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Medical debt is the leading cause of bankruptcy in America

I don't believe this is true. Some sources that claim by pointing out that on over half of bankruptcy proceedings involve medical debt, but that doesn't mean the medical debt was the problem - in bankruptcy you discharge essentially all the debts you have, including smaller ones that were not really the cause of the bankruptcy. Do you have any sources in mind that medical debt is actually the main driver here?

over 100 million Americans struggle with medical debt

I also don't believe this. In fact I think it is contradicted by one of your links, which says:

Approximately one hundred million people in the United States, or 41 percent of all US adults, currently have healthcare/medical debt, according to a national survey report by the Kaiser Family Foundation ... Fifty-nine percent of those polled said they expected they could pay off their medical debt in two years or less.

Since many people have debt but don't struggle with it, the number who struggle is presumably considerably less than 100 million.

Layla S

May 11 2023

"Two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall." https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html This results from several factors: Having to take time off work for medical treatments (the United States does not offer paid sick leave in all states), having to change work schedules/reduce hours, and the costs of treatments themselves. https://www.cnbc.com/2022/06/22/100-million-adults-have-health-care-debt-and-some-owe-10000-or-more.html This is directly from the Kaiser study which found that medical debt impacts 100 million Americans. Overall, an estimated 41% of people — or about 100 million adults — currently face such debt, ranging from under $500 (16%) to $10,000 or more (12%), according to a report from the Kaiser Family Foundation. Using $2,500 as a base level, 56% who carry medical and/or dental debt owe below that amount and 44% owe that much or more. However, some of that medical debt may not have shown up in past estimates or surveys. For example, some is on credit cards (17% of adults are paying that way) or is being paid off over time directly to a doctor, hospital or other health-care provider (21%). For instance, 63% with current or recent debt (within the past five years) said it caused them to cut spending on food, clothing and other basics — including 51% of those with annual household income above $90,000. Nearly half (48%) with such debt said they used up all or most of their savings to pay it off.

LarksMay 12 20234

"Two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall." https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html

First of all, this is weaker than your original claim, which is that medical debt (not medical issues more broadly) was the leading cause, and secondly CNBC is mis-citing the underlying study, which only asks about whether something is a contributor, not if it is a "key" contributor:

The majority (58.5%) “very much” or “somewhat” agreed that m

... (read more)

Jason

May 11 2023

"Medical issues" is much broader than "medical debt" though. In general, I'd say this is helpful in showing that medical debt is a problem, but not that this organization's programs are effective. Debt on a credit card, that is being paid on, or on which the creditor intends legal action isn't the kind of stale debt that is going to be sold for a penny on the dollar. The harms described above have already happened before RIP MD gets involved.

See in context

RIP Medical Debt

by Layla S

May 10 20231 min read 13

0

Global health & developmentLess-discussed causesUnited States

Frontpage

This is a linkpost for https://ripmedicaldebt.org/learn/

1 in every 2 Americans struggles between paying medical bills and affording their basic needs. Medical debt is the leading cause of bankruptcy in America and it is estimated that one in three, over 100 million Americans struggle with medical debt. As someone with endometriosis, I have experienced medical debt myself. As a social work student at Columbia University, I know the toll that medical debt takes on my clients.

disclaimer: I am not affiliated with this organization, I'm sharing this voluntarily but I know of their work and thought it would be of interest to the EA community.

RIP Medical Debt is a nonprofit that buys debt for pennies on the dollar and eliminates this debt for families in need, no strings attached. Families are chosen based on data: households that earn less than 4x the federal poverty level (varies by state, family size) or whose debts are 5% or more of annual income are the organization's priority. On average, every $100 donated clears $10,000 in medical debt.

Medical debt is an important issue for people with disabilities and chronic illnesses who are more likely to visit medical providers, need specialized treatments, and overall have a higher burden of care compared to individuals in good health. Many patients with medical debt will avoid seeing medical providers and delay important screenings because they are scared of incurring more debt.

I have linked some resources below for anyone interested in learning more about medical debt and the toll that it takes on people. Looking forward to hearing everyone's thoughts!

https://www.cssny.org/news/entry/predatory-medical-debt-collection-practices-by-hospitals-must-end

https://pubmed.ncbi.nlm.nih.gov/22352364/ (The Intersection of Medical Debt and Predatory Lending among Hispanics)

https://nonprofitquarterly.org/eliminating-healthcare-debt-a-liberatory-approach/

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LarksMay 11 20236

Medical debt is the leading cause of bankruptcy in America

over 100 million Americans struggle with medical debt

I also don't believe this. In fact I think it is contradicted by one of your links, which says:

Approximately one hundred million people in the United States, or 41 percent of all US adults, currently have healthcare/medical debt, according to a national survey report by the Kaiser Family Foundation ... Fifty-nine percent of those polled said they expected they could pay off their medical debt in two years or less.

Since many people have debt but don't struggle with it, the number who struggle is presumably considerably less than 100 million.

Layla SMay 11 20231

This results from several factors: Having to take time off work for medical treatments (the United States does not offer paid sick leave in all states), having to change work schedules/reduce hours, and the costs of treatments themselves.

https://www.cnbc.com/2022/06/22/100-million-adults-have-health-care-debt-and-some-owe-10000-or-more.html

This is directly from the Kaiser study which found that medical debt impacts 100 million Americans. Overall, an estimated 41% of people — or about 100 million adults — currently face such debt, ranging from under $500 (16%) to $10,000 or more (12%), according to a report from the Kaiser Family Foundation. Using $2,500 as a base level, 56% who carry medical and/or dental debt owe below that amount and 44% owe that much or more.

However, some of that medical debt may not have shown up in past estimates or surveys. For example, some is on credit cards (17% of adults are paying that way) or is being paid off over time directly to a doctor, hospital or other health-care provider (21%).

For instance, 63% with current or recent debt (within the past five years) said it caused them to cut spending on food, clothing and other basics — including 51% of those with annual household income above $90,000. Nearly half (48%) with such debt said they used up all or most of their savings to pay it off.

LarksMay 12 20234

"Two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall." https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html

The majority (58.5%) “very much” or “somewhat” agreed that medical expenses contributed, and 44.3% cited illness-related work loss; 66.5% cited at least one of these two medical contributors—equivalent to about 530 000 medical bankruptcies annually.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6366487/

I also wonder if there is some social desirability bias in the responses here, where medical debt is less shameful to admit to than things like imprudence, gambling or drug addiction.

JasonMay 11 20232

"Medical issues" is much broader than "medical debt" though.

In general, I'd say this is helpful in showing that medical debt is a problem, but not that this organization's programs are effective. Debt on a credit card, that is being paid on, or on which the creditor intends legal action isn't the kind of stale debt that is going to be sold for a penny on the dollar. The harms described above have already happened before RIP MD gets involved.

JasonMay 11 20235

Prior discussion of this organization here: https://forum.effectivealtruism.org/posts/FiJZduXnddAGSveAC/mackenzie-scott-s-grantmaking-data

Layla SMay 11 20230

Thanks for sharing! I am new and did not see it. Have a good night!

Milan Weibel🔹May 11 20234

EDIT: Other commenters have pointed out reasons why the elimination of debt sold really cheap is unlikely to affect much the lives of recipients. Still, if the debt relieved did in fact significantly help the beneficiaries, it could turn out to be very effective. However, we won't know until RIP releases recipient outcomes data.

TL;DR: About as cost-effective as GiveWells's top charities, IF my assumption about outcomes is broadly right. $14.16 to provide debt relief to one person. If one assumes a lifespan increase of 0.2% (less than two months) as the effect (by preventing healthcare avoidance), it comes out to $7080 per death-equivalent-in-lifespan averted. I recommend looking further into it, particularly with respect to outcomes.

Hi Layla, welcome to the Forum! Thanks for posting!

This looks like an interesting opportunity. Within the cause area of health in the US, RIP seems to have chosen a big and tractable problem, and to be triaging their beneficiaries according to the relevant metrics.

Here is my attempt to have a rough idea about RIP's cost-effectiveness.

RIP claims that it has "helped 5,492,948 individuals and families" and has relieved $8,520,147,644 of medical debt. The average debt relieved per recipient is thus $8,520,147,644 / 5,492,948 = $1551. If, as you say, "every $100 donated clears $10,000 in medical debt", then the cost per recipient is $15.51 (!!!).

I was initially skeptical of this calculation, but it checks out. In its 2021 year end report, RIP says that it relieved debt to 1,312,697 people during the year, and in its 2021 financial statement declares total expenses of $18,587,272. So the cost per recipient is $18,587,272 / 1,312,697 = $14.16.

It's hard to estimate the benefit from medical debt reduction. Let's say, for the sake of simplicity, that the avoidance of medical treatment and mental health problems derived from struggling with medical debt make people live 0.2% shorter lives (1.92 months if starting out with an 80-year lifespan), and that the debt relief provided eliminates that effect. It follows that preventing 0.002 death-equivalents costs $14.16, and thus preventing one death-equivalent unit of lifespan reduction costs $7080. This is about as cost-effective as GiveWell's most recommended charities.

This would be huge if true. However, my priors advise me against getting too hopeful. It should be hard to find a charity about as cost-effective as GiveWell's top charities. RIP has been assessed by Charity Navigator, and does a fair bit of marketing. It would be weird if no EA had picked this up before. I have reason to believe that I am overestimating the positive effects of debt relief.

To find out whether RIP is really so effective, it would be great to have numbers on the welfare outcomes of debt relief. I found this report on RIP's site, which while a potentially useful qualitative source, makes no effort to quantify outcomes.

Layla SMay 11 20232

Thank you for the welcome and your insight! I did find this specific focus group report conducted by RIP Medical Debt that you may find of interest. https://ripmedicaldebt.org/wp-content/uploads/2022/08/Focus_Group_Report_August.pdf

Key Takeaways:

Having health insurance didn’t protect them. Some focus group participants thought they had “good” health coverage when they incurred their medical debt while others were uninsured. They agree having health coverage does not protect you from big bills or medical debt. They believe hospitals (most Atlanta-area hospitals were mentioned), providers, and insurance companies find loopholes in order to send large and unexpected medical bills to people.
Those who had debt abolished by RIP Medical Debt say it was extremely helpful. They are grateful and say it made a difference. It relieved the constant pressure of their debts. Some also sought health care services once their debt was paid – care they had been putting off – because they felt less vulnerable. And at least two Atlanta residents said having their medical debt abolished was a catalyst to paying down other debts – they could see the light at the end of the tunnel.
Debt creates more debt. Going into medical debt means they start falling behind in other areas too. Some go into credit card debt to pay off medical bills. Others miss car payments or ignore student loans. Medical bills and debt can cause a larger financial spiral. Some see their credit affected which has knock-on effects that impact their ability to move to a better neighborhood, get approved for loans, etc.

JasonMay 11 20232

One problem here, as I see it, is that there is a significant difference between the mean adverse effects of all medical debt and the mean adverse effects of the types of medical debt that a debtholder is willing to sell for about a penny on the dollar:

For instance, presumably no one would sell debt on which they thought they could collect -- e.g., by wage garnishment -- at that price. Thus, it's unlikely (e.g.) that debt of that type is a materially contributing factor toward bankruptcy for bankruptcy filers. Anyone who files bankruptcy over a debt that is known to be practically uncollectable up to the expiration of the statute of limitations probably needs a better bankruptcy attorney first and foremost.
Also, most debt that can be bought so cheaply is old enough that it's less likely to be a significant factor in disrupting a provider-patient relationship. E.g., If the provider was going to fire the patient for non-payment, or the patient was going to terminate the relationship due to shame about owing the debt, it likely would have happened prior to that point.

Layla SMay 11 20232

I do think it could have a positive impact on people's well-being though, especially since medical debt is linked to worse health outcomes. Medical debt also impacts people's credit scores and overall financial well-being.

I'm still reading into it but I found this: "Personal debt and financial hardship are strongly correlated with poor mental health, which can exacerbate adverse effects of other health conditions. A Consumer Financial Protection Bureau (CFPB) study found that medical debt worsens mental health conditions and is strongly correlated with increased chance of suicide. Many people who carry medical debt describe feelings of anguish and have higher rates of anxiety and depression. Medical studies have shown that poor mental health is a risk factor for chronic health conditions, and vice versa."

JasonMay 11 20232

I think it's likely to have positive effect, although I have significant uncertainty about the extent. The organization recently got a $50MM grant; hopefully the terms weren't too restrictive and it can afford to fund some rigorous third-party research on the effectiveness of its programs. At least for an organization that has pulled in that much money, I think most EAs would want to see a randomized controlled trial of the effectiveness of this particular intervention before donating.

More generally, I'd be interested in a lobbying approach to this problem -- reading the website, a fair amount of what the organization does seems to involve a moderately complex scheme to do debt relief without violating certain federal healthcare financing laws and insurance contracts. I can also think of a few ways to wipe or functionally wipe significant tranches of stale medical debt by legislative action that seem politically plausible on their face -- e.g., writing some sort of auto-forgiveness provision into the Medicare terms of participation or restricting/forbidding collection activity under the FDCPA.

Layla SMay 11 20231

I agree, getting rid of medical debt is great but it doesn't fix the underlying issue: unaffordable healthcare, especially for people with disabilities and chronic illnesses.

Some provisions in the affordable care act such as preventing insurers from not covering someone based on pre-existing conditions have helped reduce medical debt. Ideally, I would like to see a universal healthcare or a medicare for all type of model so that everyone can get the coverage that they need. There is a lot of data about how expanding medicare in different states has saved lives, resulted in less emergency room visits, etc.

Daniel_DeweyNov 21 20231

I just heard about this via a John Green video, and immediately came here to check whether it'd been discussed. Glad to see that it's been posted -- thanks for doing that! (Strong-upvoted, because this is the kind of thing I like to see on the EA forum.)

I don't have the know-how to evaluate the 100x claim, but it's huge if true -- hopefully if it pops up on the forum like this now and then, especially as more evidence comes in from the organization's work, we'll eventually get the right people looking to evaluate this as an opportunity.