More than half of all U.S. adults say they’ve gone into debt because of medical or dental bills in the past five years. A quarter of them even have health insurance. And while the problem of medical debt is widespread, the burden of medical debt falls most heavily on Black Americans, worsening inequities.
The pandemic worsened inequities. More than half of those infected with COVID-19 are now struggling with medical debt, according to the health care-focused Commonwealth Fund. The fund found a disproportionately burden borne by Black, Latino and low-income people, who were more likely to have jobs exposing them to COVID and are least likely to have affordable health care.
Berneta Haynes, who tracks issues related to medical debt as a staff attorney for the National Consumer Law Center, said this disproportionate burden is driven by and helps fuel the racial wealth gap, leading to devastating financial consequences.
“It's that lack of extra money to deal with those medical debt and medical bills when they come that really sends people down this spiral,” she said. “That small $500 bill can really destroy low-income families’ financial well-being.”
Medical debt storms and wealth gaps
Understanding what creates these disparities requires an understanding of the nature of medical debt, in addition to persistent and pervasive racial health and wealth gaps that fundamentally shape people’s experiences.
“Medical debt is a very unpredictable kind of debt. It shows up when we are least expecting it,” said Haynes. “Your ability to weather a medical debt storm really, truly depends on how much extra money you have, whether it's in a savings account, whether it's equity in your home, if you happen to own a home, and your income.”
Because of a long history of racist laws, policies and practices – including facially race-neutral policies and practices that still undercut Black wealth accumulation – a smaller share of Black Americans have been able to build and maintain the kind of financial cushion to cover the costs of unexpected medical care.
In 2019, the median non-Hispanic Black household had a net worth of $24,100, compared to the median non-Hispanic white household’s $188,200.
Because of these historical and institutional impediments, Black folks have been locked out of homeownership, she said, and they tend to earn lower incomes and are more likely to be uninsured compared to other racial groups.
“So the medical debt storm, when it hits us, hits us really hard,” she said. “Some folks just don't have the disposable income, the savings accounts or parents to fall back on who can provide them a few hundred dollars to cover a medical bill.”
Racial health gaps
And when it comes to medical debt, that racial wealth gap is also tied up in a racial health gap, which stems from a history of discrimination and exclusion denying black people adequate health care.
In southern states, that came in the form of Jim Crow laws; “states that formerly had a lack of hospitals for Black people to receive treatment,” Haynes said.
Research also finds that implicit bias and a host of other factors continue to deliver worse health outcomes for Black people and other people of color when they seek medical care.
Policy choices also continue to undermine Black people’s health in southern states, Haynes said. Texas is one of a dozen states where lawmakers have chosen not to expand Medicaid.
“Black people are predominantly located in the Southern states. That's where we see more medical debt affecting families. And it's also the same region that has failed to expand Medicaid.
In Texas, which boasts both the largest Black population of any state in the nation and the largest uninsured population as well, that expanded Medicaid program would ensure more than a million people, about three quarters of them people of color.
No easy fixes, but some improvements
Haynes explained that programs aimed at helping people pay for care they need but can’t afford often fall short. Often, she said, the eligibility requirements for charity care are so narrow that people who need help don’t qualify, and hospitals don’t always direct patients to programs that could help them.
“These programs are really allowed to operate with little accountability,” she said.
Research has shown that recent declines in medical debt are likely linked to federal pandemic relief money like stimulus checks and an expanded child tax credit that helped families pay off old bills and get out from underneath some of their debt.
Now that most pandemic financial aid programs have lapsed, Haynes thinks it’s possible that medical debts will start going back up.
But recent improvements in laws and policies may help slow the rise, she said.
Texas is one of a handful of states that have limited so-called “balance billing,” which will leave fewer patients with surprise bills for procedures they thought were covered by their insurance plan. A federal law to curb surprise balance billing went into effect in January.
And the three big credit bureaus – Experian, Equifax and TransUnion – say they are no longer including medical debt on credit reports after it’s been paid off, and will now give people a year to address delinquent medical debt before dinging their credit reports.
That announcement came as the Biden Administration’s Consumer Financial Protection Bureau has been publicly scrutinizing practices around medical debt and collections.
Got a tip? Christopher Connelly is KERA's One Crisis Away Reporter, exploring life on the financial edge. Email Christopher atcconnelly@kera.org.You can follow Christopher on Twitter @hithisischris.
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