As Americans Reel from Medical Debt, States Prescribe New Bills

The rising cost of health care is a top concern for many Americans. It is estimated that as many as 40% of Americans, or approximately 100 million people, are burdened by health care debt because of medical or dental bills in the United States. A 2022 Consumer Financial Protection Bureau report stated there was $88 billion in medical debt on consumer credit reports.

According to a 2022 poll conducted by the Kaiser Family Foundation (KFF), more than half of U.S. adults report that they have gone into debt due to medical or dental bills, with around one in five Americans stating they don’t expect to ever pay off their medical debt. But medical debt is not just impacting Americans’ financial security and overall well-being. Around one in seven Americans state they have been denied access to care due to unpaid bills, preventing their access to critical care.

As medical debt becomes a crisis for a growing number of Americans, federal action on healthcare reform remains stalled in a divided Congress. In the absence of federal legislation, state legislatures across the country are acting. From legislation to protect consumers from the effects of medical debt, to bills to establish medical debt relief programs and require greater transparency in the cost of care, at least a dozen states are leading the effort to protect residents from the dire consequences of medical debt as health care costs continue to rise.

Just last month a groundbreaking consumer protection took effect in Colorado. The new law, which is the first of its kind in the country, protects Colorado residents with medical debt by prohibiting the inclusion of medical debt information on credit reports. A separate law in Colorado, which was also passed this year, capped the interest rate on medical debt for state residents at 3%. As a result of this new law, Colorado now has one of the lowest medical debt interest rates in the country.

These two legislative initiatives – reforms to medical debt interest rates and impacts on credit scores – are also being considered by several other states. This year, New York lawmakers passed a similar measure to Colorado prohibiting medical debt from impacting credit scores, while North Carolina lawmakers currently consider a proposal that would cap medical debt interest rates at a 5% interest ceiling.

Other state proposals to address the medical debt crisis include legislation to create medical debt relief programs. These programs are currently being considered in states including Pennsylvania, Arizona, and New Jersey. Legislation to protect critically important personal property, like cars, from medical debt collectors is also being considered in states like Florida and Massachusetts.

While states continue to legislate in response to federal inaction, Americans are left with a patchwork of legislation, which may force the federal government’s hand to create a more level playing field for American families.

Last week, the Biden Administration announced its plan to prohibit medical debt from affecting Americans’ credit reports, which would be a significant step forward in addressing this problem on the federal level. However, the proposal is not likely to be developed until next year. This announcement is expected to face industry opposition and will likely stir up debates on legislative proposals on the medical debt issue at the White House and on Capitol Hill in the near future.