Medical debt is a lose-lose situation. It harms not only borrowers but providers as well. It’s important to be aware of these various harms so that both borrowers and providers are motivated to avoid medical debt as far as practically possible. 

The most obvious way in which medical debt affects patients is that it can become a serious source of stress and anxiety. When financial worries are chronic, this can then negatively impact one’s physical health. Indeed, there are many studies on the negative effects of medical debt on people’s health.

Research shows that debt and debt-related collections practices can cause stress, leading to risky health behaviors like smoking, increased alcohol consumption, and poor nutrition. It has been reported that some collectors use threats of legal action and jail time as an intimidation tactic, despite there being no legal basis for a lawsuit. These kinds of aggressive debt collection practices can further increase stress.

There is also evidence highlighting that people who have medical debt or trouble paying their medical bills are more likely to suffer from:

• High blood pressure
• Worse self-reported health status
• Poorer mental health
• Shorter life expectancy

Medical debt can affect health outcomes, exacerbate already poor health outcomes, and worsen health disparities by:

• Impacting economic stability and mobility
• Reducing the use of and access to medical care
• Limiting access to neighborhoods with environments – with features like access to parks and green spaces – that encourage good health

But whether or not a medical debt is related to someone’s health outcomes, we know that people with such debt are less likely to access needed health care or prescriptions than those without. Reasons for avoiding treatment can include fears of incurring additional debt or healthcare providers refusing service until pre-existing bills are paid.

This kind of debt can, moreover, have negative effects on people’s economic circumstances. Medical debt can hurt your credit history and credit scores. If you don’t pay an unpaid medical pill within a certain timeframe, your credit score can be reduced for seven years (even if you pay off the debt). 

Credit scores themselves relate to factors that contribute to your health, including:

• Housing
• Employment
• Access to transportation
• The ability to access credit that allows you to build wealth

If medical debt hurts your credit scores, making it harder to stay afloat or get ahead, then your overall well-being could be affected. 

Many people struggling with unexpected medical bills and medical debt report having difficulty paying other bills and meeting their basic needs, like paying for food, housing, clothing, and utilities. 

Medical debt may lead to cycles of debt. People who face issues paying medical bills are more likely to have credit card debt, student loans, car loans, and payday loans (controversial short-term loans, with often very high interest). For some people, a single unexpected medical bill can make it harder to pay off other debt, making it necessary to take out loans, creating further debt, and so on. It becomes a vicious cycle.

The other major risk facing those with debt is lawsuits. Like all creditors, health care providers and debt collectors can sue people in civil court for unpaid bills. These lawsuits can inflate the costs of the original debt by adding on court costs, attorney’s fees, and interest. 

Providers Are Harmed by Medical Debt, Too

While it may be assumed that health care providers only serve to benefit from medical debt, say, by charging interest, there are some ways in which they suffer too from this kind of debt. 

Firstly, if health care providers or debt collectors decide to take someone to court for not being able to pay their medical bills, they will also have to cover court costs and attorney’s fees. Of course, depending on the scale of the debt, providers and debt collectors may find it’s in their interest – despite the time and costs involved – to file a lawsuit.

Providers are also negatively affected by debt because of the increased strain this puts on the health system. If this type of debt is worsening people’s overall physical and psychological health, then this means health care providers will have to allocate more resources for dealing with the additional or exacerbated health issues that people in debt face. Since this means extra costs and work pressure, it is in the interest of health care providers to ensure that patients aren’t forced into debt from the very beginning.

The Problem With ‘Debt’

According to Michael Waterbury, CEO of Goodroot (a community of companies committed to reinventing healthcare), the term ‘debt’ carries judgment. It implies someone chose to put themselves into debt. However, no one chooses medical debt. It’s something that happens to you. Even if you have comprehensive health insurance, all it takes is something like a single car accident or a cancer diagnosis to plunge you into six-figure debt.

Describing this phenomenon as ‘medical debt’ can divert accountability from the major players in the system. Waterbury argues:

“If you are part of the healthcare industry, understand that it’s up to us to fix this. Most people in this complex industry can see some small way to make it better. You owe it to yourself and to our country to bring those ideas to life, whether that’s within your current role or by finding or creating a new one. We can do better. We have to. And it starts with taking responsibility.”