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Americans Owe $140 Billion to Collections Agencies Because of Medical Debt

A newly published study finds that the amount of medical debt owed by Americans is even larger than previously thought. It’s just further proof of the moral abomination that is for-profit health care.

A new report from the Journal of the American Medical Association reveals that medical debt in the United States is now at an astonishing $140 billion. (Olga Kononenko / Unsplash)

As a Canadian, I sometimes find it difficult to wrap my head around phrases like “medical debt.”

My country’s health care system is not without its share of problems, but one of the lasting achievements of Medicare has been to sever the whole idea of going to the doctor from anything involving your wallet. When I have had to spend money due to illness (usually on prescription drugs, which are still a significant gap in public insurance coverage), it’s always felt weird and unnatural — kind of like being charged for borrowing a book from the library.

If you’ve even had a taste of a public health care system, the very idea of commodified, for-profit health care doesn’t compute, and concepts like “medical debt” seem dystopian beyond belief.

It turns out, incidentally, that America’s health care regime is actually more dystopian than anyone thought. Thanks to a new study published by the Journal of the American Medical Association, the crippling extent of what untold millions of Americans owe to collections agencies for the crime of getting sick is now coming into view — and the picture looks almost too bleak for words.

In 2018, an investigation of medical debt in the United States pegged the total figure at a whopping $81 billion. The journal’s examination, however, finds that the actual figure is nearly twice that amount, an astonishing $140 billion. In fact, given the limitations of any study of this kind, the figure is probably much higher still, researchers only having access to medical debts held by collections agencies (meaning their findings don’t include debts owed directly to providers).

Nevertheless, through detailed examination of consumer credit reports between 2009 and last year, and data concerning nearly forty million individual cases, researcher Raymond Kluender and his colleagues show that as of June 2020, almost 18 percent of Americans had medical debt. This means, of course, that the situation is even bleaker than it is currently possible to capture. Data from during the pandemic is currently unavailable; given the extent of unemployment and fallen incomes since last year, and reports of increased debt among many Americans, it’s safe to assume medical debt has risen further.

According to the study, the mean amount of medical debt was $429, though it rose as high as $616 in parts of the South. To the financially secure, neither figure probably sounds like all that much. Consider, though, that in January 2020, just before the pandemic hit, less than half of Americans reported having even $1,000 worth of savings in the event of an emergency. The average single deductible is almost twice that amount.

A 2016 study by the Kaiser Family Foundation, meanwhile, suggests that nearly three quarters of those with medical bills end up reducing their spending on food, clothing, and other essentials. As Luke Thibault observed in Jacobin last year, the possession of even a small amount of medical debt can wreak tremendous havoc on a person or family’s life in ways that go beyond a monthly overdraft:

Medical debt can trap its victims in a lifelong Sisyphean cycle. Unpaid medical bills lead to collections agencies, which can hound families to the grave. Getting a job, buying a car, renting an apartment, securing a mortgage, or applying for a credit card can all be made much more difficult. Ruined credit scores can set in motion further snowballing effects, like having to pay outrageous interest rates to payday lenders. Or forgo further medical treatment: in 2019, half of US adults said they or a family member has had to put off care due to cost.

Medical debt, in other words, is a phrase synonymous with economic and personal ruin — one that usually signals impending financial collapse or the imminent rap of a collections agent at the door.

Given the corrosion of millions of bank accounts wrought by the pandemic, the need for radical political intervention in health care has only become even more urgent. In the short term, that means wiping out the travesty of medical debt and sending the collections agencies packing.

In the long run, it means ending the moral evil of profit-driven health care so that phrases like “medical debt” are a thing of the past.