100 million people.
That’s how many people have healthcare debt in the United States, how much medical debt is in collections and the median amount that households owe in medical debt. The most significant contributor to those stark figures? Black Americans.
Black people incur healthcare debt at higher rates than whites and are more likely to borrow money because of medical debt, be contacted by a collection agency and have past due medical bills. Twenty-four percent of Black adults say they have a medical bill they don’t think they will ever be able to pay.
“If you incur a significant hospital stay that’s hundreds of thousands of dollars, you’re not going to pay that back. So it sits there until you die or it’s expunged,” says Andre Perry, Senior Fellow at Brookings Institution. “We need to figure out ways to extinguish medical debt. If you do that, you free people to live more productive lives and contribute to the economy in better ways.”
Contributors to Medical Debt
One of the contributing factors to Black medical debt is racism.
“Everything related to race in this country goes back to structural barriers and systematic racism in housing, credit and employment opportunities because those make communities of color more financially vulnerable,” says Breno Braga, principal research associate in the Center on Labor, Human Services and Population at the Urban Institute.
Braga points to structural racism in the labor market, as Black people are more likely to be underinsured.
“For people of color and Black people more specifically, it’s harder for them to get jobs that provide employer-sponsored health insurance,” he says. “If you work for McDonald’s or some other company that does not offer insurance, you’re more at risk of facing medical debt. Something also tied to medical debt is racial inequalities in health insurance coverage. That’s especially the case in states that have not chosen to expand Medicaid.”
An Urban Institute report found that 79 of the 100 counties with the highest levels of medical debt are in states that have not expanded Medicaid under the Affordable Care Act. That includes southern states like Texas, Georgia and North Carolina. The highest concentration of Black people live in the South and without health insurance, they face higher medical bills. If a county has a high proportion of residents with chronic medical conditions, they are more likely to use healthcare, and as a result, face more medical bills.
“Some statistics show that if you expand Medicaid to all states that have not expanded Medicaid yet, this will allow about 1.5 million uninsured Black Americans to access health insurance,” says Braga. “That would reduce disparities in health insurance coverage and also in terms of medical debt.”
Unexpected medical bills also contribute to healthcare debt. Thirty-seven percent of Black adults say they can’t pay in full a $500 unexpected medical bill not covered by insurance, compared to 25% of Hispanics and 13% of whites.
The Impact of Medical Debt
A significant consequence of medical debt is the racial wealth gap.
In 2019, the average Black household had 15% less wealth than the average white family, according to the Federal Reserve. That translates to $24,100 for Black families compared to $142,500 for whites.
“The wealth gap plays into this when we look at the financial ability of an individual to weather a
surprise medical bill or any medical bill,” says Berneta Haynes, Staff Attorney at the National Consumer Law Center. “Lack of wealth means medical bills are more likely to create a financial struggle for Black families than white families.”
People with medical debt face an increased risk of bankruptcy. A negative impact on their credit score could affect their ability to rent an apartment or secure a job. Medical debt may also force people to sacrifice essentials like food purchases or paying utility bills. Haynes says the burden pours more salt on a wound in a community that has been financially left behind.
“Medical debt has a way of blocking Black families out of opportunities to build wealth as people can see their wages garnished, savings accounts, property liens attached to their homes and even civil arrest warrants,” she says.
Haynes says property liens are particularly disturbing. Blacks have historically had the lowest homeownership rates compared to other racial groups and continue to fall further behind. In 2022, 45.3% of Black households owned a home compared to 74.6% of white households, according to the Census Bureau.
The consequences of healthcare debt are not limited to finances. One in seven Black adults with healthcare debt says they’ve been denied care because they owe money.
“Medical debt causes undue stress for folks that can contribute to health conditions and worsen chronic conditions,” says Haynes. “It can also lead people to skip out on necessary medical care or delay it, leading to worse health outcomes and more medical bills down the line.”
Medical Debt Solutions
There’s a glimmer of hope for people who have had their credit scores damaged by medical bills.
In July 2022, credit agencies Equifax, Experian, and TransUnion stopped including paid medical debt on credit reports and will wait one year before including unpaid medical debt. Beginning in 2023, medical debt of less than $500 will not appear on credit reports.
“People will be helped and probably have been helped by these changes as they’ve been implemented,” says Haynes. “But many people will be left out of that help based on that $500 threshold.”
Perry says separating health insurance from employment and holding non-profit hospitals accountable for providing community-services benefits are steps in the right direction.
“We’ve also got to figure out remedies for surprise billing that many patients see bills that they did not expect,” he says.
The No Surprises Act, which was passed at the beginning of 2022, protects consumers from surprise medical bills under certain circumstances, including emergency services from an out-of-network provider or facility and without prior authorization. But you must have a group health plan or individual health insurance coverage.
Hospitals and health systems can also prevent medical debt by expanding their financial assistance and flexible repayment options.
Kaiser Permanente (a 2022 DiversityInc Hall of Fame company) offers financial assistance to low-income, uninsured or underinsured patients who need help paying for all or part of their medical care at the company’s facilities.
Northwell Health (No. 1 on DiversityInc’s 2022 Top Hospitals and Health Systems list) has hired additional certified financial counselors to assist patients in completing financial assistance applications and implemented a tele-financial counseling program.
“In 2021, which is unique to hospitals and health systems nationwide, Northwell created a new role – medical debt ombudsman – which serves as an independent reviewer to help patients with medical debts avoid potential action by ensuring they are aware of financial assistance options available to them,” says Barbara Osborn, Vice President of Public Relations at Northwell Health.
More than a dozen states passed legislation including the regulation of facilities fees, limits on medical debt collection and requirements to provide information on free and discounted care options. In November 2022, New York enacted a law that protects patients from medical bills that can lead to wage garnishment or liens against their property.
Perry says finding solutions to the medical debt crisis is a moral imperative.
“We know wealth and health are inextricably linked – wealthier people live healthier, longer lives,” he says. “It’s not just about our behaviors, it’s also about our structures. If we have policies that create wealth inequality, we will have some people sicker than others. Eliminating medical debt is essential in creating healthier citizens.”