Medical debt is not a new problem in the U.S. It has, however, received greater attention in recent years especially following implementation of the Affordable Care Act (ACA)—the premise of the ACA is to provide coverage to as many individuals as possible to spread out the risk pool and reduce overall health care costs. Despite several million gaining coverage post-ACA, problems persist with respect to cost of care and associated debt.

In Tennessee, for example, 24% of residents had medical debt on their credit history in 2016, according to The Sycamore Institute—the 10th highest rate in the nation with the median debt in the state being just $739! Certain demographics were more affected than others, namely the uninsured, low-income, those with lower education, and racial minorities. Medical debt can lead to individuals ignoring preventive care or treatment or both, which can have a spiraling effect on health.

Experts at the Sycamore Institute have proposed several policy options for upstream prevention and downstream resolution of unpaid health care bills


  •  Surprise Medical Bills/Balance Billing

A patient visiting a health care center may not be aware, or may not be informed, that even if the hospital or emergency room (ER) they are visiting is in-network with the patient’s health plan, the physicians who render services may be out-of-network (OON) and not covered by the patient’s insurance. This leads to balance billing, where the OON physician bills patients for charges not covered by insurance.

How can this be prevented? The Sycamore Institute proposes the following policy solutions:

    • Insurers should determine the reimbursement rates for OON providers providing services at in-network facilities and also install a dispute resolution process
    • Set a cap on the maximum amount that an OON provider can bill a patient enrolled in an in-network facility
    • Insurers should be responsible for the balance bill amount that supersedes the patient’s cost-sharing requirements
    • All service providers at a hospital or ER should be required to contract will all the insurance plans that contract with the facility

While 31 states have implemented either partial or comprehensive balance bill protection laws, hospitals can play a significant role in keeping patients informed. Transparency about OON providers upfront could help patients and their family caregivers make wise choices about who they receive their services from.

  •  Improving Health Insurance Coverage

Developing plans to ensure most people have coverage, it is affordable, and that individuals do not have gaps in their health coverage, or it doesn’t lapse, is important. The following solutions can help:

o   Keeping the ACA alive and well. The ACA offers coverage expansion that can protect individuals’ finances. While the ACA’s individual mandate was repealed, states could take steps to ensure residents have coverage.

o   States can offer subsidized high-risk pool plans to reduce premiums in the individual market and make insurance affordable

o   Utilize insurance navigators to assist with the enrollment process

o   Monitor and prevent delayed or lapsed coverage by partnering with hospitals or clinics to  conduct eligibility screening

  • Managing Expectations With OOP Costs

The price of health care services vary based on the hospital, the enrollee’s health plan, and the specific contract that the hospital has with the plan. The exact cost of a service is therefore hard to decipher. Consequently, hospitals do not always provide upfront costs of a procedure or service to the patient. The Sycamore Institute recommends:

o   Forcing transparency from insurers, both private and public, and developing tools that can provide enrollees pricing information and help them deduce their OOP costs. Tennessee has passed the right-to-shop act that requires insurers to provide decision-support programs from 2021, including OOP spending estimates. 

The Health and Human Services administration recently finalized an order to provide transparency to health care costs and in turn, empower consumers. The final rule released at the end of October 2020 has mandated group health plans and health insurers in the individual and group markets to provide coverage transparency. This follows on a previous ruling that mandated hospital price transparency. The approach is two-pronged:

o   Individual and group health plans would need to provide personalized OOP cost information to the beneficiaries—digital and paper if requested. This includes the patient share for prescription drugs.

o   The order also prescribes health insurers in the individual and group markets to provide detailed pricing information, in-network and OON prices for care providers and in-network rates for covered prescription medicine at the pharmacy.

Downstream Support

Efforts can be directed toward protecting those who may be struggling financially because of their medical debt.

o   Hospitals can provide patients and their families access to care navigators who can consult on available financial resources or health insurance that they may be eligible for

o   Financial advice centers can provide financial literacy services and individual counseling to help people better manage their finances

A concerted effort by various stakeholders is required to meet this challenge, while keeping the patient’s health and financial stability in focus.

Additional Resources

  1.     Advice on how to reduce medical care costs:
  2.     More on medical debt collection:


The information in this article was researched and summarized by Surabhi Dangi-Garimella, Ph.D., Principal, SDG AdvoHealth, LLC.