By KIM BELLARD
Among the many things that make me angry about the US healthcare system, at the top of the list is healthcare systems sending their patients into debt collection or even suing them (especially when they are “non-profit” and/or religious organizations). . , which we should expect to behave better).
There is no doubt that healthcare debt is a major problem in the United States. Studies have found that more than 100 million people have medical debt, many of whom don’t believe they will ever be able to pay it off. The Kaiser Family Foundation estimates that Americans have about $220 billion in medical debt, with 3 million people owing more than $10,000. It is often cited that medical debt is the most common cause of bankruptcy, although it is not entirely clear whether this is actually true.
So you might think that helping pay off that debt would be a good thing. But it turns out it’s not that simple.
A new study from the National Bureau of Economic Research (NBER) by Raymond Kluender et. found, among other things, that paying off people’s medical debt did not improve their credit scores or their financial distress, but rather made them do so fewer They will likely have to pay future medical bills and have not improved their mental health.
“We were disappointed,” Professor Kluender told Sarah Kliff The New York Times. “We don’t want to sugarcoat it.”
The researchers worked with RIP Medical Debt, a nonprofit that buys medical debt “for pennies on the dollar,” to identify people with such debt, and then compared people who had been helped by RIP Medical Debt with those who had it didn’t help. One group of people had hospital debts that were about to be sold to a collection agency, and another group had debts that had already been sent to collections. And perhaps to illustrate how little we understand our healthcare system, they asked medical debt experts what their expectations were for the experiment.
To everyone’s surprise, debt payoff made no difference between control and deleveraging groups. Ie,
- “In none of our experiments do we find average effects of medical debt forgiveness on financial outcomes in the credit bureau data.
- We similarly estimate economically small and statistically insignificant effects on other measures of financial distress, credit access, and credit utilization.
- We find that debt relief results in a statistically significant and economically meaningful reduction in payment of existing medical bills.
- We estimate statistically insignificant average effects of medical debt relief on measures of mental and physical health, health care utilization, and financial well-being, with “inverse sign” point estimates for mental health outcomes compared to our previous one.
In summary:
Our results contrast with evidence on the effects of nonmedical debt relief and evidence on the benefits of upstream medical bill relief through hospital financial assistance programs. Our findings also contradict the views of the experts we interviewed, policymakers’ pronouncements on financing medical debt relief, and the self-assessments of medical debt relief recipients.
Amy Finkelstein, a health economist at MIT and co-director of J-PAL North America, a nonprofit group that partially funded the study, told Ms. Kliff: “The idea that maybe we could get rid of medical debt, and it would wouldn’t cost that much money but it would make a big difference was appealing. Unfortunately, what we’ve learned is that it doesn’t look like it’s having much of an impact.”
If it just could be that easy.
To be clear, there were three key statistically significant effects:
- “small improvements in credit access for the subset of people whose medical debt would otherwise have been reported to the credit bureaus,
- slight reduction in payments of future medical bills and
- worsened mental health and focused on those who received the most debt relief and those who received calls to raise awareness and the importance of the intervention.”
The authors admitted they did not anticipate the mental health impact and did not have a good explanation, but their “preferred interpretation is that recipients of the cash payments viewed the transfers as insufficient to bridge the gap between their resources and needs to close, which increased the importance of their finances. “They suffer from stress and damage their mental health.”
Neale Mahoney, an economist at Stanford University and co-author of the study, told Ms. Kliff: “Many of these people have a lot of other financial problems. Removing a red flag simply doesn’t make them suddenly a good risk from a lending perspective.”
The authors concluded:
Nevertheless, our results are sobering; They show no improvements in financial well-being or mental health from medical debt relief, reduced repayment of medical bills, and, if any, perverse deterioration in mental health. Furthermore, aside from minor impacts on credit access for those whose medical debt is reported, we are unable to identify ways to target relief to subpopulations that expect significant benefits.
On the other hand, Allison Sesso, executive director of RIP Medical Debt, told Ms. Kliff that the study contradicted what the group had regularly heard from those it had helped. “We’re hearing feedback from people who are excited,” she said.
As statisticians would say: anecdotes are not data.
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Eliminate medical debt appears like an idea that you can’t lose. A number of states and local governments have adopted medical debt elimination programs (most operate through RIP Medical Debt), and a number of others are considering doing so.
Last fall, the Consumer Financial Protection Bureau initiated a rule that would remove medical bills from credit reports. It’s also loud NPR“punished medical debt collectors, issued stern warnings to health care providers and lenders who targeted patients, and published reams of reports about how the health care system is undermining Americans’ financial security.”
Director Chopra admits, “Of course there are broader things we probably want to change about our health care system, but this has a direct financial impact on so many Americans.”
If nothing else, the new study should remind us that our healthcare system is best at alleviating problems rather than solving them. The issues we should address include: why so many fees are so high, why people aren’t better protected against them, and why more Americans don’t have enough resources to pay their bills, especially unpredictable bills like this of health services?
I’m glad RIP Medical Debt is doing what it’s doing, but let’s not kid ourselves that it solves the problem.
Kim is a former e-marketing manager at a major blues plan, editor of the defunct and lamented magazine Tincture.io, and now a regular THCB contributor