Opinion: Medical debt is cheaper and easier to forgive than student loan debt

Opinion: Medical debt is cheaper and easier to forgive than student loan debt

What if you had to choose between paying for your groceries or paying your medical bills? What if 80 million Americans were in the same boat? What if that choice could disappear for pennies on the dollar?

The statistics are staggering. In March 2022, the Kaiser Family Foundation reported that 4 in 10 adults currently have debt due to medical or dental bills. Half of those in debt owe more than $2,500 and 12% owe more than $10,000. Total medical debt in the United States is over $195 billion.

The consequences are also real: 48% of medically indebted adults have exhausted all or most of their savings, and 40% said they found a second job or worked overtime. Eighty percent said they skipped or delayed care or medication because of cost.

Here in Colorado, the most recent estimate for 2021 is that 733,000 Coloradans have medical debts in collection. Assuming they are all adults, that equates to about 1 in 6 adults in the state. The median debt is $748. All of this translates into hundreds of millions of dollars in medical debt that the Coloradans carry on their collective shoulders.

Philanthropists and governments seem increasingly ready to tackle this problem. RIP Medical Debt is the leading non-profit organization that has developed a medical debt forgiveness model. They use donations to buy debt in bundles, then send letters to the people who owned the debt to let them know that their debt has been canceled and any credit rating implications have been removed. They estimate that each dollar allows them to buy 100 dollars of debt.

Philanthropist MacKensie Scott recently donated $30 million for the work of RIP Medical Debt. In November, the city of Toledo passed legislation to allocate $800,000 of US bailout funding to alleviate up to $200 million in medical debt for its residents.

Should Colorado consider the same? What might state or local efforts look like? The Polis administration has made health care affordability a top priority, and for good reason. Perhaps while the state tries to reverse the tide more broadly, debt cancellation could bring immediate relief to nearly 1 in 6 adult Coloradoans burdened with medical debt. As we head into the legislative season, this is worth considering.

Certainly, there are good questions to ask about the second-order implications. If this is only done once, what about the people who will go into debt in the future? If it’s done on an ongoing basis, will that deter people who are able to pay from doing it? Does this further promote flaws in the health care system? These are legitimate points that deserve to be taken into account in the development of any policy or legislation.

The Biden administration had to weigh many of these same issues and ultimately decided that, overall, it was worth forgiving $500 billion in student loans. There are two reasons why medical debt cancellation is an easier appeal than this decision.

First, a counter-argument to student loan debt forgiveness is that people who take out student loans do so voluntarily. This is debatable given the income disparities between people with and without college degrees, but the consideration has merit.

Medical debt, however, is fundamentally different. No one chooses to have their newborn baby spend a month in the NICU. No one chooses to have a rare genetic disease. The whole concept of health insurance is based on the idea that we are all subject to time and chance and that our best financial defense is to pool our risks.

Second, the medical debt at issue is a debt that went, or potentially would go, to a debt collector. Essentially, the health care provider determined that it was better to get a few cents for every dollar of uncollected debt than to keep chasing it.

Meanwhile, the debt collector assumes that if he buys the debt for, say, three cents on the dollar and is able to collect five cents on the dollar, it’s worth it. Unsurprisingly, this also encourages them to use aggressive collection methods. Yet through this system, debt can be purchased either from healthcare providers or on the secondary debt market at well below its original value, making it significantly cheaper, dollar for dollar, than student loan forgiveness.

And while American medical debt may seem inherently modern, debt forgiveness is also rooted in ancient traditions. A 1999 statement from the United States Conference of Catholic Bishops supporting global debt cancellation reminds us:

“In the Hebrew Scriptures, the Jubilee was to be a time to free slaves, return the land to its rightful owners, and forgive debts… The Jubilee called for a new beginning for the poor, an opportunity to restore justice and equity .

Justice and fairness are hard fought and hard won, but maybe this time around they are also a bargain.

Emily Eelman, of Denver, served as chief of staff for Colorado’s Department of Health Care Policy and Financing from 2019 to 2022, and also previously served in the Health Division of Colorado’s Office of Management and Budget. the White House.

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