By Liz Nass
Gongwer News Service
Existing efforts for debt forgiveness, including one-off forgiveness and federal regulations on debt, do not go far enough to protect the more than 40 percent of U.S. adults who are dealing with debt from unpaid medical bills, a recent report from the Citizens Research Council of Michigan said.
Although several states have laws on financial assistance policies, billing and collection practices, Michigan has not enacted any of those policies protecting Michiganders from the consequences of medical debt.
Across the nation, 57 percent of adults in households making under $40,000 have medical debt and 26 percent of adults in households making over $90,000 have medical debt. The amount of medical debt around the country varies, but 16 percent of people with medical debt owe less than $500 and 56 percent owe less than $2,500 in total medical debt.
While state-level data is not available for medical debt overall, the level of debt above $250 owed to providers or collection agencies is 9 percent in Michigan – above the national average of 8 percent.
One way state and local governments are trying to decrease those burdened with debt is through grants to nonprofits for partnership efforts, CRC said.
Michigan included $4.5 million in the 2023-24 fiscal year budget for a grant program administered to a non-profit, Undue Medical Debt, to eliminate medical debt to patients with income below the poverty level. The group partners with Wayne, Oakland, Muskegon and Kalamazoo counties, using COVID-19 relief money to purchase debt from creditors for less than it is worth and forgive it.
The programs in those four counties have the potential to eliminate $900 million in medical debt, according to county estimates.
The CRC report said although the existing efforts are helping, there are other reasons to regulate debt and expand forgiveness on the state-level in Michigan. For one, studies on public-private partnerships to forgive debt found the efforts did not improve the beneficiaries' finances, access to credit or physical and mental health, forgiveness usually occurring too late to have not felt the negative consequences of medical debt.
The current federal-focused system also does not protect borrowers from future debt, instead focusing on the past debt like the system around student loan forgiveness.
The report lays out certain policies Michigan could enact, such as requiring hospitals to have financial assistance policies, which 20 other states have codified into law.
Other recommended policies include billing and collections parameters, pointing out the eight states that have a general cap on interest for medical debt, the 14 states that establish preconditions before a bill can be sent to collections and 10 states restricting the reporting of medical debt to credit agencies. Other states have protections on medical debt lawsuits and payments, including 15 states prohibiting wage garnishment on medical debt entirely and three states that have limitations on initiating lawsuits.
The report also recommended the state to require hospitals to have financial assistance policies and ensure patients are made aware of if they qualify for financial assistance before ending up in debt.
Gongwer News Service
Existing efforts for debt forgiveness, including one-off forgiveness and federal regulations on debt, do not go far enough to protect the more than 40 percent of U.S. adults who are dealing with debt from unpaid medical bills, a recent report from the Citizens Research Council of Michigan said.
Although several states have laws on financial assistance policies, billing and collection practices, Michigan has not enacted any of those policies protecting Michiganders from the consequences of medical debt.
Across the nation, 57 percent of adults in households making under $40,000 have medical debt and 26 percent of adults in households making over $90,000 have medical debt. The amount of medical debt around the country varies, but 16 percent of people with medical debt owe less than $500 and 56 percent owe less than $2,500 in total medical debt.
While state-level data is not available for medical debt overall, the level of debt above $250 owed to providers or collection agencies is 9 percent in Michigan – above the national average of 8 percent.
One way state and local governments are trying to decrease those burdened with debt is through grants to nonprofits for partnership efforts, CRC said.
Michigan included $4.5 million in the 2023-24 fiscal year budget for a grant program administered to a non-profit, Undue Medical Debt, to eliminate medical debt to patients with income below the poverty level. The group partners with Wayne, Oakland, Muskegon and Kalamazoo counties, using COVID-19 relief money to purchase debt from creditors for less than it is worth and forgive it.
The programs in those four counties have the potential to eliminate $900 million in medical debt, according to county estimates.
The CRC report said although the existing efforts are helping, there are other reasons to regulate debt and expand forgiveness on the state-level in Michigan. For one, studies on public-private partnerships to forgive debt found the efforts did not improve the beneficiaries' finances, access to credit or physical and mental health, forgiveness usually occurring too late to have not felt the negative consequences of medical debt.
The current federal-focused system also does not protect borrowers from future debt, instead focusing on the past debt like the system around student loan forgiveness.
The report lays out certain policies Michigan could enact, such as requiring hospitals to have financial assistance policies, which 20 other states have codified into law.
Other recommended policies include billing and collections parameters, pointing out the eight states that have a general cap on interest for medical debt, the 14 states that establish preconditions before a bill can be sent to collections and 10 states restricting the reporting of medical debt to credit agencies. Other states have protections on medical debt lawsuits and payments, including 15 states prohibiting wage garnishment on medical debt entirely and three states that have limitations on initiating lawsuits.
The report also recommended the state to require hospitals to have financial assistance policies and ensure patients are made aware of if they qualify for financial assistance before ending up in debt.
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