The Inconvenient Truth About Medical Debt Relief

More than 40% of American adults have medical debt, and almost 60% of those with hospital medical debt had health insurance. It is tempting for policymakers and private entities to provide medical debt relief. Has medical debt relief actually helped people who received it?

To answer this question, four economists have set out Harvard, Stanford, the University of MunichAnd UCLA executed randomized experiments involving 83,401 people. They found “no improvements in financial well-being or mental health through relief of medical debt, reduced repayment of medical bills, and if anything, a perverse worsening of mental health.”

These results came as a negative surprise to many. As reported by The New York Times, the authors expressed disappointment, but they had no intention of “sugar-coating” the findings. They have carefully designed, executed and documented them the studywhich contains extensive appendices of 76 pages.

Medical debt relief can also lead to behavioral changes among hospitals and other providers. If the study it has been documented that individuals who have received relief for past medical debt are less likely to pay subsequent medical bills. This trend may lead providers to create access barriers for low-income patients – such as requiring prepayment at the time of service – and increase commercial prices. This reactions would negatively impact low-income patients, jeopardizing the intended goal of medical debt relief.

Just as prevention is the best medicine, preventing medical debt deserves more effort than alleviating it afterwards. We need to focus on the root causes of medical debt.

First, low-income patients are often unaware of their ability to apply for charity care. American hospitals usually offer this charity care to eligible patients, depreciation or discounting their medical bills. Hospitals design their own charity care policyand a little state rules mandating charity care for certain patient groups. Low-income patients – both uninsured and insured, but exposed to cost sharing – should apply for and investigate charity care policies when using hospital care. Dollars fora non-profit platform, provides national information and assistance to patients accessing charity care.

Higher-income insured patients enrolled in high-deductible plans should note that cash prices are often cheaper than their insurance’s negotiated prices. Journalist Marshall Allen provided guidance on how to leverage cash prizes and carefully reduce medical bills.

Second, high healthcare prices contribute to medical debt. Patients are less likely to have medical debt when prices are low. Competition is the only approach capable of lowering prices, stimulating innovation, improving quality and increasing access. Therefore, government policies that create a level playing field should remove anti-competitive roadblocksAnd reduce compliance burdens for suppliers would put downward pressure on prices.

Insurance reforms that lower premiums and allow patients to personally and directly benefit from lower healthcare prices would also drive down prices. Patients with more control over their healthcare dollars have formidable bargaining power.

Third, low income makes individuals vulnerable to medical debt. The study found that medical debt relief worsened mental health among individuals who received the greatest debt relief, especially when it involved “feeling bad about yourself, like a failure, or of letting yourself or your family down.”

The law of accounting dictates that when an individual or company receives debt relief, the entity must lose assets, give up some ownership, incur new debt, or record a gain. None of these things provide an unequivocal sustainable benefit unless the debt relief is a form of debt relief. payment to reward the entity’s efforts. In this case, the effort improves the entity’s earning capacity. Simply put, when debt relief is not earned through effort but given by others, the entity is less likely to benefit from it in the long run.

Therefore, pro-growth and pro-employment policies that enable healthy adults to earn more income through their efforts would reduce medical debt in a sustainable way. Income, an important social determinant of health, also promotes health and reduces medical needs.

We are indebted to the four economists for conducting this groundbreaking research that exposed the uncomfortable truth of medical debt relief. It is up to the public to ensure that their findings guide evidence-based policy solutions to effectively address medical debt for Americans.