Even before COVID-19, Americans already owed $140 billion for delinquent medical bills. When the pandemic hit the United States, that debt burden appeared likely to increase significantly, as hospitalizations spiked, unemployment soared, and millions lost their employer-sponsored health benefits.

Instead, overall medical debt fell, according to research by Chicago Booth PhD candidate Benedict Guttman-Kenney, Harvard’s Raymond Kluender, Stanford’s Neale Mahoney, Francis Wong of the Ludwig-Maximilians University of Munich, Duke PhD student Xuyang Xia, and University of California at Los Angeles’s Wesley Yin. Elective medical procedures plummeted, and the federal government pumped money into pandemic relief support, higher unemployment benefits, and health-insurance exchanges and Medicaid (the government health-care program for the poor).

Medical-debt levels were already trending downward before the pandemic, and that continued, with proportionally similar declines across different income groups, the researchers find. The fall was unrelated to infection and vaccination rates.

Averting debt disaster

The researchers analyzed medical-debt collections from January 2018 to September 2021 using the TransUnion Consumer Credit panel, a representative sample of 10 percent of US credit files, housed at Chicago Booth’s Kilts Center for Marketing. They constructed a measure of the flow of delinquent nonmedical debt for comparison.

The results were foreshadowed in an earlier paper by some of the researchers, which finds that expanding Medicaid significantly lowered medical debt.

In that study, Kluender, Mahoney, Wong, and Yin used TransUnion data for 2009–20 to analyze medical debt across US states. They examined how the expansion of Medicaid under the Affordable Care Act, signed into law in 2010, affected household finances. They find that mean medical debt fell 34 percentage points more in the states that expanded Medicaid as a result of the ACA in 2014 than in the states that did not. Furthermore, Medicaid expansion states saw the gap between richest and poorest communities shrink, highlighting how Medicaid can alleviate financial distress for many households.

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