Their Medical Debt Was Erased. It Didn't Do Much Good

Study finds the recipients' lives didn't meaningfully improve on a number of fronts
By Kate Seamons,  Newser Staff
Posted Apr 8, 2024 12:00 PM CDT
Wiping Away Medical Debt Doesn't Help Mental Health
Stock photo.   (Getty Images/Andrii Zorii)

It's a somewhat counterintuitive finding: Wiping out medical debt with a face value of $169 million for 83,401 people didn't improve their mental health or credit scores on average. So finds a study published Monday as a National Bureau of Economic Research working paper. The researchers tell the New York Times the idea for the study was born from a 2016 segment on Last Week Tonight With John Oliver that profiled the RIP Medical Debt nonprofit, which has wiped out some $11 billion in medical debt for Americans over the last decade. The economists partnered with the group to run two experiments from 2018 to 2020.

Over the course of the experiments, the aforementioned $169 million in medical debt was paid off for 83,401 people who fit the standard RIP Medical Debt parameters: They weren't paying off their medical bills, which were at least a year old. And, as the researchers wrote, "there are reasons to be optimistic about the benefits of medical debt relief. Debt relief in
non-medical contexts—including student loans, credit cards, mortgages, and bankruptcy—has been shown to reduce financial distress, increase earnings, and improve mental

They surveyed experts who largely predicted mental health, financial well-being, and health care access would improve when the debt relief happened in a medical context. It didn't. As compared to a control group of 130,000 with medical debt, the economists found the debt relief had no impact on financial distress or mental health on average, and that it immediately lifted credit scores by "an economically small" 3.6 points on average. As co-author Neale Mahoney tells the Times, "Many of these people have lots of other financial issues. Removing one red flag just doesn't make them suddenly turn into a good risk, from a lending perspective." As for the mental health following:

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  • "We did not expect the negative effect on mental health for those with the greatest baseline debt and did not design the experiment or survey to investigate its cause." But the results mirror that of a 2023 study that found "randomized one-time unconditional cash transfers caused significant reductions in psychological well-being among low-income US households." It's possible that "receiving transfers that are insufficient to address financial needs raise the salience of financial deprivation and feelings of distress. ... The negative mental health effects could have also worsened mental health through the stigma of receiving charity, which may be relevant given recipients did not request relief." Learning about the payoff may have also reminded recipients about other debts they owe.
(More medical debt stories.)

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