State lawmakers don’t need to fret about medical debt
Sally Pipes
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For years, liberals have demanded that Congress and the White House do something about medical debt, which they say is pushing millions of people into bankruptcy. To date, there has been little federal action on the topic. So some state lawmakers are taking matters into their own hands.
Over the past few months, they’ve introduced or passed measures aimed at easing medical debt burdens in more than a dozen states. A few additional pieces of medical debt legislation are slated for debate in state legislatures in the near future.
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There’s no doubt that the high cost of healthcare is burdensome for many patients. Yet a sober look at the numbers shows that medical debt is not the crisis that liberals claim it to be.
An estimated 100 million people in the United States hold around $88 billion in medical debt, according to survey data from the Kaiser Family Foundation. Those are eye-popping numbers. But of those 100 million people, about one-third have less than $1,000 in medical debt. Nearly 1 in 5 owes less than $500.
That’s not exactly ruinous. More than 20% of those with medical debt who responded to the KFF survey said they’d be able to pay a $500 bill right away. Roughly 15% said they’d put it on their credit card and pay it off when they received their next statement. And more than one-quarter said they’d put it on their credit card and pay it off over time.
Plenty of people use similar strategies for other large purchases. And lots of people willingly take on all sorts of other debts. The average household carries more than $100,000 in debt across credit cards, car loans, mortgages, and other loans.
Put in context, it’s hard to conclude that medical bills are uniquely harmful to people’s finances. Indeed, a study published by the New England Journal of Medicine in 2018 concluded that just 4% of bankruptcies are caused by medical debt.
That doesn’t minimize the difficulty that medical bills can pose for many people. But lawmakers’ proposals to tackle medical debt could make matters worse.
Earlier this year, for instance, Sen. Bernie Sanders (I-VT) renewed his calls for a complete government takeover of the health system. Under such a single-payer system, he argued, healthcare would be “free,” presumably eliminating medical debt.
One need only look to countries with government-run healthcare to see that isn’t the case. Under single-payer systems, patients receive care for free at the point of service. But they pay for it in taxes, long waits, rationed care, and doctor shortages.
The average Canadian family of four, for example, pays nearly $17,000 Canadian dollars (nearly $12,600 in U.S. dollars) per year in taxes just to cover the cost of their government-sponsored health insurance. That family’s total tax bill eats up more than 43% of income.
At the state level, Pennsylvania is considering a measure that would use state funds to buy and forgive medical debt. New Jersey and Connecticut, meanwhile, have already used pandemic relief funds to cancel millions of dollars of their residents’ medical debt.
It’s hardly fair to ask taxpayers to foot the bills of patients who, by and large, have the ability to pay them. How are schemes like this justifiable to the many people who make sacrifices and forgo spending elsewhere in order to cover their own medical debt?
No one likes to pay medical bills. But that doesn’t mean states should just relieve people of the obligation and force taxpayers to swallow the cost — especially given that medical debt just isn’t the problem it’s purported to be.
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Sally C. Pipes is the president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.