Who’s carrying medical debt in America? More middle class patients than rich or poor ones

Poverty is not necessarily an indicator of medical debt, according to a new analysis that found the middle class has greater amounts of unpaid health care bills.

Almost 17 million people, or 23.5% of the middle class, had medical debt as of 2020, edging out 22% of lower income people with outstanding medical costs. The figures were part of “Medical Debt Hits the Heart of the Middle Class,” a report by Third Way, a center-left think tank, citing the Survey of Income and Program Participation of the U.S. Census Bureau.

“More than 100 million Americans have medical debt, making it harder for families to pay for groceries, rent, educational costs, and even future medical care. Let’s end it for good,” said the report from Policy Advisor Kylie Murdock, 2022-2023 Economic Fellow Joshua Kendall, and David Kendall, senior fellow for health and fiscal policy.

Income and insurance

The report characterized the middle class as patients with incomes of $50,000 to $100,000 for a family of three, or 200% to 400% of the federal poverty level. The proportion of debt remained across all demographics, including race, ethnicity, education, age, parental and health insurance status.

The middle class level also was nine points more than 12.9% of higher income people carrying medical debt. The researchers noted low-income patients may avoid care or search for lower-cost providers due to lack money, while middle-income families may have less disposable income than higher-income earners to cover deductibles and out-of-pocket costs.

Health insurance is not necessarily keeping middle-class patients out of debt. An estimated 7 million middle-class people without health insurance have the highest rate of medical debt – 31% – but 2 million middle-class patients with health insurance, or 22.5%, also had health care debt, the report said. That compared with medical debt rates of:

• 27.7% for lower income people without health insurance
• 20.8% for lower income people with health insurance
• 23.9% for higher income people without health insurance
• 12.3% for higher income people with health insurance

Relieving debt

Third Way has recommended congressional action on a three-part plan to relieve medical debt across the nation.

• Forgive debt for patients who have adequate insurance through their employer, Medicare, Medicaid, or the national and state-based insurance marketplaces. That could happen through an organization authorized by the U.S. Department of Health and Human Services.
• Refinance bad debt with a provider tax on patient revenues. This is similar to how nearly all states already pay for Medicaid and care for those without insurance. If health systems passed on costs to patients with private insurance, the average hospital bill would go up by 30 cents, according to Third Way.
• Make adequate coverage fully affordable. Third Way has outlined a plan to cap premiums, deductibles, and out-of-pocket costs, while expanding universal coverage to all Americans.