According to research, the share of people with medical debt on their credit reports has fallen in the past decade!
Over the past decade, fewer people have medical debt showing up on their credit reports. Despite this improvement, unpaid healthcare costs still weigh heavily on many individuals and families.
According to the Urban Institute, the percentage of Americans with medical debt in collections dropped from 19.5% in 2013 to 5% in 2023. This decrease is largely due to the major credit bureaus removing paid ones from credit reports and delaying the reporting of unpaid debts in 2022 and 2023. However, the median amount of medical debt in collections increased during this period, rising from $842 in 2013 to $1,493 in 2023.
The states that saw the biggest drops in medical debt in collections from 2021 to 2023 were mainly in the South (West Virginia saw its rate drop from 25.8% to 6.7%). In 2023, Colorado had no debt in collections due to a state law that banned credit bureaus from including them on credit reports. States with the lowest levels of debt in collections included Minnesota (0.7%), Hawaii (1.2%), Vermont (1.2%), and Washington (1.4%).
Health Care Affordability Issues
The Consumer Financial Protection Bureau proposed in June to ban medical bills from credit reports, which could potentially remove up to $49 billion in debts. KFF – a nonprofit organization that provides health policy research – showed that people with medical debt are often financially vulnerable in other areas. Among adults with debt, 72% carry a credit card balance, 68% have no emergency savings, and 58% are just getting by financially.
Adults with debt are also more likely to overdraw their checking accounts, be contacted by debt collectors, and use payday loans or pawn shops. Matthew Rae, associate director of the Health Care Marketplace Program at KFF, pointed out that medical debt often leads to other financial troubles and can be a cause of bankruptcy, especially when combined with an inability to work.
“There’s an increasing recognition that most people have health insurance, but lots of people can’t afford health care. We’ve got to think about affordability differently”, said Rae.