President Joe Biden’s campaign promise to cancel the first $10,000 of student debt on federal college loans has sparked debate about the fairness of such loan programs. While more than half of Americans in a June poll supported forgiveness of the massive debt that higher education creates, 82% said making college more affordable was their preferred approach.
But little public attention is on our nation’s — at least statistically — a larger, broader debt crisis: an estimated 100 million people in the U.S., or all adults 41% of people have health care debt, while 42 million people have student debt.
Millions of people burdened with medical debt should be helped, because medical debt is a uniquely unfair form of predatory lending, and because of its devastating cascading effects on American households reaction.
Unlike college tuition or other types of debt, medical expenses are usually not something we can think ahead and decide (yes or no) to cover. They are forced upon us by disease, accident and doom. Healthcare usually has no predictable upfront costs, and there is no cap on the amount we may owe. And, given the prices in our health system, if hospitalization costs more than the family home is worth.
When it was time for my kids to choose a college, I knew upfront was almost entirely its cost. We can decide which different tuition fees are “worth it”. We created a plan to pay this amount using money saved in a bank account, college savings plans, some financial aid, student work, and some borrowed money from grandparents. (Yes, we have enough resources to make financially considered choices.)
Think about the difference between education debt and health care debt. In one case described by KHN, parents of twins born at 30 weeks faced out-of-pocket costs of about $80,000 for neonatal intensive care and other care not covered by insurance. In another case, the spouse of a couple who went to the emergency room with a bowel obstruction required multiple surgeries and ended up owed $250,000. They had to declare bankruptcy and lose their home. Even smaller bills can lead to damaged credit ratings, cashing out retirement accounts and taking on a second job; half of U.S. adults in the survey said they didn’t have the cash to pay for an unexpected $500 medical bill.
When “taking on” medical debt, patients simply sign the kind of vague financial agreement that is ubiquitous in American healthcare: “I agree to pay for what my insurance doesn’t cover”, Shown on a stack of forms signed upon arrival at the emergency room or doctor’s office. But no one can adequately consider options or say “no” to care in pain or medical distress, or even properly agree to pay an unknown amount.
Student debt can create hardship because it hits people who have just started their careers with salaries at the bottom of the payroll, forcing them to put off life choices like buying a home or starting a family. But medical debt often comes with all this plus medical distress: In a KFF poll, one in seven people with medical debt debt said they were turned away by a healthcare provider because of unpaid bills. Sometimes a bill for just a few hundred dollars can turn into a collection nightmare.
The federal government has stepped in to help student loan borrowers. It suspended student debt payments during the pandemic, and the Biden administration announced it would forgive tens of thousands of public sector workers. Late last year, the Ministry of Education announced it would no longer contract with external debt collectors, but would instead handle loan defaults and potential defaults on its own to better “support borrowers”.
Often outsourced to aggressive private agents and the for-profit medical debt collection industry; few guardrails. Recently, the consumer credit bureau said it will no longer charge small medical debts to credit reports and cancel medical debts that have been paid. For many, this will take years. About 18 percent of Americans with health care debt said they never thought they would be able to pay off the debt.
Ironically, medical debt is sometimes repaid in large amounts by charities, such as RIP Medical Debt and church groups, who will pay pennies in dollars to make patients’ outstanding medical debts disappear. The absurdity of the solution was revealed when comedian John Oliver paid $60,000 for Americans’ $15 million debt in a late-night stunt.
But medical debt is no joke now hurting the vast majority of Americans. The government can act in the short term to ease this uniquely American form of misery by buying debt at modest prices. Then, it needs to address the root cause: a health care system that refuses to provide enough care to millions while still being the most expensive in the world.
