- Christopher Robertsonlaw professor1,
- Steffie WoolhandlerProfessor Emeritus23,
- David U HimmelsteinProfessor Emeritus23
- 1Boston University School of Law and School of Public Health, Boston, Massachusetts, USA
- 2City University of New York at Hunter College, New York
- 3Cambridge Health Alliance/Harvard Medical School, Cambridge, MA
Americans are swimming in medical debt, or more accurately, drowning in it. And, if the November 8 election results in Arizona are any indication, they’re angry about it. Proposition 2091, a ballot initiative to determine whether Arizona should impose limits on debt collection for medical bills, garnered the support of nearly three-quarters of voters.2 This lopsided margin is particularly striking in a state whose government has long been controlled by Republicans and where the votes in the 2022 midterm elections were nearly evenly split between Republican and Democratic candidates.
The Arizona initiative continues the trend for American voters to embrace progressive health reform policies for an individual state that their Republican-controlled legislatures had resisted. In the November election, for example, South Dakota became the last jurisdiction to use a popular vote to extend Medicaid coverage to low-income people, after states such as Idaho, Missouri, Nebraska and Utah. Like Arizona’s Proposition 209, these votes suggest a disconnect between American politicians and many of their constituents.
US patients may incur medical debt either because they lack health insurance coverage (11.4% of Arizonans; 8.6% of Americans nationwide)3 or because their health insurance policies insurance expose them to substantial costs through deductibles and co-payments4, which federal law allows up to $15,000 (£12,600; €14,600) per year for families. As a result, Americans carry a total of at least $88 billion in medical debt, and it’s the most common negative item on credit reports.5
For Arizonans, Proposition 209 does nothing to reduce the amount of medical debt they incur, but it does mitigate the consequences. The most notable provision of the proposal caps the interest rate on medical debt at 3% (or a percentage pegged to the yield of US Treasury bonds). Nevertheless, federal law allows domestic banks to export higher interest rates from the states where they are licensed. Therefore, if Arizonans place medical expenses on a credit card or incur medical debt with another domestic lender, that debt will not be affected by the 3% cap. Nevertheless, for Arizona healthcare providers who do not persuade a patient to pay with credit offered by a third party (thus implicitly becoming the creditor themselves), the 3% cap will apply when the provider will attempt to collect the debt or sell it to a third party.
Proposition 209 includes several debt collection reforms, and these apply broadly, not just to medical debt. Debt burdens can always affect people’s health, whatever the source, as debt is associated with a range of health problems67 and can compromise access to healthcare, housing and food security, which are important social determinants of health8.
The proposal also protects a portion of debtors’ assets and income, making them “exempt” from debt collection. Exempt asset classes include the value of homes, household furnishings, cars, and savings. In each of these cases, the proposal raised the threshold amounts that are sheltered from debt collection and set them to adjust upwards with inflation. Given that housing prices have risen dramatically in the United States, and cars are essential for getting to work in places like Arizona where public transit systems are weak, these reforms are important.
With respect to the income of indebted individuals, creditors (such as hospitals) were previously allowed to obtain a court order requiring employers to “garnish” a worker’s/debtor’s wages, sending up to 25% of the disposable income from the debtor to the creditor. Proposition 209 dramatically reduced this limit to 10%, more than halving the amount that can be extracted by creditors before it reaches the worker. The proposal also doubled another threshold that may be higher, exempting wages up to 60 times the minimum hourly wage for each full-time working week from debt collection. Starting in 2023, that wage is expected to be $13.85 an hour in Arizona.9 If an Arizonan works full-time for 50 weeks a year, the first $41,550 would be completely protected from debt collectors. This is much more protection than the 10% limit.
These kinds of exemptions from asset seizure and wage garnishment will not solve medical debt and all the problems that come with it. Even if it is uncollectible, the debt remains on a person’s file and therefore may continue to impinge on their health and access to credit for later medical care or other necessary expenses, such as housing or transportation. Only federal bankruptcy law can discharge debts permanently, but this comes with its own expense and stigma and can result in a lengthy process that many people in debt are unable to complete.
Proposition 209, however, makes it less lucrative for health care providers to sue patients for unpaid bills. A 2022 study of the 100 largest US hospitals found that only 26 of them used legal procedures such as wage garnishments to pursue medical debts from patients. laws permit), reforms such as Proposition 209 may discourage hospitals from doing so, as they risk recovering less.
While Proposition 209 is a significant effort, these types of changes cannot replace the United States’ implementation of a simpler, more humane system of universal and robust health insurance coverage. One can imagine a world where consumer medical debt does not exist, but Americans do not live in it.
We thank Boston University law student Margaret Houtz for her research assistance.