Passage of GOP Tax Bill Would Worsen Medical Debt Crisis

On May 22, the GOP tax bill passed in the House by a single vote. Now advancing to the Senate, it threatens to gut Medicaid and strip health coverage from millions of people in the United States. Doing so would further exacerbate the medical debt crisis.

As researchers at the Kaiser Family Foundation found in the 2021 Survey of Income and Program Participation, medical debt already burdens 20 million adults. Nearly one in 12 people owe significant debt to a healthcare provider. Of these, over 14 million had debts exceeding $1,000, while three million people had debts over $10,000. Overall, people in the in the United States owe at least $220 billion in medical debt.

Third Way, a DC-based left-of-center think tank, estimates that the passage of the GOP tax bill could push an additional 2.8 million people into medical debt.

One of the most controversial provisions of the bill would impose work requirements for Medicaid eligibility. If enacted, the Center on Budget and Policy Priorities estimates that between 9.7 million and 14.4 million people could lose their coverage—even though the vast majority of Medicaid recipients are already working, disabled, in school, or have caretaking responsibilities.

“56 percent of Black adults and 50 percent of Hispanic adults owe money for a medical or dental bill, compared with 37 percent of non-Hispanic white adults.”Exorbitant out-of-pocket costs would, consequently, burden those who lose their healthcare coverage. Others may defer necessary healthcare services, which often results in higher costs in the future.

For many, rising medical debt would be inescapable; low-income families—people of color in particular—would be disproportionately impacted by the loss of Medicaid coverage and rising out-of-pocket costs.

The Disproportionate Impact

The Economic Policy Institute (EPI) estimates that over 13 million Black Medicaid recipients and more than 19 million Latine Medicaid recipients are at risk of losing benefits under the bill.

As the authors of the EPI report explain, “Cuts to Medicaid will make low-income workers, non-workers, and their families poorer and less able to afford healthcare, especially those who are Black or Hispanic….Children are more than twice as likely as their white peers to rely on public health insurance.”

But even before the bill, people of color across the country already struggled to access affordable healthcare.

In a brief released in May titled The US Medical Debt Crisis: Catastrophic Costs of Insufficient Health Coverage, researcher Stephen Nuñez wrote, “56 percent of Black adults and 50 percent of Hispanic adults owe money for a medical or dental bill, compared with 37 percent of non-Hispanic white adults.”

Nuñez, the director of Stratification Economics at the Roosevelt Institute, notes that connecting these disparities to the history of racial discrimination in this country, which still perpetuates today, is important. Black and Latine families are more likely to have lower intergenerational income and less likely to have substantial savings when compared to low-income White families.

Racial disparities are so profound that according to a Brookings Institution study, “Black households with health insurance coverage are as likely to hold medical debt as non-Black households that do not have health insurance coverage.”

“There are roughly 1.4 million…individuals in the Medicaid coverage gap and 97 percent of them reside in the South.”

In fact, four of the five states with the highest medical debt are in the South—Mississippi, North Carolina, West Virginia, and Georgia—and three of these have the largest Black population by percentage in the country.

The South is also home to seven of the 10 states that have not expanded Medicaid under the Affordable Care Act (ACA). As a result, millions of low-income people fall into this coverage gap: They earn too much to qualify for Medicaid but too little to afford private insurance.

Three-quarters of adults in the coverage gap reside in just three Southern states: Texas, Florida, and Georgia. As Nuñez noted, “There are roughly 1.4 million such individuals in the Medicaid coverage gap, and 97 percent of them reside in the South.

In these states, thousands of people die each year because of a lack of healthcare access. Additionally, a report released by Georgetown University’s McCourt School of Public Policy found that living in the coverage gap is a top predictor of a person acquiring medical debt.

Steps to Address the Medical Debt Crisis

Given these staggering statistics, Nuñez proposes actions that should be taken in the short term, medium term, and long term to ease the burden of medical debt.

In the short term, he suggests that instead of passing the GOP tax bill and cutting Medicaid, Congress should protect Medicaid funding and extend the enhanced premium tax credits enacted under the American Rescue Plan Act of 2021, which made health insurance more affordable.

In the medium term, he advocates that the federal government should work with non-expansion states to expand Medicaid.

Finally, he reasons that over the long term, the federal government should work to address the market failures of the US health insurance system.

Though these actions might seem overly ambitious during this political climate, Nuñez argues that this type of action is nonnegotiable, particularly at a time when people are saddled in medical debt and—in the worst cases—dying because they cannot afford healthcare.

“A federal effort to ensure more Americans have access to medical care and to protect them from the financial ruin that medical debt can cause may seem fantastical at a time when the Trump administration is planning to take a chainsaw to our public health insurance system,” Nuñez stated. “But solving the medical debt crisis is an economic necessity that will require this sort of bold reform.”