A new report from the Urban Institute reveals that more than one in seven nonelderly adults live in families with medical debt that they cannot afford to pay. The report shows that low-income families are most affected by medical debt, with nearly two-thirds of adults affected by past-due medical debt having incomes below 250 percent of the federal poverty line. Most of the past-due medical debt is owed to hospitals, with nearly three-quarters of affected adults owing at least some debt to hospitals.

The report also finds that adults with past-due medical debt to hospitals tended to owe more compared to those with non-hospital medical debt. Moreover, about 61 percent of adults with past-due medical bills to hospitals reported that a collection agency contacted them about the debt.

Although non-profit hospitals are required to establish financial assistance policies and provide charity care to eligible patients before attempting to collect patient financial responsibility, many patients who likely qualify per hospital policies do not receive charity care. On the other hand, for-profit and public hospitals can implement their own strategies for collecting patient financial responsibility, including using a collection agency, filing lawsuits against patients, and even garnishing their wages.

In recent years, state lawmakers have gone after aggressive medical debt collection tactics, with some states modifying laws to prohibit healthcare providers from placing liens on an individual's primary residence or garnishing wages to collect medical debt. The Biden Administration has also promised to protect consumers from aggressive medical debt collection tactics through several reforms.

Although many healthcare organizations offer financial assistance programs and payment plans to ease the burden of patient financial responsibility, lack of insurance and low income hinder the effectiveness of some collection strategies. Research also shows that adults with past-due medical bills are at elevated risk of skipping medical care in the future. The Urban Institute suggests that expanded access to hospital charity care and stronger consumer protections could complement coverage expansions and other efforts to mitigate the impact of unaffordable medical bills.