The consequences of unpaid medical debt

By Christopher Wolfington 

It is no secret that medical care in the United States is expensive. As a result, many individuals, even those with strong insurance, can come home with a large bill after an extended stay at a hospital because of an accident or illness. Such debt is shockingly common. According to a report by the Consumer Financial Protection Bureau, almost 43 million Americans have outstanding medical debt, which represents over half of all outstanding debts. The average person with some sort of overdue medical bills owed $1,766.

For many, these large bills are difficult—sometimes even impossible—to pay. So, many simply don’t pay them. That reality has consequences for everyone involved. Here are three of the consequences of the millions of dollars of unpaid medical debt in the U.S.

Credit score woes (link to previous credit report piece)

Unpaid medical debts can have a negative impact on credit scores. While recent policy changes have lessened the negative impact of medical bills on credit scores, as there is a 180-day waiting period before they can start to appear, credit card debit in collections can stay on your report for seven long years.

This negative impact on credit reports is no small issue. These reports are fundamental in the process of purchasing a new vehicle or in purchasing or renting housing, both of which are big factors in one’s quality of life. Ultimately, poor credit makes loans more expensive, and difficulty paying for those loans can lead to more negative impacts on a credit report and a downward spiral.

Getting care? Better be careful

You’ve stayed at a hospital for multiple weeks and were unable to pay the bills. As a result, you have tens of thousands of dollars in debt to the hospital. Now, you have a major health issue again, but that hospital won’t let you in. You owe too much.

That’s not fiction. That’s reality, at least for privately-owned hospitals. More and more, hospitals are making decisions valuing payment before patient health. Some are even refusing treatment unless the patients pay up front. Debt and payment is not the first thing that you think of when you’re sick and need care, but it is absolutely part of the equation.

More expensive for everyone

A simple economic principle is that if something is more expensive for the supplier, it becomes more expensive for the consumer. This is true in the healthcare system as well. Outstanding medical debt that is not eventually collected for the payment of services simply makes it more expensive for everyone else. If rental car agencies didn’t collect half the cars they rented, the price to rent the cars would get higher. And yet, if the price of renting a car was so high as to be almost unpayable anyway, the incentive to not return the car would grow as well. As a result, the problem compounds upon itself—at least without startups and innovators crafting creating ways to help.