Today, Explained - What fixes medical debt

Episode Date: May 14, 2024

It's gotten so bad in America, people are crowdfunding their doctor bills. Vox's Dylan Scott and associate professor Nora Kenworthy explain an imperfect solution and offer a better one. This episode was produced by Denise Guerra and Avishay Artsy, edited by Amina Al-Sadi, fact-checked by Matt Collette and Laura Bullard, engineered by Patrick Boyd, and hosted by Noel King. Transcript at vox.com/today-explained-podcast Support Today, Explained by making a financial contribution to Vox! vox.com/givepodcasts Learn more about your ad choices. Visit podcastchoices.com/adchoices

Four in 10 Americans are burdened by medical debt, and we're coping however we can. People will cut spending on everyday items like food. They'll cut spending on rent. We certainly hear about people skipping medical services, you know, skipping prescriptions, not going to their annual checkups, not doing follow-up procedures or services because they're worried about the cost. Polling shows that unlike student debt, Americans are not that divided on how we feel about this. About seven in ten of us support some kind of relief. And organizations and individuals are providing that relief.

Two former debt collectors were inspired to tackle the problem and now their nonprofit RIP Medical Debt has wiped out more than $7 billion in debt. We thought, well, instead of collecting on the money, why not forgive it? Recently, some economists asked, how well is this working? We're going to tell you what they found coming up on Today Explained. BetMGM, authorized gaming partner of the NBA, has your back all season long. From tip-off to the final buzzer, you're always taken care of with a sportsbook born in Vegas. That's a feeling you can only get with BetMGM.

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Ontario only. Please play responsibly. If you have any questions or concerns about your gambling or someone close to you, please contact Connex Ontario at 1-866-531-2600 to speak to an advisor free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. This is Today Explained. My name is Dylan Scott, and I am a senior correspondent and editor at Vox covering health.

Dylan, you recently wrote for Vox about medical debt relief. It's become a big thing because medical debt is a big thing. What does it look like? What's it entail? Who's doing it? Tell us everything. So people might remember about a decade ago, the HBO host John Oliver got a bunch of media attention for buying about $15 million worth of medical debt that was debt from about 9,000 people. Debt. It's the reason Nicolas Cage has made so many great choices in recent years. And he just wiped it out. So are you ready to do this?

You are about to watch me give away $15 million. you, Oprah! There's a radio host in Nashville, Dave Ramsey. And that's why we wanted to take this opportunity to show the love of Jesus by taking on the debt of 8,000 people across the country. A total of $10 million of debt. A couple of Christmases ago, he bought a bunch of people's medical debt and forgave it. We bought it and it's forgiven. That's right. We bought some of your medical or your car

debt from a debt collection agency, and it's paid off. There's a group out there. It used to be called RIP Medical Debt. It's now known as Undue Medical Debt. That has systematically been going around to debt collectors who have portfolios of medical debts in collections. And they can buy it for pennies on the dollar. More than half of Americans say getting a bill they can't afford is as scary as a serious diagnosis itself. Our debt is harming us. But what if we could make that debt disappear?

Even some state and local governments have been proactive about this and have bought up the medical debt of distressed citizens and wiped it out for free. I've seen these stories. I mean, I remember when John Oliver did this. I remember when Dave Ramsey did this. To me, this seems like a really good idea, a really generous thing to do.

And yet, we would not be here talking to you today, I think, if all of this was going exactly as planned. How is medical debt forgiveness working broadly? I had the same assumption that you did. And like I've said, I think this is what made medical debt relief really attractive was, here, we can do this really cheaply. It's going to wipe debt out for people. Certainly that has to be a good thing, right? But there is this new study that's been conducted that has called the value of medical debt relief into question. So basically, there's this group of researchers, they're from a number of places, Stanford,

Harvard, University of Munich, actually, UCLA, and they basically partnered with RIP Medical Debt, or now Undue Medical Debt, to run an experiment. And what they did was there was this big group of people, they buy up these massive debt portfolios for really cheap and buy them off. So we had both people who had their debt relieved, people who didn't, people who had had debt for a long time, people who had it for a short time. As insurers work to control health care costs, patients increasingly face high copays and deductibles. For the majority of working Americans who live paycheck to paycheck,

out-of-pocket costs come at a time they can least afford it. And the researchers wanted to see, like, okay, what does this do for people? Are they happier? Are they healthier? Does their credit score improve? Do they just subjectively feel happier, feel more able to cover their bills, things like that. And obviously, everybody expected that we would see these really positive results. We've seen from other kinds of debt relief, whether it's student loans or relief for credit card debt or things like that, that, you know, receiving debt relief does lead to these positive financial and health outcomes. But what was shocking about this analysis of medical debt relief was that none of those positive outcomes actually materialized. There was not really a meaningful change to people's financial situation,

their access to credit, and there wasn't really any meaningful change to their mental or physical health. There was, if anything, there was actually some evidence that some people felt more depressed after receiving medical debt relief than they had felt before. Why? more depressed after receiving medical debt relief than they had felt before. Researchers had a couple of different theories about why this might be. For one, the relief did come pretty long after the fact. They had been carrying their medical debt for like seven years. As one of the researchers put it to me,

they've already felt the scars of the debt collection process. They've been hounded by debt collectors. Maybe they've had to cut spending on other things. That pain has already been felt, and so providing relief for it later maybe isn't making that much of a difference for people. On top of that, the people who received medical debt through this experiment, they didn't actually ask for it. And that's the way that RIP medical debts model works. Like they very explicitly do not accept like specific requests for debt relief, and yet they received it anyway. And why we might think that they would just be like, well, that's great. Now

I don't have this medical debt. There is a fair amount of research that shows that Americans, they often feel like shame if they receive charitable aid or relief from the government. And there's a stigma that's associated with receiving that kind of assistance. And so, you know, as one of the researchers put it to me, like, when we're conducting these surveys and calling these people and saying like, hey, you've received medical debt relief, you know, tell us how it's felt or how it's affecting your finances. We're both reminding them of this really, you know, potentially traumatic experience where they had these medical debts

and were being hounded by debt collectors. You know, we're maybe introducing an opening for that shame or that stigma to creep in. All right, so the study found that people felt worse, they were more depressed, at least some significant number of people. Their mental health did not improve. Did their finances improve, though?

This was the other thing. Not really, on average. There was a pretty negligible increase in credit scores, a couple of points. There was a pretty marginal increase in their credit limits, a couple of hundred dollars. But not like the dramatic improvements that we might hope to see. And like on average, the folks who were involved in the experiment, they're carrying about $28,000 in debt. And the average amount of relief that they received through the experiment was a little

more than $2,000. So like, yeah, that's a meaningful amount of assistance. But at the same time, it's not like it's completely changing your financial situation. The one exception is there was a subgroup of people whose only debts were medical debts. And so basically, through this experiment, all of their debts were wiped out. And they had a slightly larger improvement in their credit score, credit access. Does this mean that this way of relieving medical debt just does not work? So I would say, and I think the researchers would say, and I certainly know groups like Undue Medical Debt would say, that it's premature to just write off medical debt entirely because

of one study. But the findings were, they were sobering, they were surprising, and I do think they've raised questions about, you know, what are the limits of medical debt relief? You know, clearly it's not going to, like, turn people's lives around, especially if we're providing it years after the fact. And it's certainly, you know, it's not going to improve their credit scores, although that's an increasingly moot point because most of the credit rating agencies have agreed to stop reporting medical debt after urging from the Biden administration. and in some cases it can prohibit them from getting a loan to buy a home or even a cell phone. So this would essentially remove that from your life unless you're looking to get another kind of medical loan. And so I think that conversation has really taken off since this study came out. And so like it's better for us to have this information to sort of be able to digest it and confront it and then think about how it might change our approach.

Damn. Where might our energy be better focused? It seems to me preventing this kind of debt from piling up in the first place, right? This many people to this degree. How are we doing that, Dylan? Yeah, so that brings us back to the whole problem, right? We were trying out medical debt relief because it's easier than overhauling the U.S. healthcare system.

And that could take a couple of different forms. It certainly could involve providing more health insurance to people, covering people who are uninsured, providing more generous benefits to the people who do have coverage. There's Medicaid expansion that could be done under the Affordable Care Act, but a bunch of states in the Deep South haven't done it, and that's left like a million people without any accessible insurance options. So that's like, you know, low-hanging fruit that we could take. It's just politically difficult. But we do have a lot of evidence that giving people health insurance does have the positive mental,

physical, and financial effects that we were hoping to see with medical debt relief. About 15 years ago, there was this big experiment in Oregon. And basically, it's called the Oregon Health Insurance Experiment. If people want to look it up, it has become a totemic work in healthcare research. You see it referenced all the time. And what was happening in Oregon back then was they basically had a lottery that allowed certain people to get on Medicaid

for the first time. So we used that draw from the waiting list as a chance to figure out what does Medicaid do to healthcare use? What does Medicaid do to health outcomes? And the results showed that among low-income adults who received Medicaid through the Oregon Health Insurance Experiment, they saw a 9% reduction in depression. Like, we saw all the things that we hope to see happen by giving people Medicaid that

didn't happen with medical debt relief. So if we want to help and we can't really do anything about Medicaid, what do we do? What are the options? Well, I think people are finding that they don't have a lot of good options. And so they're turning to their fellow Americans, to their neighbors, to people that they know, or even to strangers on the internet for help. You've seen a dramatic rise in the last decade, I feel like, of people using websites like GoFundMe or other crowdsourcing options and saying like, hey, I had a medical emergency. I have tens of thousands of Please help me. Dylan Scott of Vox.com. Coming up next, when GoFundMe turns into GoFundYourself. Thank you. to help you save time and put money back in your pocket. Ramp says they give finance teams unprecedented control and insight into company spend. With Ramp, you're able to issue cards to every employee with limits and restrictions

and automate expense reporting so you can stop wasting time at the end of every month. And now you can get $250 when you join Ramp. We'll see you next time. Explained, cards issued by Sutton Bank, member FDIC, terms and conditions apply. Support for this show comes from the ACLU. The ACLU knows exactly what threats a second Donald Trump term presents. And they are ready with a battle-tested playbook. The ACLU took legal action against the first Trump administration 434 times. And they will do it again to protect immigrants' rights, defend reproductive freedom, fight discrimination, and fight for all of our fundamental rights and freedoms. This Giving Tuesday, you can support the ACLU.

With your help, they can stop the extreme Project 2025 agenda. Join the ACLU at aclu.org today. Today Explained. My name is Nora Kenworthy, and I'm an associate professor at the University of Washington Bothell. And I'm the author of a new book called Crowded Out, The True Costs of Crowdfunding Healthcare. How did you come to write about crowdfunding healthcare? Well, my background is in public health and anthropology. And I'm really interested in sort of how people come into medical systems and how they get treated there.

And quite honestly, I stumbled across GoFundMe many, many years ago, back when it was a site where people printed off little flyers for their campaigns and hung them on light poles. And I was just fascinated. And I was noticing how many campaigns on the site, even back then, were for medical needs. What year was that, that people were printing the flyers off of GoFundMe? Like 2013, 2014, so a couple years after the platform launched. Okay, so the platform launches, and within a couple of years, people are using it for this one specific need. And so you decided to look into what's going on, why it's going on.

Tell me about the types of stories that you heard from people who were using GoFundMe or other crowdfunding platforms to deal with medical debt. Yeah, I mean, there are so many stories, but I think we tend to hear stories of platforms like GoFundMe about very popular or very successful campaigns. You know, someone goes viral and gets tens of thousands of dollars and they're set. Their problem is solved. Parks had the treatment, is back to work, and is now approaching nine months cancer-free. And GoFundMe worked for me. And I know it works for a number of other people. But most of the people that I spoke to had much more mixed experiences. So I talked to a young guy named Diego, whose family is a family of farmers in

eastern Washington. And his cousin was in a terrible car accident and in a coma. And he set up a campaign for her because he was worried. He said his uncle was telling him that he would be in debt for life over these bills. And he set up a campaign. And while he felt like the campaign helped, you know, they only raised $1,200. Meanwhile, his cousin was in ICU for months at a time, racking up truly enormous medical bills. So in a case like Diego's, you're telling me ICU for months,

we have to be talking about tens of thousands, right? Yes, if not hundreds of thousands. I talked to other people who had campaigns that were sort of similar to Diego's. I can't pay my dentist's bill anymore. I can't afford food. My rent, my car. I won't be able to work as much due to knowing how the chemo is going to make me feel. If you could please help me out with paying for this,

it would be greatly appreciated due to how I'm trying to save up to go to college for this next winter. And so they're still facing these incredibly large bills that are coming due. I think the other thing that we don't see on the kind of surface level of crowdfunding is just how many people are actually very unsuccessful with crowdfunding. So in 2020, about a third of medical campaigns that we were able to find on the platform GoFundMe actually got zero dollars whatsoever. A third of them didn't raise anything. Anything, yeah. Did you talk to anyone for whom it was an unqualified success?

They asked for a certain amount, they got the certain amount, they're fine now? Yeah, yeah, totally. I, for example, talked to one couple that the husband needed a kidney transplant. Most people don't know this, but actually crowdfunding for transplants has long been a thing in the U.S. because the cost of transplants is so expensive and there's not a lot of programs that will help you pay for them. So they crowdfunded for his transplant and then they found out that actually his wife could be a donor through a donor match program. And so then they needed to crowdfund for her transplant. And they did. They did both. But they also talked about the long-term costs of their

illness. They talked about how much of a burden it put on their families to have to do these two huge crowdfunding campaigns. And they talked about the fact that, you know, both of them were still facing long-term health consequences. And they told me about, like, their worries that, like, they couldn't possibly crowdfund a third time if anything should happen again. So I think there's just a lot of stories out there of how crowdfunding, even when it's successful, can be a challenge. We are trying to get a new heart for our cousin.

I have the opportunity to seek a dual kidney and partial pancreas transplant with Methodist Hospital in Dallas. Unfortunately, this operation is very expensive. Even with Medicare, my copay would be over $50,000. To officially be placed on the transplant list, I need to raise $10,000. It sounds like what you're saying is crowdfunding for medical debt is not working for the most part. It does make people feel better about themselves. I've been part of medical crowdfunding campaigns. I was very happy to do it.

Is there anything wrong with this? Yeah, these are really hard things to discuss, right? Because, of course, we want to do it. Is there anything wrong with this? Yeah, these are really hard things to discuss, right? Because of course we want to help people. Of course we want to be generous with our friends and our family. And I don't fault anyone for either giving to a campaign or needing a campaign. And there are certainly times and places where these campaigns provide really meaningful support to people. What's hidden beneath the surface, though, is that these campaigns tend to provide the most benefit to the people who need help the least. So what we find time and time again is that the most privileged people who turn to crowdfunding are the ones who do the best. Mary Lou Retton's family is asking for prayers this morning after turning to crowdfunding are the ones who do the best. Mary Lou Retton's family is asking for prayers this morning after turning to crowdfunding for what could be a lengthy

and expensive hospital safe for the former gymnast. As of this hour, the spot fund for Mary Lou's medical expenses has raised over $280,000 of its original $50,000 goal. Her treatment is continuing. What, at the end of your book and at the end of the day, do you think that people with medical debt should do? I think that what we're all responding to

is a recognition of the brokenness of our systems, right? That like, how is it possible that we're reduced to this and yet sort of also caught up in the feel-good collective action of helping one person. And so I think that because a lot of times we feel so powerless about the broader systems that have eroded our social safety nets and our health coverage and thrust us into medical debt, we hold on to these stories of one person's hope or one person's problems being solved. And I think that that can be a really profound distraction from some of the

other things that we could be doing in order to change things. One of the more powerful arguments of organizations like the Debt Collective is first that debt itself is fundamentally unfair, especially medical debt. Most people didn't ask for it. They didn't agree to it. They may not have even known the price of things when they went in for care. But secondly, they also quote from capitalist John Paul Getty to remind us that debtors actually have power, so that if you owe the bank $100, it's your problem. But if you owe the bank $100 million, it's the bank's problem. And in this case, organizing debtors to express their power and to express how unfair these debts are is working. Americans are estimated to owe the

bank essentially $220 billion in medical debt. That does have power. But also, this is a problem that we need to solve systemically and politically. And so I think we got to figure out how we can reorganize each other around the idea that everyone is entitled to a certain amount of basic medical care. of that collective duty, right? So as much as it feels good for all of us to contribute to like one person, you know, who's homeless or who walks to and from work, what crowdfunding is also inculcating us with is the idea that we get to pick and choose. We get to pick and choose who gets help and who gets rescued.

And that is completely antithetical to the kind of moral architecture of a more universal health care system where people get care even if they make bad choices or regardless of the color of their skin or how much money is in their bank account. There are new efforts underway in the U.S. Senate right now, a bill to address U.S. medical debt and forgive it. That's, I think, where the real solution to this lies, is in reminding people that this debt shouldn't exist in the first place.

Nora Kenworthy. The book is Crowded Out, the true cost of crowdfunding healthcare. Denise Guerra and Avishai Artsy produced today's show. Welcome, Denise. Amina El-Sadi edited. We were fact-checked by Matthew Collette and Laura Bullard. And Patrick Boyd is our engineer. I'm Noelle King. It's Today Explained. you