How Medical Debt Relief Can Do More Harm Than Good
President Obama presses lawmakers to vote for the Affordable Care Act, March 2010
It’s widely known that medical debt imposes a major burden on the wellness of Americans. Costing Americans $220 billion and affecting 36% of all households, solutions seem ineffective. The Affordable Care Act saw an increase in the medical debt rate 3 years after passing and over 40% of Americans with insurance hold this debt.
In July 2025, a Trump-appointed judge of the U.S. District Court for the Eastern District of Texas struck down and vacated a CFPB rule that prevented medical debt from being reported to credit bureaus. While this was a major blow to those in favor of combatting the exorbitant cost of healthcare in the US, many states have been quick to fill this regulatory vacuum. From California to Rhode Island, state legislatures have implemented bills that not only ban reporting of medical debt, but also proactively prevent medical debt from being utilized for property executions (i.e. asset seizure).
At the same time, nonprofit organizations like Undue Medical Debt are addressing these concerns by coordinating initiatives to forgive hundreds of millions of dollars of medical debt.
President Trump signs Executive Order on healthcare, October 2017
While these efforts are well-intentioned, analyses of medical debt reporting bans suggest that outsourcing federal regulation to the state level can negatively impact the American population. Studies find that these bans are worse for patients unless regulators are quick to stop the practice of risk shifting.
Researchers at Stanford University conducted two randomized controlled trials between 2018 and 2020 where, across nearly 84,000 patients, the nonprofit Undue Medical Debt relieved $169 million worth of face-value medical debt. Unfortunately, the researchers concluded that this debt relief had no effect on patients’ physical and mental health, their likelihood of seeking out more medical care, or their day-to-day financial stability.
Their analysis came down to two major aspects: 1) patients already were not making payments, so hospitals sell their debt on the secondary market for pennies on the dollar 2) medical debt is the culmination of severe health problems and financial instability. Ultimately, this means that medical debt is not the underlying cause of their difficulties; it is simply a consequence.
Not only does medical debt relief fail to improve holistic patient well-being, it also incentivizes predatory healthcare systems to quietly offset the economic risk of bad debt back towards the patient. Risk shifting can be understood to exist in two forms: temporal and categorical.
Temporal risk shifting occurs as hospitals alter payment timelines to require more upfront costs, affecting patients of all demographics and class strata. Waystar, a “healthcare revenue cycle management solutions” company, advises hospitals to restructure collections by moving it to the pre-service stage. In fact, they recommend deceiving and pressuring patients by calling collectors as “financial advocates” and training appointment schedulers to identify patient balances.
In the past year, payment burdens have been exceedingly pushed onto patients, tying hospital performance to direct payments from patients. Indeed, the Medical Group Management Association found that practice saw better collections when they heavily prioritized “front-end” and “time-of-service” workflows. As of 2026, patient-generated revenue accounts for nearly 30% of provider revenues.
Doctors perform brain surgery, August 2022
Categorical risk shifting is the process by which hospitals establish new pipelines to extract value from patients to offset their debt risk. Hospitals primarily accomplish this through medical credit cards, which are marketed directly to healthcare providers in order to train them to deceive patients more effectively. Providers often pitch these credit cards as 0% interest, when in reality, interest can be charged after the promotional period, even on amounts that were paid on time.
Medical debt relief effectively pressures profit-driven hospitals systems to offset debt risk onto patients, leading to even worse predatory practices. Similar to how gas companies artificially hike prices during bearish markets even if their supply chains are not significantly affected, healthcare corporations are incentivized to get everything they can out of their patients.
This is not to say that forgiving medical debt is unnecessary or immoral. Rather, medical debt is a downstream consequence of a profit-driven healthcare system. So long as public policy fails to address systemic profit incentives and the unchecked practices of healthcare corporations, American patients will continue to suffer under the burden of unreasonably expensive healthcare. As such, it is wholly imperative that medical debt relief is paired with more systemic implementations to decrease the cost of medical procedures and life-saving drugs.
All images sourced from Wikimedia Commons under Creative Commons 4.0 License