Biden’s Band-Aid On Medical Debt

The Biden administration took new steps yesterday to reduce the burden of medical debt — but the moves don’t address its underlying causes, and may have unintended consequences.

Why it matters: The vast amount of medical debt in the U.S. is a direct reflection of the fact that many Americans can’t afford deductibles and other out-of-pocket costs, but also can’t forgo needed care.

Driving the news: The actions announced yesterday include a Health and Human Services Department evaluation of providers’ billing practices, which couldfactor in how much federal grant money they get. The administration is also directing all agencies to eliminate medical debt as a factor for participation in credit programs.

  • The administration argues that medical debt is a bad predictor of whether someone will pay other bills, since health care often isn’t a choice, unlike credit card debt or car loans.
  • “No one in our nation should have to go bankrupt just to get the health care they need,” Vice President Kamala Harris said yesterday.
  • “Having medical debt because you were sick or injured should not lower your credit score and make it more difficult to secure the help you need to get out of debt,” she added.
  • The administration’s actions follow last month’s announcement by private credit reporting agencies that they will soon no longer include most medical debt on credit reports.

Between the lines: Health insurance reduces the likelihood of someone receiving a bill they can’t pay. That means that increasing the number of people with health coverage or preventing providers from sending patients surprise medical bills for out-of-network care — policy actions touted yesterday by Biden officials — reduce the threat of medical debt.

  • But an increasing number of insured Americans can’t afford deductibles, copayments or other out-of-pocket costs that are rising with the underlying cost of care.
  • More than 40% of households don’t have enough liquid assets to pay typical private plan cost-sharing, according to a recent KFF analysis.

Reality check: Taking some of the bite out of medical debt doesn’t prevent it from accruing in the first place, and it could have unintended consequences.

  • “Policymakers should be cognizant of potential unintended consequences that could undermine some of their goals. Lenders may find ways to proxy for the hidden medical debt or try to avoid consumers likely to have them,” said the American Enterprise Institute’s Ben Ippolito.
  • “These policies may also reduce payment rates, which could affect providers’ willingness to treat certain patients,” he added.

What they’re saying: “Hospitals and health systems do more than any other part of the health care field to support vulnerable patients: Our doors are always open, regardless of a patient’s ability to pay,” said Stacey Hughes, executive vice president of the American Hospital Association. “We look forward to learning more about this new initiative from the administration.”

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