Personal Finance

Medical debt has dropped during pandemic, new research shows. That trend soon could shift

Key Points
  • The share of adults who carry medical debt dropped to 16.8% in April 2021 from 23.6% in March 2019, according to new research.
  • Paying for health care or insurance could pose problems for millions of households once certain federal programs end.
  • Notably, Medicaid enrollees or people or with private insurance through the public marketplace could be impacted.
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Medical debt has dropped during the pandemic, but that trajectory could reverse course in the coming months, new research suggests.

The share of adults ages 18 through 64 who carry medical debt dropped to 16.8% in April 2021 from 23.6% in March 2019, according to a new study from the Urban Institute, a think tank focused on economic and social policy research. Yet as federal programs that have allowed people to secure affordable health coverage during the pandemic inch closer to ending, problems paying medical bills could rise again.

"Without further policy action, the risk of medical debt may increase again as health-care use rebounds and the remaining [pandemic] relief measures expire," the research paper said.

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Due to legislation implemented in 2020 and 2021, millions of people were able to gain coverage through Medicaid or they could qualify for generous subsidies — for monthly premiums and cost-sharing like copays — for plans through the public health insurance marketplace. 

However, changes are brewing that could leave people either without insurance or paying more for it.

First, anywhere from 5.3 million to 14.2 million could be disenrolled from Medicaid after the public health emergency ends, according to new estimates from the Kaiser Family Foundation.

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When the $100 billion Families First Coronavirus Response Act became law in March 2020, the legislation stipulated that the federal government would provide extra Medicaid funding to the states as long as enrollees were not removed from the program for the duration of the public health emergency.

That declaration was first made in January 2020 and, after several extensions, is now scheduled to expire July 15. President Joe Biden could extend it again or allow it to lapse. He is expected to give a 60 day warning of its end, whenever that may be.

Roughly 87 million people are enrolled in either Medicaid or the Children's Health Insurance Program, according to the most recent estimate from the federal government. That's 15.7 million more than in February 2020.

Some people would see small increases, some could see a big increase.
Cynthia Cox
Director of the Affordable Care Act program for the Kaiser Family Foundation

Additionally, the temporary increase in subsidies through the health insurance marketplace is scheduled to expire at the end of the year. 

"Some people would see small increases, some could see a big increase," said Cynthia Cox, a vice president at the Kaiser Family Foundation and director of its Affordable Care Act program.

"But it won't be uncommon for people to see their premium payments double," Cox said. 

Roughly 13 million of the 14.5 million people who are insured through the exchange — whether federal or state — receive subsidies to help pay their insurance costs, according to the foundation.

The $1.9 trillion American Rescue Plan Act, enacted in March 2021, temporarily expanded the existing subsidies (technically tax credits) available, making them more generous and reaching more people for 2021 and 2022. Generally speaking, people who get coverage through an exchange are those who can't get it at work (or their spouse's) or who don't qualify for Medicaid or Medicare.

Prior to the temporary expansion of the subsidies (technically tax credits), the aid was generally available to households with income from 100% to 400% of the federal poverty level. The cap was eliminated for 2021 and 2022, and the amount that anyone pays in premiums is currently limited to 8.5% of their income as calculated by the exchange.

A proposal to extend the subsidies through 2025 was included in the Democrats' Build Back Better bill, which cleared the House last year but fell apart in the Senate.

It's uncertain whether the provision will be revived in other legislation that Democrats may try to get through the Senate before a new Congress starts in January — the makeup of which could look very different due to the midterm elections Nov. 8.

"There's a great deal of discussion around [an extension] but it's unclear what action would be taken," Cox said.