With Millions Expected to Lose Coverage, States Look for New Ways to Prevent Medical Debt

Dan Gorenstein (DG): Hop on social media right now and odds are good you’ll find someone upset about being hit with a huge medical bill.

@lifestylewithtrishm: So I just received a $17,000 medical bill. 

@ginnyisgolden: We owe $443.27 for a flu nose swab. 

DG: Many of us have experienced this shock and panic ourselves. Even with insurance, we can struggle to pay these bills.

@ginnyisgolden: Do you know how much gas costs? I don’t have an extra $443 laying around to give you for a nose swab.

@lifestylewithtrishm: Will they see it anytime soon? Probably not. I’m just being honest. Prob-ab-ly not. 

DG: Americans owe more than $194 billion in medical debt, according to one estimate.

That’s enough to buy nearly every NFL football team.

Experts fear far more people will soon end up in medical debt as funding cuts by Congress are projected to leave millions newly uninsured.

Neale Mahoney (NM): People who are struggling with the double whammy of health issues and financial distress if we can take steps to make their lives easier, we’re having the biggest impact on the people who are most vulnerable. 

DG: Today, we check in on our nation’s medical debt crisis, and how researchers and policymakers are looking to minimize its harms.

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

***** 

Was I supposed to get dressed up for this? (Yeah!) Just you? Fancy schmancy. (What the hell?) 

DG: This is ridiculous. 

NM: Don’t I look like a tech founder or something? 

DG: Yeah, you do, but do you want to? 

DG: Neale Mahoney is an economist at Stanford University, out in the land of big tech. 

Neale has become, over the last two decades, one of the nation’s leading researchers and thinkers on protecting consumers from medical debt.

Neale, welcome back to Tradeoffs. It feels like a really important moment to be talking to you. As many as 5.8 million folks could drop their Obamacare plans this year, after Republicans in Congress decided to let enhanced federal subsidies to help pay premiums lapse. 

On top of that, millions more are expected to go uninsured under new federal rules for Medicaid, which start to take effect next year. 

Research and surveys tell us that we can expect more Americans to end up with medical debt.

You’ve measured what this looks like for average Americans, Neale, and I’d like you to walk us through what you found when you looked at debt in collections.

NM: A couple things we documented. Almost 20% of people who have a credit report have medical debt in collections. So that’s hugely widespread.

There are communities in this country where nearly 50% of people have medical debt in collections.

Perhaps the most striking result is if you look at all debt and collections. So from medical bills, from unpaid credit cards, from utilities, from auto loans. Medical debt is more than half of debt in collections. So if a debt collector is calling you up, is knocking on your door, more than half of the time, it’s medical debt. I think that just speaks to how important our health care system is in the financial health and financial distress of Americans in ways that are profound and, you know, troubling in my perspective.

DG: In 2023, the big credit agencies voluntarily took medical debts smaller than $500 off credit reports. 

That’s the same time you were working as a senior White House official in the Biden administration on consumer protection and medical debt. 

The federal Consumer Financial Protection Bureau or CFPB wanted to remove all medical debt from credit reports, something you helped with.

Why such a big focus on credit reporting?

NM: So the reason we have credit reports is to help lenders provide loans to people who are going to repay those loans. And we report whether you’ve been in default on a credit card or an auto loan or in medical debt to help lenders make those decisions.

The CFPB looked into medical debt over a decade ago and found that it is less predictive of somebody’s creditworthiness than other forms of debt in collection. We had a study that came out in 2025 which shows that medical debt has almost zero predictive power. And it makes sense. Medical debt, more than any form of debt, is a symptom of bad luck.

You trip on the stairs and you have to go to the ER. It’s not a signal of overspending on your credit cards and not having your financial house in order.

The second point is, why do we have medical debt on credit reports? And the reason is that debt collectors like to report medical debt to get leverage with us to repay bills. If they report the medical debt, we become scared and we’re more likely to get on a payment plan with them and they can offer to…

DG: It’s a money making opportunity.

NM: Uh, it’s a money making opportunity. And, and look, people who can pay their medical bills should. So I’m not against all forms of leverage for debt collectors. But my view is we set up our credit-reporting system to help lenders determine someone’s creditworthiness. We didn’t set up the credit reporting agencies to give debt collectors leverage to go after medical debt. That’s now how it’s used. Like we may want to give them leverage. But we should be clear eyed about the consequences of doing it through this system. 

DG: In the final weeks of the Biden administration, the CFPB finalized a rule to remove all medical debt from credit reports.

It was quickly challenged in court by the credit agencies, who argued that lenders really do need to know if someone has medical debt to decide whether that person can handle a new mortgage or credit card.

Now, the new Trump administration declined to defend the rule and in July 2025, a judge blocked it from going into effect.

How, Neale, did you feel when you heard that news?

NM: So that July, July 2025, the One Big Beautiful Bill act was signed, which is going to lead to millions of people losing Marketplace and Medicaid coverage. And this rule was overturned in the courts. And I think the combination of people losing coverage. And then one of the safeguards against the downstream effects of people losing coverage was taken away at the same time, made me sort of a combination of sad and angry, but also strengthened my resolve to keep on doing the work that shines light on these issues and what are the most promising tools we have to address them.

DG: I mean, you clearly think that getting medical debt off credit reports, as this Biden rule would’ve done, was one of those promising tools.

What evidence do we have, Neale, about what it means for consumers to remove medical debts from credit reports?

NM: Sometimes the impact is big if you have no other blemishes on your credit report, that will lead to a material increase in your credit score, in your credit card credit limits, in your access to credit. There are other people who have a host of other blemishes on their credit report. Maybe they’ve defaulted on a credit card. They’re behind on their auto loans. For them, removing medical debt is not going to be enough to put them into a sort of more creditworthy category. 

DG: So you’ve got the Trump administration reversing medical debt policies at the federal level. 

Many states are going ahead on their own, doing things like banning medical debt from credit reports and mandating refunds when hospitals collect from patients who qualify for financial aid.  

But the Trump administration and the debt industry are trying to force states to drop those laws, arguing that all states should follow unified federal rules around debt.

With all this swirling, Neale, how would you describe the status of consumer protections for medical debt?

NM: Decidedly mixed. We’ve taken two steps forward, one step back, one step forward, two steps back. But two things give me some optimism. The first is that you talk to your neighbors, you talk to your colleagues at work. They understand these issues are widespread. Even if you have great insurance and you get sick on the road and you go out of network, you can get hit with impossible medical bills.

So I think there’s really widespread recognition of the problem. And then secondly, we’re seeing lots of policy experimentation. We’re seeing action in cities and states, from bold nonprofits. I think through all of that, we’re going to figure out what has the highest bang for the buck and we’re going to be able to address people’s concerns. And, you know, maybe I’m naive, but there does seem like there’s a path forward here to do good policy that addresses a deep and widespread concern in our society. 

DG: And your source of optimism stems from the nation’s collective concern slash potential outrage over this.

NM: Yeah. And a belief in democracy. That if people are really concerned and outraged and we’re listening and we try to fix it, that we’re going to figure it out. 

DG: When we come back, as the fight plays out over how to soften the blow from medical debts, Neale and others explore where policy might actually shrink or even erase the debt itself. 

BREAK

DG: Welcome back. We’re talking with Neale Mahoney, one of the country’s leading scholars of medical debt. 

Okay, Neale, we’ve discussed one approach to easing the burden of medical debt, getting it off of people’s credit reports. 

But even if that happens, as you know, people still have debt. 

I’d like to spend this half of the show talking about a different approach some policymakers are taking, which is eliminating the debt. 

And, you did a major randomized controlled trial on what happened after a nonprofit paid off tens of thousands of people’s old medical bills. 

Your research, as you know, surprised a lot of people. What did you find?

NM: So, the main lesson we drew was that we need to provide debt relief earlier. Our study, we randomly forgave debt at a year and a half to five or even seven years after the precipitating medical event. The debt relief improved their credit scores, credit card credit limits. But we didn’t see any impact on measures of stress, anxiety or people’s self-reported health. 

That contrasts with we did a study working with Kaiser Permanente in Northern California, studying their hospital financial assistance program, where weeks or maybe a few months after a medical event, if your income is below a certain threshold, you qualify for debt relief. And we found that people who just qualify for the program relative to people who don’t, they’re more likely to go back to the doctor. They’re more likely to fill their meds. They’re more likely to get diagnosed and treated for chronic conditions. So, if you intervene quickly enough, you can make a real difference. And so what I’ve been telling people is we need to address the issue closer to the source.

DG: Closer to the source, meaning closer to the precipitating event, closer to when you got that first bill.

NM: Exactly.

DG: So when you look at your research and the work of others, financial assistance from hospitals, health insurance coverage, these are two effective ways to protect people from debt. 

But, and I know you know this very, very well, insurance coverage and hospital financial aid are incredibly tricky. 

Insurance can be confusing. What are my copays? Are my doctors in-network, out-of-network? What pharmacy do I use for my prescriptions? Like how do I actually use this health insurance policy?

And then with hospital financial aid, figuring out how to get it can feel like you’re getting audited, right? You have to paw through your pay stubs, medical records, tax returns. It can be laborious, it can be humiliating. 

You gave this kind of agony a poignant name: the annoyance economy, which maybe even falls short of how awful and terrible this can be. But can you tell us what the annoyance economy means?

NM: Yeah. So it’s everyday interactions, which should be simple, but end up being these drawn out ordeals which waste our time, sometimes waste our money and leave us wanting to pull our hair out. 

There are hoops and hurdles at every stage in the process. Finding an in-network doctor that has availability is difficult. The provider directories are often out of date. The websites are clunky. The types of ordeals you need to go through to receive the financial assistance that nonprofit hospitals are required by law to provide in exchange for their non-profit status, it can be a real drain of time and money and energy, uh, and grind us down.

DG: And this annoyance economy, these frustrations, matters in health care because when I don’t understand my health insurance, they can reject my claim. I don’t get any financial aid if I can’t fill out the application, let alone because I can’t even find the application on the hospital’s website. Is that right? 

NM: That’s exactly right. That’s what we’re concerned about. That, you know, people were already hurt when they got sick. They get hurt again trying to navigate this process.

DG: I’d like to focus on getting financial assistance from hospitals, because as more Americans lose their insurance, this seems likely to become a more important safety net for even more people. What roadblocks do patients face to getting this kind of help and support from hospitals?

NM: I’ll tell you one story. Speaking to a doctor who cared a lot about helping their patients manage the financial side of getting sick and wanted on the back of the bills where they list, if you have problems paying your medical bills, call up this number, go to this website, fill out this paperwork. Wanted that information to be printed not in small font, light gray, but in regular font in black letters and mocked up updated bills and brought it to the CFO, the chief financial officer of the health care system. And the CFO shot this doctor down. 

Of course, there are people in hospital systems and in people in medicine who want to resolve these issues. But sometimes the hospital’s bottom line gets in the way with consequences for patients. 

DG: Obviously many hospitals would argue that they are always trying to do what’s best for patients and financial assistance policies certainly vary from place to place. 

But it’s pretty common for hospitals to make it difficult to get financial aid … and that’s  costly. 

One report found nonprofit hospitals tried to collect at least $2 billion in one single year from patients who likely should be getting financial aid. Neale, what do you see as the strongest options for policymakers? What would you prioritize? 

NM: There’s a term that experts throw around called presumptive eligibility. And what that means is when a patient finishes their course of treatment in the hospital is thinking about sending them the bill, they can, you know, run the patient’s situation through some software and determine, does this person have any ability to pay? And if they don’t, they can sign them up ahead of time for financial assistance. They don’t have to actually squeeze that patient as hard as they can to get payment before deciding that they’re going to provide charity care.

I think this is an area where hospitals could make a difference. We have extraordinary statistical tools. We can identify people who have an extremely low probability of repaying, and we can provide them relief without this stressful and difficult process.

DG: I know hospitals in some states are already required to use presumptive eligibility, other hospitals do it voluntarily, but how it works really varies — who gets screened, when they get screened. 

Do we know anything about best practices here?

NM: Not yet, or not in ways that I’ve seen. I would be eager to see hospitals working on this and sharing best practices, uh, so that we can provide relief to people who need it while still recovering payments from people who can afford it.

People who have the ability to pay, we should get them to pay. But I think over time, the availability of data can allow us to separate out people who can pay from, people who going after them is going to cause a lot of stress and not generate a lot of money for the system.

DG: Neale, thank you for taking the time to talk to us on Tradeoffs.

NM: Always a pleasure.

DG: Neale is far from the only person interested in whether “presumptive eligibility” can help keep people out of medical debt, especially with millions expected to lose their insurance in the coming years.

Across the country, states are starting to require hospitals to implement this advanced screening policy, with some eye-catching results. 

Lawrence Furnstahl: Now that we’re screening everyone, 64% of our patients are eligible for some form of assistance. And this is, frankly, much more than we had anticipated. 

DG: This fall, we’ll be publishing a special series exploring why a growing number of states are turning to presumptive eligibility, featuring original data analysis and the pros and cons of forcing hospitals to provide more charity care.

Make sure you’re signed up for our weekly newsletter to get the latest on our upcoming medical debt series and other reporting that examines potential solutions to health care’s toughest choices.

Sign up at tradeoffs.org. I’m Dan Gorenstein, this is Tradeoffs.