NEWS ANALYSIS

Could Medical Debt Be Forgiven Like Student Loan Debt?

medical bill

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In August 2022, the Biden administration announced that people with outstanding federal student loans could get up to $10,000 of their debt forgiven, or up to $20,000 if they had received a Pell Grant (for low-income borrowers). The student loan forgiveness is available to individuals with income under $125,000, and couples with income under $250,000.

That might make you wonder: Could something similar ever be done for medical debt? There is ongoing debate about how and when the government should step in to help people with their debts, and it’s a fraught topic, both politically and socially.

There’s no doubt that medical debt is a problem in the U.S., although it’s not on the same level as student loan debt. Student loan debt (before the forgiveness was announced) amounted to about $1.75 trillion, owed by about 45 million Americans.

Medical debt, on the other hand, amounts to an estimated $195 billion, owed by 23 million Americans. But that only accounts for people with medical debt of more than $250; another analysis found that about a third of American adults have medical debt, and that more than half of those people owe at least $1,000.

Although the total amount of student loan debt in the U.S. exceeds the total amount of medical debt, both types of debt can be crippling, particularly for people who owe large amounts of money. Plus, medical debt often causes people to avoid seeking subsequent medical care, which can be detrimental to their health over the long run.

Given all of this, could the federal government help people with medical debt the way they’re helping people with federal student loans?

Financial relief from the federal government is always possible. In addition to the student loan forgiveness, the COVID stimulus checks that were issued in 2020 and 2021 are examples of this. So are the additional child tax credits that families received in 2021.

But medical debt relief on the scale of the recent federal student loan relief would be much more complicated and more difficult to administer. This is primarily because medical debt is not owed to the federal government the way federal student loan debt is.

Private student loans are not owed to the government, and are not eligible for the Biden administration’s loan forgiveness.

Payments Go Directly to Medical Providers, Not the Government

Medical debt is owed to thousands of separate hospitals, doctors, and other medical providers across the country. It’s important to keep in mind that although the U.S. medical insurance system is a mix of private (self-purchased or employer-sponsored) and public (Medicare, Medicaid, etc.) coverage, medical bills are almost universally paid to private medical providers.

The U.S. government does not operate most medical facilities, even for people who have federally-run health coverage. For example, although more than 64 million Americans have Medicare, which is run by the federal government, these individuals still owe their out-of-pocket medical costs directly to hospitals, doctors, and other medical providers.

There’s a notable exception for the Veteran’s Affairs (VA) system, under which the federal government owns the medical facilities and employs most of the medical providers. This makes it easier for the federal government to provide medical debt relief through the VA system. And indeed, the Biden administration announced earlier in 2022 that they were streamlining the VA debt forgiveness program to “make it easier and faster for lower-income veterans to get their VA medical debt forgiven.”

But for most medical debt, a federal relief program would involve sending money to thousands of separate medical providers throughout the country. Most doctors and hospitals in the U.S. do already receive payments from the federal government when they treat Medicare beneficiaries. But the technical administration of payments to cover patients’ outstanding bills would be complicated.

If a medical debt relief program were to be means-tested (like the $125,000 income limit for federal student loan forgiveness), the government would have to work with each medical provider to determine which of their patients would qualify and which would not.

What About a Tax Credit for Medical Debt?

Another possibility for medical debt relief is a federal tax credit for people with medical debt—either a flat amount, or an amount that varies depending on income or the amount of medical debt a person has. These could be administered through the IRS, much like the tax credits that people can already claim for things like buying an electric vehicle or installing solar panels.

But tax credits have to be authorized by Congress, and debt relief is a controversial political issue. There is also no way for the IRS to ensure that a person actually uses a tax credit for a certain purpose. So if a tax credit were to be provided with the intention of giving people a means to pay down their medical debt, households could use it for other purposes and continue to struggle with medical debt.

According to the Biden administration, medical debt is the largest total source of debt in collections in the U.S., exceeding the combined balance of credit cards, auto loans, and utilities that have been sent to collections.

What This Means for You

Federal action to provide medical debt relief is always a possibility, although it would likely be much more complicated than the federal student loan forgiveness program.

If you’re struggling with medical debt, it’s wise to reach out to the doctor or hospital and see if you can negotiate better terms. You may find that you can set up a payment plan that will allow you to settle your debt for less than the amount you currently owe.

Communicating with the medical providers, and agreeing to at least a small monthly payment, can help to keep medical bills from being sent to collections. This can be important for people with large medical bills that will still appear on credit reports as of 2023.

The information in this article is current as of the date listed, which means newer information may be available when you read this. For the most recent updates on COVID-19, visit our coronavirus news page.

8 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Department of Education: Federal Student Aid. The Biden-Harris administration's student debt relief plan explained.

  2. Nerd Wallet. Student loan debt statistics: 2022 U.S. student loan debt totals $1.75 trillion as of August 2022.

  3. Kaiser Family Foundation. 1 in 10 adults owe medical debt, with millions owing more than $10,000.

  4. HealthCare.com. Americans knowingly going into medical debt: survey.

  5. The White House. Fact sheet: the Biden administration announces new actions to lessen the burden of medical debt and increase consumer protection.

  6. USA.gov. Advance child tax credit and economic impact payments - stimulus checks.

  7. Department of Education: Federal Student Aid. When it comes to paying for college, career school, or graduate school, federal student loans can offer several advantages over private student loans.

  8. Centers for Medicare & Medicaid Services. Medicare monthly enrollment.

By Louise Norris
 Louise Norris has been a licensed health insurance agent since 2003 after graduating magna cum laude from Colorado State with a BS in psychology.