• Medical debt is an enormous social and economic problem, affecting millions of Americans.
  • Nearly 40% Americans with annual household incomes below $50,000 report problems paying medical bills.
  • In 2012, 41 million adults (or about 22%) were contacted by a collection agency for unpaid medical bills. This does not include an even larger number of Americans whose medical debt is still held by hospitals and medical providers.
  • 55% of those with medical bill problems report debt of $2,500 or more.
  • Medical debt represents more than half of the debt collected by debt collectors[1]

• Medical debt robs Americans of opportunity, worsens poverty and health.
  • Medical debt, including existing aging or “zombie” debt*[2], affects people’s credit rating. One black mark due to medical debt reduces credit ratings by 30 to 100 points, resulting in higher loan costs or worse: no car loan, lost job opportunities, rental apartment refusal or a declined mortgage.
  • Struggling families have difficulty paying off medical debt, compounding the negative effects on credit and lost opportunities over time. The typical medical debt remains on credit reports for several years.
  • Medical debt can lead to personal bankruptcy. Over 60% of bankruptcies are caused by medical debt.
  • Among insured households with medical debt, over half put off getting health care or do not fill a prescription. Even fewer uninsured households with medical debt get necessary care.

• This is a systemic problem that burdens both the uninsured and insured.
  • Two-thirds of medical debt is caused by a one-time or short-term medical expense such as a hospital stay or an accident. The remaining one-third is related to treatment costs for chronic conditions, such as cancer, heart disease, or diabetes, that have built up over time.
  • While medical debt disproportionately afflicts the uninsured, insured Americans are not immune. A landmark study noting the relationship between bankruptcy and medical expenses found that 75% of in “medical bankruptcy” had health insurance coverage at the onset of illness.
  • Among the insured, the shift towards higher deductibles exposes Americans to greater financial risk, resulting in greater risk of medical debt and negative health-.
  • Though not intended, some proposed healthcare reforms may exacerbate this problem.[3]

[1] Ernst & Young, The Impact of Third-Party Debt Collection on the National and State Economies, Feb. 2012. The study found that medical debts constituted 52.2% of the debt collected by debt collection agencies – more than twice as much as credit card and other financial debt.

[2] Unlike “fresh” medical debt (resulting from costs incurred within the last 12 months), zombie debt is uncollected debt that is out of statute and charged off the books but that has been sold and bought by debt collectors on the debt market. This debt often impacts the most vulnerable. Debt collectors buy this debt at pennies on the dollar, then search for individuals to repay part or all of this debt. This often “revives” the debt, impacting credit and financial security. In a national study of debt-buyers, nearly 25% of debt acquired from the original creditor and more than 60% of debt purchased from other debt buyers was over three years old at the time of purchase. These data likely underrepresent the scope of zombie debt in existence.

[3] See Report on “Strong Medicine Needed”, National Consumer Law Center, 2014