Medical debt 'doom loop' regularly plagues Americans, CFPB report details
Medical debt keeps worsening for Americans around the country.
A new report from the Consumer Financial Protection Bureau (CFPB) found that U.S. consumers hold $88 billion in medical debt as of June 2021. Medical debt also accounts for 58% of all third-party collection tradelines (i.e., the credit accounts listed on a credit report).
Most medical debts are under $500, though the report did note that many of the individuals with this type of debt have multiple collection accounts. This can affect how Americans receive health care as well as other aspects of financial well-being, like access to credit.
“When it comes to medical bills, Americans are often caught in a doom loop between their medical provider and insurance company,” CFPB Director Rohit Chopra said in a statement. “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”
'They want to avoid the costs'
Part of the problem is that health care costs have largely increased over the past decade.
A report from the Commonwealth Fund found that health insurance premiums and deductibles for Americans with employer-sponsored coverage accounted for 11.6% of the median income in 2020, a 9.1% increase from 2010.
These high costs often leave consumers forced to make a difficult choice — seek the care they need and risk falling into debt or defer care in order to save money.
“What we’ve found that it does for people with lower and moderate incomes is that it’s a disincentive for people to get care,” Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, previously told Yahoo Finance. “People with higher deductibles are less likely to get health care when they need it because they want to avoid the costs associated with it. We also know that when people do get health care when they have high deductibles, they’re more likely to report they carry medical debt or are having difficulty paying their medical bills.”
The CFPB report found that Black and Hispanic individuals are more likely to have medical debt, along with young adults and low-income individuals. This is partly due to the fact that uninsured individuals or those receiving out-of-network care are faced with higher charges since there is no insurance company to shoulder some of the cost.
Medical debt is also more prevalent in the southern half of the United States, particularly in states that haven’t adopted the Medicaid expansion offered by the Affordable Care Act (ACA). Those in debt who live in non-expansion states have on average $375 more in debt than those in states that did expand Medicaid and are more likely to report difficulty in paying off the balance.