‘Nobody Knows What These Bills Are For’

Not long ago, Catherine did something many other people have done. She ignored a medical bill.

Catherine, who asked me to use only her middle name to protect her privacy, is a white-collar worker in Pennsylvania. “About 10—Jesus, 12—years ago, I was diagnosed with Crohn’s,” she told me, which led her to rack up debt, some of it related to her use of a $46,000-a-year IV-infusion drug. After her mother’s death from brain cancer in 2022, she decided to get her life in order. “I’m on this big journey,” she told me. “I had bills going back to an urgent-care visit I made in college. I was going to get on top of it.”

Yet when she started calling hospitals, doctor’s offices, and collection agencies, she realized that nobody could tell her what she was paying for and why she was being charged a certain amount. Some bills had been forgiven; some were miscoded. “I was like, I’m not going to just send you $500 for this random you-know-what,” she told me. “My takeaway was: Nobody knows what these bills are for.” So she did not pay them. She tossed new ones in the trash. She sent unknown numbers straight to voicemail. Getting on top of her debts meant ignoring them.

She wants to pay her bills, she told me; she’s not the type to walk out on the tab. But “it’s like no one even knows how much my procedures are going to cost,” she said. “The whole thing is so convoluted.”

In years past, Catherine’s medical debt would have accumulated late fees and interest. Her creditors might have sued, seizing her assets or garnishing her wages. Her credit score would have plummeted, making it hard or even impossible for her to rent an apartment or buy a home. Some doctors might have refused to give her care. Some companies might have refused to employ her. But now, all of Catherine’s debts might not augur much of anything. A quiet, confusing revolution is happening in the world of medical debt, one that—and I cannot believe I am typing this—actually bodes well for consumers.

[Read: What happens when you don’t pay a hospital bill]

Medical debt is not like other debt. The stuff is omnipresent: Two in five American adults owe something to a health-care provider, and 3 million people each owe more than $10,000. But this is largely a financial burden dumped on consumers, not chosen by them. People often have no idea how much a medical procedure might cost, what their insurance might cover, or how much they might end up owing. Shopping around is rare and difficult to do, and sometimes—if you’re brought to a hospital after an accident, say—impossible. Billing offices fudge the numbers they send to insurers and patients, taking into account who’s paying, for what, where, how, and when. Half the time the bill is wrong.

That does not stop hospitals from sending debts to collectors or going after patients themselves. Nearly 60 percent of bills in collections are medical bills, and more than half of the debts on consumer credit reports are medical debts. Debt collectors buy bills and quietly “park” them on credit reports, to pressure individuals to pay up once they realize their score has dropped. “Americans are often caught in a doom loop between their medical provider and insurance company,” Rohit Chopra, the director of the Consumer Financial Protection Bureau (CFPB), has argued. “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”

Poor, sick Americans are much more likely to have medical debt than affluent, healthy ones; debt burdens are particularly heavy for the profoundly ill, such as cancer patients. Two in three people with medical debt report cutting back on food and other necessities to try to pay their bills; large shares skip other bills, work extra hours, or delay major purchases. Many avoid or delay getting more medical care. In extreme cases, medical bills have led Americans to lose their home.

That is just one way our broken medical system is broken: In a country in which most adults have insurance, and in which most pay hefty out-of-pocket costs in addition to insurance premiums, many are nevertheless hounded to fork over cash for specious medical charges that do little to shore up the health system’s finances but a lot to trash family budgets and crush sick people’s souls.

Ten years ago, an Occupy Wall Street–inspired nonprofit called RIP Medical Debt (now going by the name Undue Medical Debt) began publicizing how horrid this all was, while buying up medical debt from collections agencies and forgiving it. The debt abolitionists have erased $14.2 billion in debt owed by 8.6 million people, and counting.

[Read: Americans are going bankrupt from getting sick]

The relief had more muted financial effects than many consumer advocates had hoped: A randomized control trial showed that it had no impact on recipients’ credit access, did not relieve measures of financial distress, and did not improve their mental health. “We were surprised,” Neale Mahoney, an economist at Stanford, told me. “And, frankly, disappointed, because these are people who are struggling, and if there was a scalable way to make their lives a little bit better, that would be awesome.”

But the nonprofit was nonetheless successful in raising awareness of the issue and setting the groundwork for policy change. In early 2022, municipal governments began purchasing and erasing medical debt, using money from the COVID-era American Rescue Plan. Cook County, Illinois, used $12 million to erase up to $1 billion in debt; New York City spent $18 million to forgive $2 billion for half a million residents; Washington, D.C., wiped out $42 million.

Private industry made changes too. In early 2022, Equifax, Experian, and TransUnion, the country’s three major credit bureaus, announced that they would not put medical debts on consumers’ credit reports until the bills were a year old. Shortly after, VantageScore removed medical debt in collections from its credit-scoring model. And in 2023, the credit bureaus declared that medical bills under $500 would no longer appear on credit reports at all. These companies were not changing their policies out of pure altruism, but with the understanding that medical debt is not a great predictor of creditworthiness, anyway: Getting hit by a car is not the same thing as buying a Corvette with a credit card.

The policies governing medical debt began shifting as well. Federal agencies are eliminating the consideration of medical debt when underwriting loans such as government-backed mortgages and small-business loans. Colorado, Rhode Island, and other states barred medical bills from credit reports. New York prohibited hospitals from putting liens on people’s homes and garnishing their wages; Delaware forbid companies from foreclosing because of medical debt; Florida and Virginia made it harder for providers or collectors to sue; Delaware and Maine banned creditors from charging interest on medical bills.

Now a truly colossal change is pending. The CFPB has proposed excluding medical bills from credit reports altogether. The agency has a rule-making process that takes months, but if the changes go into effect as anticipated, $49 billion in debt will disappear from 15 million consumers’ credit reports in an instant.

When that happens, will Americans simply start ignoring their medical bills? Well, no. Depending on the state, hospitals and providers could still sue, foreclose, or affect the chance of a person getting hired or being able to rent an apartment. “All the other ways to collect continue,” a CFPB official told me. “Just because it’s not on the credit report doesn’t mean that it doesn’t exist, and doesn’t mean that there’s no recourse for collecting it.”

Plus, most people do pay their debts if they can. “There’s this theory, this myth, that the American people won’t pay their bills unless there’s a sword of Damocles hanging over them,” the official said. “We just don’t have that same perspective on the nature of the American people.”

Hospitals themselves don’t seem that concerned. I asked the American Hospital Association, the powerful lobbying group, for comment, expecting fierce pushback against the CFPB proposal. A spokesperson instead directed me to a mild statement emphasizing the importance of insurance coverage. (Notably, cash coming from overdue medical bills constitutes as little as 0.03 percent of hospitals’ revenue.)

Still, the financial-protection agency is taking away the main lever—a lower credit score, with all the annoyances and costs that come with it—that debt collectors use to get people to pay up. The CFPB forecasts that the rule change will result in 22,000 additional mortgages being approved a year.

Even if consumers end up protected from harassment over their medical debts, they would be better off not accruing them in the first place, health experts told me. Sara R. Collins of the Commonwealth Fund, a health-care-policy think tank, described the underlying issue: First, hospitals charge too much, too opaquely, for medical services, and do not provide enough financial assistance to low-income patients, even when required to do so by law. Second, insurance coverage is not nearly comprehensive enough for lower-income Americans. “We still have about 25 million people who are uninsured, and they have high rates of medical debt,” Collins said. “But the big issue is people are underinsured, with high deductibles or high out-of-pocket costs relative to their income.”

Fixing those issues would be far more difficult and expensive than writing off past-due debts and scrubbing credit reports. The medical-billing system remains “impossible to navigate,” Catherine told me. “If someone could tell you up front how much health care would cost, that would change the experience. For me, that would make the numbers real.” For now, she is planning on just ignoring the numbers and enjoying her health.