The Hunt for Lasting Fixes to America’s Medical Debt Crisis

Note: This transcript has been created with a combination of machine ears and human eyes. There may be small differences between this document and the audio version, which is one of many reasons we encourage you to listen to the episode above!

Dan Gorenstein (DG): America is awash in medical debt. Some 100 million people owe a combined $220 billion in unpaid bills. 

This kind of debt can delay people’s access to medical care, harm their mental health, even send them into bankruptcy. 

So when a nonprofit popularized a cheap, easy way to help — by buying up debt for pennies on the dollar and forgiving it — lots of folks jumped on board.

News clips: There is a new effort tonight by a pair of Denver city council members to wipe out medical debt // We are taking steps to retire medical debt for up to an estimated 1 million Arizonans // It seems the least we can do with this debt I cannot believe we are allowed to own is to give it away. So are you ready to do this? [cheers]

DG: Cities, states and regular people are spending millions of dollars on these relief efforts, but a new study throws a big bucket of cold water on the benefits of this approach.

Today, what researchers found and where experts say we should go from here.  

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

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DG: For years, doctor Henry Harrell felt like he was a part of this problem.

Henry Harrell (HH): Frankly, there’s a lot of people that have been put into medical debt by me and my practice.

DG: Henry’s had a primary care office in downtown Nashville for the last 27 years and dealing with patients behind on their bills has always been one of the harder parts of the job. 

HH: I will get a quarterly report from our office that says, “Here are the patients that still owe you and who do you want to be put out to collections? And who do you want to dismiss from your practice?”

DG: On the whole, Henry says he errs on the side of grace, letting debts linger, continuing to care for patients even when they’re in the red.

HH: There’s not a lot of people that I’ve dismissed from my practice because of debt and those sorts of things because there’s always been that uncertainty about why. You really don’t know the story.

DG: There are times when Henry has known the story. And those stories have given the doctor a deeper understanding of medical debt — how often it’s just one part of a bigger, bleaker picture, like a symptom of a more complicated disease.

HH: The patient three months ago that was on that report, who owed me the most money, I knew that her house had just been destroyed in a tornado. And what would that feel like to suddenly be put out to collections and lose your doctor and you don’t have a home?

DG: So when Henry first heard several months back about churches raising money to forgive their neighbors’ medical debt, he thought, “This is my chance to be part of the solution,” and he figured it’d be a pretty easy sell.

HH: Nashville is kind of a big health care community. So a lot of my church is in the medical care field, either as physicians or as nurses or as health care administrators. And so I anticipated that it would be something that would really resonate with a lot of people.

DG: Their church, West End United Methodist, is less than a mile away from four major hospitals including the largest in the state, Vanderbilt University Medical Center. And Henry was right: Lots of folks were eager to repair harm they felt that they had in some way done, even if indirectly, to their own community.

They got even more excited when Henry told them that for every dollar donated, the debt relief charity they were working with — known at the time as RIP Medical Debt — could buy and forgive up to $100 worth of debt.

HH: To tell people, you know, we raise $10,000, that’s $1 million of medical debt — that kind of blows people’s minds.

DG: $10,000: That was the goal Henry and his church set this March as part of a service project tied to Lent. He announced it with a short blurb in the church’s Monday newsletter with plans to pitch it in earnest at that week’s Sunday service.

HH: That came out the Monday before and by Tuesday, we had already raised $10,000.

DG: In just 24 hours. So Henry raised the bar to $25,000. The group cleared that too. To date, the church has raised $83,000 — enough to erase $8.3 million bucks of medical debt. That would forgive all of the eligible debt in their county — and lots more counties across the state of Tennessee.

For the rest of March, Henry rode the high of a job well done. Then, he got a text.

HH: It was Tuesday, the 9th, at 9:45 a.m. 

DG: A message from a woman at Henry’s church flagging a new working paper about the effectiveness of forgiving medical debt. He searched online for a quick synopsis.

HH: And I saw the Sarah Kliff article in the New York Times.

DG: The story explained that researchers had followed more than 200,000 people [and] randomly forgave the medical debt of some but not others, then compared the two groups. Just over a year later, little had changed.

The topline finding: Forgiving medical debt had failed to improve most people’s mental health or their ability to access medical care, two of the three main measures the researchers set out to study.

The third and most counterintuitive — people’s financial health — that didn’t improve either. In part, because just like Henry’s patient whose house got hit by the tornado, erasing one medical bill does little for people who tend to have a bunch of other financial problems at the same time. And also, because after recent policy changes, many medical debts stopped counting against people’s credit scores. 

The doctor felt like he’d been punched in the gut.

HH: You’re just like this can’t be real.

DG: Says he started spiraling quickly through the five stages of grief. First: denial.

HH: Who’s this article coming from? It’s like, who are these people really? You know, what do they know? Oh, well, it’s from Harvard and Stanford. Okay, well, they’re pretty good.

DG: Next: anger. Without much thought, Henry fired off a feisty tweet, tagging two of the paper’s authors.

Tweet: “OK, for the record @nealemahoney @ray_kluender I’m mad at you…not the most mature response but imagine being a physician who LAST MONTH led your church on a @RIPMedicalDebt campaign that wildly exceeded all expectations & then someone says “seen this?” THAT’S ME.”

DG: Pretty quickly, though, Henry says he reached the fifth and final stage of his grief: acceptance.

HH: When I calmed down and, you know, really thought about this, this is important to know. You know, I’ve been in the practice of medicine [for] 27 years, and there are so many things that make sense that turn out not to be true. And so, I see the importance of understanding what is the true effect of these things. 

DG: Henry still feels good about the fundraising campaign he led. But what he wants now, he says, are some answers.

HH: This problem is still there and the solutions are less clear than we thought. And so what do we do next? 

DG: Yes, what do we do next? Two of the country’s leading experts on medical debt weigh in after the break.

MIDROLL

DG: Welcome back. A major new research study has cast a shadow over one of the most popular approaches to addressing America’s medical debt crisis.

Doctor Henry Harrell is just one of many people this paper has left reeling, wondering what it means for the 100 million Americans still suffering under the weight of unpaid bills. What will bring them meaningful relief?

Serious people trying to answer that include the study’s co-author Stanford economist Neale Mahoney, the guy that Henry had fired that angry tweet at.

Neale Mahoney (NM): Responding to people on the internet is not, like, my M.O. That said,  I’d been there. I’d been frustrated and disappointed when I first saw these results, and, it took us a while to sort of figure out how this evidence could be used for good.

DG: Another person on this hunt is Allison Sesso. She’s CEO of Undue Medical Debt, formerly RIP Medical Debt, the nonprofit that’s forgiven nearly $12 billion of unpaid bills and whose work was the subject of Neale’s study. It’s been hard, Allison says, to reconcile the results with the realities she says she sees every day.

Allison Sesso (AS): I know that it does have an impact on people, because that’s what we’re hearing back from people directly. It is meaningful. And I worry that people will take a black and white view of these results and push down what we’re doing in a way that is not going to help the larger cause.

DG: That larger cause — finding ways to deliver relief to the millions of people struggling to pay their bills — Neale and Allison have dedicated years of their careers to that, one as a researcher, the other as an innovator on the frontlines of this financial crisis. And they both — on their own — have come to similar conclusions about where this disappointing study tells us this work should head next. 

The first takeaway: Relieve people’s debt further upstream. That means wipe it away before the collections process can devour their savings or destroy their credit. Much of the debt forgiven in the trial was 6 or 7 years old, but Allison says her nonprofit is working to buy younger debt now. 

AS: In 2019, 5% of our debt was zero-to-five years old. By 2023, 67% of our debt is between zero and five years old so you can see the massive difference.

DG: Neale’s study ended too soon to measure the impact of that shift, but he says another paper of his supports the change that Allison has made. That older study looked at a large hospital system’s financial assistance program, which reduces or writes off needy patients’ bills immediately after a patient’s stroke or heart attack.

NM: We found comparing those people who barely qualified to those who barely didn’t, that people who had the debt relief from hospital financial assistance were more likely to go back to the doctor [and] they were more likely to get diseases diagnosed and treated.

DG: That’s a big impact, says Neale — about the same level of benefit you see when you give people health insurance after being uninsured. 

NM: Of course, the benefits of health insurance are long lived while the benefits of the financial assistance program we studied only lasted six months. But it does speak to the impact of giving people assistance right when they need it. 

DG: A big question now, Neale and Allison agree, is how soon is soon enough? Basically, how far downstream from someone’s brain surgery or childbirth does forgiving their unpaid bills still make a difference? 

NM: We know that debt relief at the source through financial assistance works. We know that debt relief far downstream doesn’t work. It’s fairly obvious to me that there’s probably a sweet spot in between at the source and further downstream where, you know, we can have meaningful bang for the buck. I think the challenge for us as researchers and the challenge for advocates is to find that sweet spot.

DG: Takeaway two: Figure out who benefits most from this work. Neale’s study found, for example, that forgiving bills did improve the financial health of the small number of folks who still had medical debt showing up on their credit reports. But a variety of industry reforms over the last decade mean fewer and fewer people are in that camp.

So who else could this help?

AS: We are always looking at the numbers and trying to figure out, are there, you know, certain communities we should be targeting?

DG: Allison says her group is constantly experimenting, and in 2022, they opened up their charity to a new pool of people: the middle class. 

AS: We’ve increased our threshold of who qualifies. So it used to be up to 200% of federal poverty, and now it’s 400% of federal poverty.

DG: That’s about $120,000 a year for a family of four up from just $60,000. Research by the think tank Third Way found medical debt actually hits the middle class harder than those with the lowest incomes.

Beyond that, Allison says her group is considering other types of studies that might capture the fuller effects of their charity on people’s lives.

Overall, when it comes to both the who and the how of debt relief, Neale and Allison agree there’s a lot to figure out.

AS: We’re really still in a learning mode. We’re only at the 10-year mark as an institution. These are all questions that we are asking ourselves and are going to continue to examine. I think we have a responsibility to do that.

DG: The third step that could bring people meaningful relief: Policy fixes. While forgiving debt one person [and] one medical misfortune at a time can feel good, it’s ultimately a piecemeal solution to a systemic problem. The ideal solution, says Neale, is preventive policies that protect people from ending up with unaffordable bills in the first place.

NM: People have unpayable medical bills because they don’t have coverage or they have crappy coverage. And, the price is too high. And so those things will not be easy [to] meaningfully change, but I think our study says that those hard things are necessary.

DG: Neale adds that smaller, easier policy fixes can make a big difference too, like recent changes to how credit agencies report medical debt. Allison agrees policy improvements are important and has even added a policy arm to her team, but given that health reforms take time to pass, she says we must continue to bring immediate, even if imperfect, relief.

AS: We are cognizant that what we’re doing is not fundamentally solving the problem. We are clear eyed about that, but we also think people need help today. And so, as we often say, we like to walk and chew gum at the same time. We need both and.

DG: These three takeaways offer some promising steps that advocates and policymakers can take in the wake of an admittedly disappointing study. Allison worries, though, whether there’s the will to take those steps. Her group has spent the last decade bringing attention to this issue, building political momentum, forgiving the debts of more than seven million people.

But a stream of media stories since the study came out have boiled down that work to phrases like “little impact” and “no benefit.” 

AS: I worry that when you put out results like this without the right context and you try to have these debates within just the media it undermines what you should be taking away from it and some of the nuance that’s behind what’s being done. 

DG: Allison says she’s committed to deepening her group’s policy work, buying younger debt and partnering with hospitals to improve financial assistance programs — all things Neale agrees his study affirms are on the right track. 

NM: Allison and her team did the brave thing studying the impacts of medical debt relief. It would have been very easy to dismiss or to deny the results, but instead, I think they’ve thought about them deeply and are thinking about how they can address these problems in more impactful ways. 

DG: As for Dr. Henry Harrell in Tennessee, this study has taught him relieving people’s medical debt — a problem he’s inflicted on some of his own patients — is harder to solve than he and his church had hoped.

HH: I think that ultimately, debt forgiveness is something that we could easily do, and we did. That’s a very merciful thing to do, but part of the inspiration for it was I wanted to start the conversation about the problems with our health care system — the inequities that are in it, the people who are going without.

DG: The lesson Henry says he’s taking from all this: He’s just going to have to work a little harder to help tackle a crisis that derails the health and dreams of millions of people.

HH: In many ways, this is just the beginning of the conversation and hopefully the start of our work.

DG: Yesterday, Wednesday, May 8, Senator Bernie Sanders introduced new legislation that would wipe out all of the country’s 220 billion dollars in current medical debts. Going forward, it would also force hospitals to do more to make financial assistance available before collecting on bills.

I’m Dan Gorenstein. This is Tradeoffs.