- Laura Berlind is executive director of the Sycamore Institute, a non-partisan public policy research center in Tennessee.
Whether or not you have health insurance, unforeseen medical bills can wreak financial havoc. When those bills go unpaid, it can be even worse.
Like all creditors, health care providers can sue people for unpaid bills or sell the debt to collection agencies. And like other types of unpaid debt, it’s likely to show up on your credit report – used by lenders, employers, utilities, and others to assess your financial reliability.
A unique but common problem
Yet, in many ways, medical debt is unique. Unlike a mortgage or a student loan, most of us don’t go into debt voluntarily for health reasons. The circumstances that lead to medical debt are often things we cannot predict or control, such as emergency surgery, a surprise bill, or a billing dispute between your hospital and your insurance company.
Medical debt is also surprisingly common across all demographic and socioeconomic categories. In 2016, it hurt 1 in 4 Tennessee’s credit reports – the 10th highest rate in America.
While many had thousands of dollars in medical debt, half of those credit histories were under $ 740. However, even small amounts can make progress more difficult by initiating or fueling a cycle of indebtedness and reducing access to jobs, housing and the forms of credit that help people build wealth.
What can policy makers do?
There is no quick fix for medical debt, but Gov. Bill Lee and state lawmakers have a wide range of options to prevent the problem, help people manage it, and mitigate its effects. .
To avoid situations where medical bills go unpaid, they will need to start upfront. One way is to reduce surprise bills that arise when patients visit network or emergency facilities, but are treated by non-network providers.
Meanwhile, getting more Tennesséens registered for health insurance could help them pay better for health care in the first place. Price transparency tools could also contribute to affordability.
The next challenge is to make it easier for people to manage their medical bills. For starters, new rules and monitoring of provider billing and collections could help patients access supports they may already be eligible for, such as insurance coverage or financial assistance and sponsored payment plans. by the hospital.
To help Tennesseans help themselves, policymakers can encourage personal savings and help connect people without bank accounts to traditional financial services instead of more expensive alternatives like payday loans. Likewise, there may be ways to improve access to affordable loans and financial literacy, counseling and coaching.
Downstream, lawmakers also have ways of alleviating the problems of those already in debt. To improve repayment results and reduce stress for Tennesséens with unpaid bills, they could apply existing rules for debt collectors to healthcare providers and affiliates, limit interest rates and update the rules. governing communications from debt collectors.
Addressing certain aspects of debt collection lawsuits could also reduce negative financial and legal consequences. For example, many lawsuits go unchallenged and result in default judgments, even if the basis for the lawsuit is incorrect.
More monitoring of debt settlement services to prevent fraud can also help. Finally, additional limits on how medical debt affects your credit history could ease a significant barrier to financial security and economic mobility. And if all else fails, the charitable approach of paying off people’s debt might at least provide some relief.
What can you do?
The root causes of medical debt are often beyond our control, but the solutions are not. Any of the above mentioned policy options can be achieved if we choose to pursue them. While none alone will solve all aspects of this problem, together they could make a real difference to the roughly 1 million Tennessians with medical debt.
To learn more about each of these options, read Full report of the Sycamore Institute on our website. You can also register for our next event, Medical Debt in Tennessee: Causes, Effects, and State-Based Solutions, October 29 from 5:30 p.m. to 7:30 p.m. at Belmont University.
Laura Berlind is executive director of the Sycamore Institute, a non-partisan public policy research center in Tennessee.