Healthcare Insights: How Medical Debt Is Crushing 100 Million Americans

George Curlee is one of 52 million people or 1/3 of Americans in the workforce who earn $15/hour or less.

Pictured above is George on the day he appeared at a public event at the White House in support of the Consumer Financial Protection Board (CFPB)’s efforts to eliminate medical debt from American’s credit reports.

I had the opportunity to interview George recently about his experience with medical debt and how it has impacted his life. Having suffered an industrial accident, and even though his employer was responsible for his injuries and he carried health insurance, he still accumulated $20,000 in medical debt.

George grew up near Dallas, and spent his life working hard as a full-time warehouse and retail worker.

At one point in his life, he found a job he enjoyed as a fork lift driver in a factory that produced ceramic tile. In time he switched jobs, working on the production line. One fateful day a piece of metal struck him in the foot. He had to have surgery and underwent the amputation of one of his toes.

He had to take a month off of work, and when he returned he went back to driving the forklift truck. He found that due to his accident and surgery, he could not operate the forklift to his satisfaction. He became frustrated with not being able to operate the forklift, grew depressed, and left the job.

“It took me three months to get back on my feet after the toe amputation. There was nursing care for two months to help me walk again. This life saving medical procedure left me with over $20,000 in debt, even with insurance! I avoided doing necessarily follow up with doctors due to not being able to afford the additional needed care.

These were hard times. On top of this, I suffered a great deal of depression due to losing my job during my leave of absence. This medical debt is currently following me. There was a point of time that I was rebuilding my credit. Before the surgery I built it up by over 120 points. With this medical debt on my credit report, my credit score dropped 60 points.

This big drop in score has not allowed me to get my own place. I'm not able to continue to pursue my dream of being a voice actor due to not having proper financial footing to go back to school. I can’t travel and do the things I would like to do. I'm working, but things are very tight financially. The medicine that I need is being paid out of pocket.

After paying my bills I'm often in the negative. There is no money left over to pay off this medical debt. I can’t save money right now- not even towards retirement. To have this medical debt on my credit score means not being able to pursue a better life.”

He went on short term disability for a while, but then found the part time job he holds now at Walgreen’s. He had to return to work to help pay for the house he and his brothers had purchased together.

Through this period, George had to take payday loans, and between those loans and his weekly wages, he attempted to pay back the money he owed the hospitals.

He learned that because of his medical debt, his credit rating was destroyed by credit agencies who learned that he had fallen behind on his payments to the hospitals.

According to the CFPB, 100 million Americans owe $220 billion in medical debt.

George told me that medical debt has had several devastating impacts on his life:

• Inability to borrow money for a mortgage or a car.
• Employers ask for credit reports, and reports that show that an applicant for a position are often rejected due to a poor credit report. This has impacted his ability to find a better job than his part-time job at $15/hour with no benefits working at a Walgreen’s where he lives in Garland, TX.
• Incredible stress that further impacts his health conditions including diabetes. (An additional note: Garland, TX where George lives is near Dallas. Tarrant County which includes Garland and Dallas is a locality with high medical debt and high profit for the health systems in the region.) 

Though George makes very low wages, medical debt is a broadly shared experience by Americans across income groups. Clearly, low wage workers suffer the worst burden, but the problem is pervasive and a broad feature of American life and experience.

Some Background

In an oft-cited study, as many as 66.5% of people who file for bankruptcy blame medical bills as the primary cause. As many as 550,000 people file for bankruptcy each year for this reason. 

This data has been known for many years and has continued even with the passage of the Affordable Care Act.

Lesser known is the amount of medical debt that Americans carry.

What are the causes of this burden on so many?

While more Americans have health insurance today than ever before, coverage has many gaps. High deductibles and narrow networks which prevent patients from seeking health providers of their choice are common causes of accumulation of high cost bills. When patients understandably seek care from a preferred provider, too often that care is not covered.

Most health plans only provide 80% payment for covered costs. 20% patient responsibility of high medical bills can leave people unable to pay their bills.

Approximately 14 million people (6% of adults) in the U.S. owe over $1,000 in medical debt and about 3 million people (1% of adults) owe medical debt of more than $10,000.” 

Additionally, this government report identifies many of the components of medical debt which are completely out of the control of the patient. In most cases these practices are unlawful, but hospitals use these tactics frequently to press patients to pay including:

• Double billing: Companies cannot attempt to collect on medical bills that have already been paid by the consumer, insurance, or a government program such as Medicare or Medicaid. This practice can coerce consumers into paying twice for the same service, causing significant financial harm.
• Exceeding legal limits: Companies must not attempt to collect amounts that surpass federal or state caps, such as those set by the federal No Surprises Act or state laws on “reasonable” rates. These violations can saddle consumers with unjustifiably high medical debts, burdening their finances and deterring them from seeking future care.
• Falsified or fake charges: Debt collectors must not collect on bills that include “up coded” or exaggerated services, or charges for services the consumer did not receive. This deceptive practice can drastically inflate consumers’ medical debts, potentially leading to long-term financial distress or even bankruptcy.
• Collecting unsubstantiated medical bills: Debt collectors must not attempt to collect medical debts unless they are substantiated, which may include having documentation of payments or financial assistance eligibility. Collecting unsubstantiated bills can result in consumers being harassed for debts they do not owe or for which they qualify for financial assistance.
• Misrepresenting consumers’ rights to contest bills: Companies must not misrepresent to consumers that the amount being collected is fully settled, when the payment obligation may be uncertain. Misrepresenting the status of the amount may pressure consumers into paying disputed or negotiable debts.

Paul Sugar’s story is compelling and tragic.

Paul spent much of his life, starting as a child learning about jewelry, living in a small town near Albuquerque, NM. At an early age he earned enough money selling silver and turquoise necklaces to be able to buy a motorcycle. As he became an adult he developed a successful business in the mining and selling of silver and turquoise used in making jewelry.

He also worked at a GE engine plant, but was laid off during the time of industrial downsizing. He also worked for Quest, installing communications infrastructure, but was laid off from that job when Quest was acquired by US West.

So, he returned to his business.

On January 9, 2019 he was terribly injured in a fire in his home.

He is still recovering physically and economically. After losing 66 percent of his skin and getting care at a specialty trauma unit in another part of the country, he ended up owing over $82,000 in medical bills. The medical debt on his credit report means he has not been able to get loans to expand his business and earn more. After the fire, his medical bills were $550,000.

Insurance covered most of it, but it was still more than he could pay. He made payment plans with all of the various bills, but when his credit card number changed some of the automatic payments he had arranged for did not go through, and the bills ended up in collections before he even knew he was behind.

Prior to the fire he always had a stellar credit rating, but since this medical debt it has gone down. In his business it's important to be able to take out short-term loans to resupply the company, but now he cannot do that at reasonable terms and rates. He spent his retirement savings account trying to pay back all of the medical bills, but it just was not enough. Now, he worries about his future. How will he retire? Will he have enough for his daughter's college education? Can he move homes if he needs to?

At one point he needed to replace his car because he and his wife had to travel in 18 hours round trips every couple of weeks to receive prescriptions for pain medication. He was denied the credit to do so.

Our Health Care Professionals are on the Frontlines of the Impact of Medical Debt

Doctors and other healthcare professionals experience firsthand when patients are denied care due to medical debt. This article describes how health systems deny care to patients with medical debt. 

Dr. Matt Hoffman who is a leader in the successful effort to form a union with Doctors Council in 2023 of more than 600 doctors at the Allina Health System in Minnesota, was a whistleblower to the New York Times, about a new policy at Allina. The policy instructed staff to stop providing care to patients with more than $4,500 in overdue bills, going beyond the more common practice of turning such debts over to collection agencies.

He and his fellow doctors protested their health system’s decision to deny patients access to care due to medical debt. Minnesota Attorney General Keith Ellison banned the denial of care for patients based on medical debt.

Some Observations and Lessons

In the course of my investigation into these issues, I had the opportunity to speak with Denise Fleming, VP of Advocacy for WorkMoney. Her organization led an effort to support the Consumer Financial Protection Board to eliminate medical debt from the credit scores of millions of Americans. She and her team collected and submitted over 1,000 comments from individuals around the country, including those of George Curlee and Paul Sugar.

Denise shared with me some stark realities about the crisis that so many Americans find themselves in, almost always through no fault of their own.

Bad credit ratings caused by medical debt:

• Makes getting any loan much more expensive because such loans come with high interest rates
• Employers do credit checks, and poor credit ratings are often used to deny employment to applicants
• Rental companies do credit checks, and often turn down prospective renters based on these poor credit scores

Moreover, common characteristics of the victims of poor credit ratings due to medical debt include:

• 80% of the people who have medical debt are insured
• Most are employed, but have gaps in their medical coverage, including out-of-pocket caps and out of network charges

Denise went on to say: “When people have catastrophic events, they are in no position to choose the care they want. As a result, they wind up in care that is most often out of network and not covered by their health plan. On top of that, ambulance transport is rarely covered”.“People are faced with bills that are incorrect, have double-billings, costs are often inflated, and frankly the bills are just hard to figure out,” she stated.

Denise and her allies are very pleased with the CPFB rulemaking to prohibit medical debt from being placed on people’s credit scores. These rules are in the final stages of implementation. She hopes that the rules will go into effect in the Spring of 2025.

She knows that the banking and loan industry are preparing legal challenges to the rules, and as such, the struggle on this issue could continue for a long time.

Through her work at WorkMoney, Denise believes that the kind of work she and her organization are doing “pulls Americans together in a time of deep division. By bringing people together in common cause, we can develop strong bonds between people with common interests. We must do this because today we are experiencing a breakdown of what it means to be an American.”

Paul Sugar told me that: “Before I had this experience, I was like most other Americans in that I did not know how my experience was actually shared by so many others. But when I think about how all of us can have accidents or diseases, and through no fault of our own we wind up with medical debt that destroys us, I learned that we can stick together about experiences that we share. Back in the 1950’s people did stick together, but now we are divided. We can come together.”

George Curlee told me that having worked most of his life in customer service, he saw the good and the bad in people. “That experience made me realize that we must come together and not allow good and bad to divide us, but allow us to do good for one another.”

Grass roots response and organizing to the medical debt crisis are having a great impact on the well-meaning actions of the CFPB. It is a timely and successful effort at a time when healthcare policy overall needs great reform. Hats off to George Curlee, Paul Sugar, Denise Fleming and WorkMoney for showing the commonality among us, and through the illumination of common interests among people, real change can occur in a time of deep division.

John August is the Scheinman Institute’s Director of Healthcare and Partner Programs. His expertise in healthcare and labor relations spans 40 years. John previously served as the Executive Director of the Coalition of Kaiser Permanente Unions from April 2006 until July 2013. With revenues of 88 billion dollars and over 300,000 employees, Kaiser is one of the largest healthcare plans in the US. While serving as Executive Director of the Coalition, John was the co-chair of the Labor-Management Partnership at Kaiser Permanente, the largest, most complex, and most successful labor-management partnership in U.S. history. He also led the Coalition as chief negotiator in three successful rounds of National Bargaining in 2008, 2010, and 2012 on behalf of 100,000 members of the Coalition.