Amid increased bipartisan interest from policymakers on the nation’s increasing medical debt burden (estimated to total at least $220B), this week’s graphic examines who holds medical debt and how recent changes to credit reporting have affected them. About 8% of American adults have at least some medical debt, although this percentage is much higher among certain populations including those in poor health, the uninsured, and Black Americans. The 14% of Americans who owe over $10K carry over three-quarters of the nation’s total medical debt burden. In contrast, the nearly 50% of Americans who owe less than $2K are responsible for just 5% of the medical debt total. Reporting changes recently implemented by the three major credit rating agencies have reduced the impact of medical debt on other aspects of consumers’ financial health, but mostly for smaller medical debtholders. By excluding medical debt in collections for less than a year as well as medical debt of less than $500 from appearing on credit reports, the share of Americans whose medical debt affects their credit score has dropped to 5%. The Consumer Financial Protection Bureau proposed a rule in June that would ban the inclusion of almost all medical debt from credit reports, effectively reducing this number to zero. Although removal from credit reports offers a reprieve from the knock-on effects of medical debt, policymakers are increasingly experimenting with direct relief. Much of this activity was spurred by the $7B in American Rescue Plan funds provided to states, counties, and cities to eliminate medical debt, but North Carolina just received federal approval to use its Medicaid program to incentivize hospitals to forgive up to $4B in medical debt for eligible state residents as well as prevent the accumulation of new debt.
