Treatment For The American Healthcare Debt Crisis

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Healthcare debt has become a burden and a scourge for many American families and a sensible healthcare debt proposal that squares relief with fairness and feasibility is desperately needed.

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According to the Consumer Financial Protection Bureau, half of all overdue debt on credit reports in the United States is from medical debt. American households now carry a staggering $17.5 trillion in debt and healthcare-related debt is a troubling and rapidly growing subset of this total.

According to Liz Hamel and her colleagues at the Kaiser Family Foundation, 26 percent of adults in the United States between the ages of 18 and 64 disclosed that they or someone in their household either had issues paying or were completely unable to pay medical bills in the last year. A survey by the Commonwealth Fund of 193.5 million U.S. adults between the ages 19 and 64, found that 24 percent reported problems paying, or an inability to pay, medical bills in the prior year.

Among major economies, this is a distinctly American problem because of our equally distinctive — and outlier — healthcare system. Millions of families are uninsured, and those that are insured increasingly have deductibles as high as $3,000 or $5,000. In a country where the Federal Reserve reports that four in ten adults would have difficulty covering an unexpected $400 expense, unplanned medical expenses and surprise medical bills can trigger a debt chain reaction that puts a household in arrears on credit cards, auto loans, student loans, mortgages, and other debt.

Healthcare debt totals are hard to quantify since they can appear in different loan categories: credit extended by hospitals, credit cards, bank installment loans, credit union loans, and others. Our best estimate is that total healthcare debt is in the range of $300 billion to $650 billion.

The Benefits To A Healthcare Debt Relief Program

I propose a straightforward solution that could provide relief of $100 billion to $200 billion. Below are some of the overall benefits to a healthcare debt relief program:

  1. Reimbursement for low-income patients on select expenses.This would provide a means-tested program so that individuals with less than $85,000 in household income could apply for the government to reimburse them for any debt incurred for a select number of critical healthcare expenses — including procedures for diabetes, cancer, and heart disease.
  2. Promote better care and health outcomes.There is a hidden cost to the exorbitant price of healthcare that should be factored into the analysis. The struggle to pay medical bills causes many to defer or skip important medical procedures. As a result, many healthcare problems that could be resolved for a thousand dollars today are compounded through neglect, and cost hundreds of thousands of dollars when treated later, whether under Medicare or another means.
  3. Relieve the burden on healthcare providers, lending institutions and the overall economy.It is important to note that, in addition to providing relief to low-income households, the program would bring significant relief to healthcare providers and lending institutions. It would also bring relief to the economy overall, in the form of healthier citizens and diminished bad debt.

While debt relief for households earning less than $85,000 can a great deal of pressure on many American households, a better and more encompassing solution would be for the government to introduce an overall catastrophic health insurance plan as part of an expanded healthcare initiative. This would cover people for a select set of procedures and reimburse them for deductibles. Better still, the single-payer plan that many advocate would also solve our country’s pertinacious healthcare debt problem. However, it’s worth it to think about healthcare debt relief proposals that aim for something feasible in the short run.

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

The views 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 2020 appointment, he was managing partner of Gabriel Investments. Previously, he was co-founder, chairman and CEO of Energy Plus, an electricity and natural gas company. Vague was also co-founder and CEO of two banks and founder of the economic data service Tychos. He currently chairs The Governor’s Woods Foundation, a nonprofit philanthropic organization. His new book is The Case for a Debt Jubilee (Polity Press, Nov. 22, 2021). Learn more at