions in medical debt. Can cities help? Retrieved from https://www.reuters.com/article/idUSL8N38W2UP/

[3] Simons, R. (2023, November 30). Provider ‘smash and grab’ tactics fueling medical debt, hurting patients. Retrieved from https://adapadvocacyassociation.blogspot.com/2023/11/provider-smash-and-grab-tactics-fueling.html

[4] MacDougall, H., Tuttle, M., Henning-Smith, C. (2024, March 18). To address the crisis of medical debt, lawmakers should focus on Greater Minnesota. Retrieved from https://www.minnpost.com/community-voices/2024/03/to-address-the-crisis-of-medical-debt-lawmakers-should-focus-on-greater-minnesota/

[5] RIP Medical Debt. (2024). https://ripmedicaldebt.org/

[6] Walsh, J. (2023, April 25). Cleveland City Council approves medical debt relief; here's what that means. Retrieved from https://www.news5cleveland.com/news/local-news/investigations/cleveland-city-council-approves-medical-debt-relief-heres-what-that-means

[7] Vollers, A. (2024, February 22). Governments can erase your medical debt for pennies on the dollar — and some are. Retrieved from https://www.thelundreport.org/content/governments-can-erase-your-medical-debt-pennies-dollar-and-some-are

[8] End Medical Debt Maryland. (2024, February 14). Testimony to the House Health & Government Operations Committee. Retrieved from https://mgaleg.maryland.gov/cmte_testimony/2024/hgo/1bQYmcYDHBKw2yjI4-IgapCig5mvNIusH.pdf

[9] Work, M. (2024, March 11). California attorney general boosts bill banning medical debt from credit reports. Retrieved from https://kffhealthnews.org/news/article/california-attorney-general-medical-debt-ban-on-credit-reports/

[10] Urban Institute. (2023, October 10). Debt in America: An interactive map. Retrieved from https://apps.urban.org/features/debt-interactive-map/?type=medical&variable=medcoll

[11] Thompson, I. (2023, September 5). Nonprofit hospitals pursue aggressive medical debt collection. Retrieved from https://nonprofitquarterly.org/nonprofit-hospitals-pursue-aggressive-medical-debt-collection/

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates. 

340B Covered Entities’ Revenue Witnessed Huge Executive Compensation Increases, Alarming Charity Care Decreases

By: Marcus J. Hopkins, ADAP Blog Guest Contributor, and Founder & Executive Director of the Appalachian Learning Initiative (APPLI)

Research conducted by ADAP Advocacy, as part of its ongoing 340B Project, and its newly minted Ryan White Grantee 340B Patient Advisory Committee found executive compensation increased significantly at 340B Covered Entities after they became eligible for 340B drug rebates as a source of revenue. In the same period, hospitals receiving 340B rebates almost uniformly saw nearly universal decreases in the percentage of charity care they provided as a percentage of revenues.

Read the ADAP Advocacy press release, here.

Photo Source: CANN

ADAP Advocacy examined total annual revenues for select Covered Entities participating in the 340B Drug Pricing Program—including executive compensation (only Chief Executive Officers, or CEOs)—charity care totals, and charity care as a percentage of annual revenues. The analysis identified trends across 340B Covered Entities, breaking them into two groups: hospitals and non-hospital grantees. It compares the year before each organization was deemed 340B eligible, one year after, five years after, ten years after, and the most recent year on file.

Across the non-hospital grantees, executive compensation increased at an average rate of 391.3%. When excluding outliers, that average was 320.2%. Across the hospitals, CEO compensation increased at an average rate of 224.9%, including outliers, and 186.8% when accounting for outliers.

Photo Source: Vistage.com

Of the hospitals examined, just three hospitals—Ascension’s St. Francis, Bon Secours’ St. Francis Xavier Hospital, and Wellstar’s Piedmont Athens Regional Medical Center—increased the charity care they provided as a percentage of overall revenues by 114.9%, 86.7%, and 13.2%, respectively. An additional two hospitals provided no charity care information. Overall, charity care as a percentage of revenues decreased across all hospitals at an average rate of 29.7%. When accounting for outliers, the average decrease was 36%.

These decreases in charity care as a percentage of total revenue come at a time when there are mixed reports about the number of Americans and households with medical debt in the United States. Different agencies and outlets report vastly different perspectives and analyses of medical debt, highlighting the need for more clarity and transparency about how medical debt is calculated and counted.

According to the Biden Administration, the number of Americans with medical debt on their credit reports fell by 8.2 million from the first quarter of 2020 to the first quarter of 2022. They attribute this decrease to streamlining by the Department of Veterans Affairs (VA) to improve access to medical debt relief for veterans with lower incomes, the purchasing and forgiveness of medical deb from hospitals and other sources using funds from the American Recovery Plan (ARP) by individual municipalities and counties, and the development of a new credit score that excludes medical debt.

Photo Source: National Foundation for Credit Counseling

Conversely, a report released by the Consumer Financial Protection Bureau in 2022 found that there was roughly $88 billion in medical debt on consumer credit reports. Since that report, credit agencies have voluntarily removed debts of less than $500, debts less than a year old, or those that have been marked as ‘Paid’ (Goldberg, 2023). Additionally, Kaiser Family Foundation (KFF) found that one out of every ten adults has medical debt and that the amount owed is at least $195 billion. 

According to Goldberg’s article in Politico, the real issue is that total medical debt is impossible to quantify in the United States “…because it hits people in incalculable ways.” Medical debt doesn’t always take on the form of debt sent to collections that will be reported on credit reports:

• Patients may be actively paying on debts owed, meaning that the only people aware of the medical debt are the holder and the patient.
• Patients may have paid medical debts using credit cards or personal loans, which again, so long as the patient remains current on their payments, would not be reflected on credit reports.
• Patients may have borrowed from family or friends and are repaying them.

These represent just a few of the potential scenarios that make the true total of medical debt impossible to quantify.

What is clear when looking at maps of households with medical debt released by the Urban Institute is that the communities where the percentage of households with medical debt in collection are largely located in the American South, including almost every county in West Virginia and South Carolina, as well as a plurality of counties in Oklahoma, North Carolina, and Texas. It is therefore important to evaluate which hospitals serving those communities are living up to their obligations of using 340B funds to improve patient care and access to care and treatment.

Editor’s Note: At the request of ADAP Advocacy’s CEO, Brandon M. Macsata, to demonstrate transparency, we’re sharing some information about compensation paid to his firm, Purple Strategy Group, Inc. (PSG). PSG is paid a monthly management fee, which covers the work Brandon does on administrative, accounting, governance, marketing, and programs. The monthly fee is $8,000 per month, which has remained at that level since 2013 without an increase. Based on budget and net revenue year-end numbers, Brandon is also eligible to receive a performance bonus up to $6,500. Additionally, Brandon gives back to the organization annually, with his annual financial contributions ranging between $2,500 and $15,000+. No fringe benefits are paid, since Brandon is a 1099 contractor and not an employee. He is eligible to receive additional compensation for special projects that fall outside the scope of work, although most years there are no such projects.

Disclaimer: Guest blogs do not necessarily reflect the views of the ADAP Advocacy Association, but rather they provide a neutral platform whereby the author serves to promote open, honest discussion about public health-related issues and updates.