US Collection Agencies Trying To Recoup $140B In Consumer Medical Debt

Medical debt in the U.S. is more than any government department was aware, with collection agencies trying to recoup debts totaling some $140 billion, The New York Times reported on Tuesday (July 20), citing a new JAMA study.

Healthcare debt is now the biggest source of American debt in collections and largely aligns with states that didn’t take part in the Affordable Care Act’s Medicaid expansion program. The total arrears is almost twice what officials thought. In 2016, total medical debt held by consumers was $81 billion, a previous JAMA study indicated.

“If you think about Americans getting phone calls, letters and knocks on the door from debt collectors, more often than not it’s because of the U.S. healthcare system,” Neale Mahoney, the JAMA paper’s lead author, told the NYT. Mahoney is also a Stanford University health economist.

This latest study takes a deep dive into the information surrounding the 18 percent of Americans who have overdue medical expenses and also includes people without bank accounts or credit cards. The numbers were culled from 10 percent of all credit reports from the credit rating agency TransUnion, according to the news outlet.

Unpaid medical debt was the biggest source of unpaid bills Americans held that was owed to collection agencies from 2009 to 2020. 

The $140 billion debt total doesn’t measure actual monies owed to care providers, since it only takes into account the debt owed to collection companies. Also not included is the rising number of lawsuits originating from hospitals to collect debt, which can bring wage garnishments that often include legal fees. Medical bills paid with credit cards and direct installment payments are also not included, according to the NYT, nor does it include data from the COVID-19 pandemic.

Previous research has shown that states participating in the Medicaid expansion program were less likely to have people buried in medical debt. Expansion states give low-income adults medical coverage without overhead for premiums and deductibles. 

PYMNTS research has shown that fraud has cost healthcare insurers close to 12 percent of annual revenues. U.S. medical insurance companies have to make shareholders happy and tasked corporate employers and workers to prevent rate hikes.

The June Healthcare Payments Innovation Playbook by PYMNTS, done in collaboration with Rectangle Health, found that nearly 21 percent of respondents paid the entire cost of their most recent medical visit out-of-pocket.