Medical Debt

1 In 10 Americans Hold Over $5,000 In Medical Debt. Arizona’s Proposition 209 Could Help Them

A new ballot measure would cap interest on medical debt, and protect debtor’s assets from seizure. If the law passes.

women working at laptop with head in hands

While much has been made of the student loan debt crisis, Americans are also staggering under the weight of a different, and less discussed, debt crisis: medical debt. It’s estimated that Americans carry somewhere between a total of $88 billion and $200 billion in medical debt. Roughly 16 million U.S. residents owe more than $1,000 in medical debt, and 1 in 10 (or 6 million) Americans owe more than $5,000 for dental or medical services. Three million Americans carry over $10,000 in debt for medical or dental procedures that would be free or highly subsidized in other wealthy nations.

In addition to the astronomical price tags associated with medical care in the U.S., unsavory collection practices have left countless people struggling to make ends meet or, in some cases, without a home.

Although we haven’t heard as much about medical debt relief as student loan debt relief during this campaign cycle, one state is trying to address the crisis at the ballot box. This November, Arizona voters will have the opportunity to cast their votes for ballot measure Arizona Proposition 209. If passed, the proposition make some major changes to how medical debt is collected throughout the state.

What Is Arizona Proposition 209 And What Will It Do?

Arizona Proposition 209 was drafted by advocacy group Healthcare Rising Arizona, and the group collected signatures to have the proposition placed on the ballot. The ballot measure, if passed, will place a cap on medical debt interest.

Currently, interest rate limits are set by the U.S. Department of Health and Human Services, and they can change quarterly. The newest interest rate cap, set in September of this year, is 10%.

The Arizona proposition would cap medical debt interest at 3%, a massive change to interest on medical debt and one that could make it far easier for people to pay off their bills.

Prop 209 would also help protect people’s homes and belongings from asset seizure by debt collectors by “exempting more of a household’s assets from forfeiture or garnishment,” per Vox.

Currently, “Arizona law protects $250,000 of the value of a home from debt collection,” per Ballotpedia. Prop 209 would increase that amount of value for certain property, including homes, to be “exempt from attachment, execution, forced sale, and other debt collection processes.” The law would ensure Arizona law protects $400,000 of the value of a home from debt collection, helping protect more homeowners from asset seizure. Values for home furnishings, vehicles, and other positions would also increase, protecting people’s belongings up to the new values from seizure.

Private funds held in banking institutions would also gain increased protection — exempting up to $5,000 instead of the current amount of $300.

"These are protections that people generally agree with, that you shouldn't lose your car. If you have debt you have to pay off, in Arizona, you need a car to get to work," said Healthcare Rising spokesperson Rodd McLeod. "Losing their car doesn't help them pay off the debt."

Why Does Medical Debt Matter, And How Bad Is Medical Debt In The United States?

Privately held medical debt ballooned due to the COVID-19 pandemic — by mid-2021, 58% of the debt on credit reports was medical in nature. And in a system as convoluted and bogged down by red tape as the American health care system, billing mistakes happen, often leaving people who may not owe any money at all with debt reported to credit agencies, decreasing their creditworthiness and making it more difficult for them to obtain financing for homes and vehicles.

Vox reports that 41% of American adults hold medical debt, and that those who hold medical debt tend to have lower incomes, be of poorer health, and are more likely to be disabled and Black. Medical debt is a hundreds of billions of dollar problem — and it’s one that will continue to grow as people are unable to pay off their bills and more people deal with COVID-19 related complications.

But it’s not all bad news. Earlier this year, the big three credit reporting agencies — Equifax, TransUnion, and Experian — changed how medical debt is reported, increasing the amount of time before medical debt is reported to the agencies from six months to one year. This extra time allows patients more freedom in haggling with hospitals and insurance companies and provides a cushion for clearing up mistakes before their credit score is affected. The credit agencies also agreed to remove paid medical debt from credit reports.