Dealing with the US debt crisis in the healthcare sector

Health care debt has become a burden and a scourge for many American families, and a sensible health care debt proposal that balances relief with fairness and feasibility is desperately needed.

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According to the Consumer Financial Protection Bureau, half of all outstanding debt on credit reports in the United States comes from medical debt. American households now carry a staggering $17.5 trillion in debt, and health care debt is a troubling and rapidly growing subset of that total.

According to Liz Hamel and her colleagues at the Kaiser Family Foundation, 26% of adults in the United States between the ages of 18 and 64 have revealed that they or a member of their household have payment problems or are completely unable to pay. their medical bills. Last year. A Commonwealth Fund survey of 193.5 million American adults aged 19-64 found that 24% reported payment problems or an inability to pay their medical bills in the past year. .

Among major economies, this is a quintessentially American problem because of our equally distinctive and aberrant healthcare system. Millions of families are uninsured, and those that are increasingly have deductibles of up to $3,000 or $5,000. In a country where the Federal Reserve reports that four in ten adults would struggle to cover an unexpected $400 expense, unforeseen medical expenses and surprise medical bills can trigger a chain reaction of debt that puts a household behind on credit cards, car loans, student loans. , mortgages and other debts.

Health care debt totals are difficult to quantify because they can appear in different categories of loans: credit from hospitals, credit cards, bank installment loans, loans to credit unions, etc. Our best estimate is that the total health care debt is between $300 billion and $650 billion.

The Benefits of a Healthcare Debt Relief Program

I offer a simple solution that could provide $100 billion to $200 billion in relief. Here are some of the overall benefits of a healthcare debt relief program:

1. Reimbursement for low-income patients on certain expenses.This would provide a means-tested program so that people with household incomes below $85,000 can ask the government to reimburse them for any debt incurred for a number of essential health expenses – including procedures for the diabetes, cancer and heart disease.
2. Promoting better care and better health outcomes.There is a hidden cost in the exorbitant price of health care that should be taken into account in the analysis. The struggle to pay medical bills causes many people to postpone or skip important medical procedures. As a result, many health problems that could be fixed for a thousand dollars today are compounded by neglect and cost hundreds of thousands of dollars when treated later, whether through health insurance or otherwise.
3. Ease the burden on health care providers, credit institutions and the economy in general.Importantly, in addition to providing relief to low-income households, the program would provide significant relief to healthcare providers and lending institutions. It would also bring relief to the economy as a whole, in the form of healthier citizens and fewer bad debts.

While debt relief for households earning less than $85,000 may put a lot of pressure on many American households, a better and more comprehensive solution would be for the government to introduce a comprehensive catastrophic health insurance plan into the part of a larger health care initiative. This would cover people for a select set of procedures and reimburse them for deductibles. Even better, the single-payer plan that many are advocating would also solve our country’s ongoing health care debt problem. However, it is worth considering proposals for healthcare debt relief that aim for something achievable in the short term.

Health care costs are a debilitating drag on families, communities and our entire economy. Bold programs to address this challenge are needed now.

The opinions expressed in this article are those of the author and do not reflect the official policy or position of the Commonwealth of Pennsylvania.

About the Author

Richard Vague is Secretary of Banking and Securities for the Commonwealth of Pennsylvania. Prior to his appointment in 2020, he was Managing Partner of Gabriel Investments. Previously, he was co-founder, president and CEO of Energy Plus, an electric and natural gas company. Vague was also co-founder and CEO of two banks and founder of economic data service Tychos. He currently chairs the Governor’s Woods Foundation, a non-profit philanthropic organization. His new book is The case of a debt jubilee (Pity Press, November 22, 2021). Find out more at richardvague.com.