How Medical Debt Destroys The Lives Of Millions Of Americans

In the US, patients recovering from life-threatening illnesses often find that their first concern is not their health but the massive medical debts they’ve incurred. Right-wing politicians, insurers, and hospitals have worked to maintain this status quo.

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An empty hospital bed in the cardiac catheterization ward at Mount Sinai South Nassau hospital in Oceanside, New York, on May 18, 2020. (Jeffrey Basinger / Newsday RM via Getty Images)

The United States lags behind almost every wealthy country in not having a health care system that is either free at the point of use or affordable. Instead, millions of people are saddled with medical debt that they will never be able to afford to pay back. Even on its own terms, this system is irrational. The revenue raised for private hospitals and debt collectors by issuing patients with bills is a relatively insignificant proportion of income. However, the costs of these debts to patients, who are often summoned to court because of delinquent payments, are life wrecking.

Luke Messac, a doctor and historian of medical treatment, spoke to Astra Taylor for Jacobin’s the Dig podcast about the causes of the United States’ medical debt crisis. At the heart of it is, he argues, not just ruthless profiteering of the private insurance and medical establishment, but the refusal of charity and public hospitals to live up to their legally mandated commitments to patients.

However, the fact that doctors, historically hostile to efforts to create single-payer health care, have joined picket lines in recent years is a welcome sign. The struggle for free health care in the United States must, as Messac argues, rely on a recognition of the hospital as a site for labor organizing and mobilization.

This interview has been edited for length and clarity.

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Astra Taylor

So, you write that this fantastic book of yours, Your Money or Your Life: Debt Collection in American Medicine, began with a sense of betrayal. I was wondering if you could talk to us about that sense: What happened, and how did it launch you into an investigation into medical debt?

Luke Messac

Absolutely. I first started hearing about aggressive medical debt collection, things like lawsuits against patients and wage garnishment and home foreclosures, probably about five or six years ago. I was picking them up in the newspaper, in part because there was a campaign going on in Baltimore, Maryland, where a lot of community members, unions, activists, and nurses were protesting the lawsuits filed by Johns Hopkins Hospital against low-income patients.

I was pretty horrified at what I was reading, and gratified by the fact that so many people were standing up against it. But I was curious to know: Was this sort of thing happening at my hospital? I didn’t think it was. I’d never heard of it happening anywhere in my, you know, nearby area. So, I just assumed it wasn’t. But I just wanted to know. I wanted to make sure. So, I went to the local county courthouse — a place I’d never been before and hope rarely to be again. But I started looking up court cases, and there they allowed me to type in the names of the hospitals into the search function on the county database, and you would see a lot of cases involving the hospital. Now, some of them were malpractice cases in which the hospital or physicians at the hospital were defendants. Some of the cases involved lawsuits against contractors and things like that.

But then I saw a bunch of cases where my hospital, the hospitals where I was training, were suing patients. They were suing them oftentimes for $1,000, $1,500, $2,000 for single visits, sometimes emergency-room visits, hospitalizations. And the really amazing thing is that you can see the letters that patients wrote back in response to receiving notice that they were being sued. They would write really plaintive letters about what was going on.

They would say, “Listen, I’m a single mom, very limited income. I can’t afford to pay back $2,000 right now.” Some folks were on Social Security disability income, some folks were recent immigrants, and their pleas really were answered with the slightest degree of lenience, really in the form of onerous payment plans. So instead of being charged $2,000 at once, they would be charged $25 a month for the next seven years for a single visit. If they didn’t repay on that schedule, then they would be charged interest at a rate of 10 or 11 percent. They already had late charges in court, fees to deal with, and the fact that patients could be placed into such a hole, which we know from years and years of rigorous study, leads people to forgo care, to miss needed medicines and to die sooner, is shocking. The fact that that was happening at my hospital was just really too much to bear.

I started talking to other doctors and other nurses and other folks at the hospital about it. They were equally horrified at what was going on, and I thought I had to do something. I didn’t know quite what. I didn’t think that a series of meetings with C-suite executives where we discussed the merits of doing this or that was going to pan out to that much. So, I wrote an op-ed, and I sent it around to some newspapers: the New York Times, the Boston Globe, no interest; the Providence Journal, no interest. And then I sent it to Steve Ahlquist, who is a muckraking journalist who chronicles the issues that matter for people’s lives in the Rhode Island area, who runs a blog called Uprise Rhode Island.

He was interested, which I was grateful for. He ran it on his blog. I was concerned when I wrote it that I would be the only one to read it. I didn’t know what Steve’s readership was. I thought it was just folks like me. But then I got a call from my boss at the hospital the very day that the article ran saying that I needed to have some meetings because they had seen it very quickly. And at first when they met with me, they told me that I was wrong, that the hospital didn’t sue patients, that I was mistaken.

I was kind of flummoxed by this. I knew that a lot of people, even administrators, didn’t know what hospitals were doing, but I didn’t realize just how far that went. I ended up sending them the court records that I had. I said, “You sued two hundred people this year. You sued someone two weeks ago,” and they, to their credit, looked into it, and in a matter of weeks they’d cut off their relationship with the debt collector they had been using, and they dismissed the remainder of the cases.

To my knowledge, the folks who were still on those payment plans from the past remained on those payment plans. We couldn’t get them to reverse that decision. But so, something had changed. But that was the beginning of my journey into trying to understand what was it that we were doing to patients, and how could it have come to pass that bills for hospitalizations became these tradable assets, that became these, you know, bludgeons with which we would take people to court and take their homes and take their bank accounts and put them in jail. I really needed to know how this had happened. And so, I put on my historian hat and started to look into it that way, too.

Astra Taylor

All those things that you just laid out are common practice in the United States today. And one interesting tidbit toward the end of your book is that lawsuits against patients actually stopped in recent years during the COVID pandemic, but that was because the courts were shut down, not because of any kindness on the on the part of hospital administrators. Just speak a little bit more about being a doctor. What do you see in the emergency room when you work? Do you see people concerned about debt? It’s obviously a really stressful time. Nobody wants to be in the emergency room. But does that added strain come through in your interactions with patients?

Luke Messac

Yes, absolutely. Patients bring this up. And I guess I wasn’t initially as understanding or as attuned to their concerns as I should have been. You know, I’d have patients who I’d ask to stay overnight. One particular patient comes to mind, a woman who was having some chest pain. It was slightly concerning. Her labs were a little concerning for a small heart attack, and I asked her to stay overnight. She turned to her husband. She turned to me. She said, “How much is this going to cost?” I said, “I don’t know.” I went and asked around anyone who I could find at the hospital, including a lot of folks who’d worked there for decades, and they said, “We have no idea. You know this, it all depends on her insurance and what they’ll cover and how long she stays.”

There’s really no way for us to tell her that with any degree of accuracy. And we really have nothing to do with that process. We can have her talk to the social worker or have her talk to, you know, registration and billing. But we don’t know. Physicians don’t know. She was willing to stay, but her concern kind of worried me — how long she waited to say yes to this, what I thought was a pretty routine admission. Sometimes it got even worse. I mean, one story that comes to mind is a woman who came in with a widely metastatic cancer, a tremendously painful, fungating mass that she had seen six months earlier and had not sought care for.

I think a lot of us in medicine have hidden behind the reality that we really don’t have much to do with the billing process for our patients.

She’d worked in health care her whole life, and she told me that she worried about the unbearable cost that she would leave to her family if she did seek care. And so, by the time she came in, she knew what her fate was. She just needed some pain relief at that point. And so I started to understand from them, from these patients, that this was something that weighed on them heavily, and that I just couldn’t ignore it any longer, that blindness was no longer an excuse.

I think a lot of us in medicine have hidden behind the reality that we really don’t have much to do with the billing process for our patients. We used to be physicians, used to be the people delivering the bills to patients and asking them to pay and negotiating with them when they couldn’t. That was no halcyon day. That was not a perfect era. People still struggled to pay their bills then, but the fact that we have outsourced that first to hospital administration and then to third-party collectors and to debt buyers certainly hasn’t made it any better for patients.

Astra Taylor

That fear of debt, as you intimated, also stops people from seeking the care they need, just like she delayed it. You know, some people don’t get it at all. So, a lot of fear preventing people from going to the doctor. Can you give us a very general overview of the medical debt crisis? So just big picture before we zoom into the history and the details, you know, how much money is owed by how many people and in what form, like what form does this debt take? Because it’s pretty decentralized.

Luke Messac

Absolutely. And this is something that we’ve only started to understand in greater detail in recent years. Unfortunately, the medical debt crisis, though it has been well understood by people going through it, wasn’t really a subject of the medical and public health literature in the way it should be, I’d say until a few years ago. But what we’ve started to learn is that approximately one hundred million Americans owe debt to a medical or dental provider in some form. The amount of debt owed varies depending on the measure you use to try to estimate it, but some of the more recent estimates put it at least $140 billion. And it is a huge crisis. It extends over the entire country, but it is not evenly felt, as you might imagine, among every social and racial demographic group. It’s more common in women than men. It’s more common in black and Hispanic Americans than in white Americans, and it’s more common in low-income Americans than in middle- and upper-class Americans, although it is a widespread phenomenon.

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“Gentle” Debt Collection

Astra Taylor

It’s a problem for the insured as well as the uninsured. That’s something that you make clear. It’s also very geographical. Could you talk about that?

Luke Messac

I live in Rhode Island. I grew up in Massachusetts and New York. And as chance would have it, these are the places where medical debt is the least common. I mean, it’s a relative term, but the geographic distribution of medical debt is very wide. The percentage of people with medical debt on their credit reports varies from about 3 percent in Manhattan, New York County, as it’s known, to 27 percent in Dallas–Fort Worth.

So, the number of people experiencing this on a day-to-day basis really does vary. And some of those differences can be explained by, you know, deep, deep history of lack of access to care and threadbare social benefits in the states of the former Confederacy, which extended into the decision about whether or not to expand Medicaid after the National Federation of Independent Business v. Sebelius decision in 2012, where Chief Justice John Roberts said that not every state could be forced to expand Medicaid.

Doing so, he argued, was against states’ rights, and every state had to be allowed to make its own decision. As a result, half the states initially declined to expand Medicaid, even though 90 percent of the cost would be borne by the federal government. In those states that did expand Medicaid, allowing a larger number of people to access public insurance, medical debt declined precipitously, falling by almost one-half, but stayed relatively constant in the states that didn’t.

Astra Taylor

Right. And you make that really clear, that debt is racialized and gendered. Black households have more medical debt. Women, especially, or households with children, have more medical debt. But at the same time, it is very widespread. And when I said it was decentralized, I was also getting at the fact that we owe it to all sorts of different entities and that sometimes it doesn’t look like medical debt because it’s put on a credit card. Right? So, these numbers about how much people are indebted are actually kind of speculative.

Luke Messac

Yeah, that’s a great point. Every estimate we have is inevitably probably an underestimate, because you can measure the number of people who have medical debt by their credit reports. But that’s an underestimate, because not all medical debt is always reported to credit bureaus. But as you said, some medical debt is paid at the point of care by patients and placed onto credit cards or borrowed from family members. And so, it’s extremely difficult to get an accurate count of how many people actually owe medical debt. And the numbers we have, as large as they are, are likely underestimates.

It’s extremely difficult to get an accurate count of how many people actually owe medical debt. The numbers we have, as large as they are, are likely underestimates.

This has been known for a long time. I mean, Elizabeth Warren, before she was senator, was a legal scholar who studied bankruptcy and in particular medical debt. And her work from the ’80s to the ’90s to the 2000s did show that these bills were often placed on credit cards and would be really hard to tally. And the debates about how many medical bankruptcies there were, how many people were actually placed into bankruptcy as a result of medical debt, stem in large part from the fact that it’s still really hard to know how many people are placed in arrears because of seeking care.

Astra Taylor

Yeah. And let’s talk a little bit about, you know, just how punitive the collection practices have been. Again, just a general overview. You write in the beginning of the book that what are known as extraordinary collection processes have become all too ordinary. You already mentioned the phrase “aggressive debt collection,” which kind of makes you wonder, you know, what “gentle debt collection” is. What is happening to people? I mean, you mentioned already, you know, garnishments lawsuits, but just spell it out a bit. It can get really dark really quick for people.

Luke Messac

Let’s go from, from “gentlest,” if you want to ever use that term, to the most aggressive collection measures. And let’s put it in the context of a specific patient. A patient goes into the hospital, gets their care, and leaves. A few months later, they get their bill, and they don’t pay it or don’t pay it in full or don’t pay it on time. Their bill is referred to a collections agency, and that collections agency might start with phone calls. They can call multiple times a day. They can call their workplace. They can put the screws to them. That way they can send a number of letters of increasing severity and threatening language. And so those are the first steps that most patients experience.

After that, if after a time the debt still isn’t paid and satisfied in full, then the hospital and the debt collector and the debt buyer can resort to what are called “extraordinary collection actions.” That is a legal term used to refer to any number of tactics that can be used against patients in medical debt, which can be used for people with other forms of debt. These tactics include reporting debt to a credit bureau. That’s a negative action on a credit bureau that can affect the patient’s ability to get a mortgage, even get a job. Their credit can be shot for years thereafter.

The hospital or debt collector can also file a lawsuit against a patient. In those lawsuits, they almost always win. Patients rarely show up. Even if they do, they usually have little recourse; if they lose that lawsuit, as they almost always do, then they can have their wages garnished. So up to 25 percent of their wages can be taken out of their paycheck and sent directly to the creditor. They can have a lien placed on their home — that’s basically a right over that asset that the hospital now has that prevents the patient from doing with their property as they wish.

If the debt still isn’t satisfied and the hospital wishes to do so, it can foreclose on that property. So, take the patient’s home away from them. It can seize a patient’s bank account and drain it of its funds, and direct that right into the hospital account. And if all those measures fail, or if the hospital seeks more rapid resolution, then it can actually put the patient in jail. Specifically, if a patient fails to show up for a postjudgment hearing where their assets are discovered for the hospital to claim, then the hospital or a judge can seek what’s called a “body attachment,” where a warrant is issued for the patient’s arrest and the patient can be placed in jail. So, patients can and do face any and all of these measures, these extraordinary collection actions, if they do not pay in time.

Astra Taylor

It’s important to just kind of frame this as these hospitals who are creditors in this case and creditors more broadly, and debt collectors being able to sort of hijack the legal system. Right? I mean, the courts are essentially state powers working on their behalf to collect on debts that people have incurred because they have gotten sick or injured. And that apparatus of the state is helping to impose these very onerous financial burdens on people, you know, just compounding the harm. But it is astonishing. I don’t have the exact figures, but a huge amount of the cases that work through our local courts are debt-collection cases like this.

Luke Messac

Yeah, this was the thing that was most astonishing to me, because I didn’t consider that exertion of state power, as you rightly point out, could be the consequence of a patient seeking care in my hospital. Someone comes into the emergency department in a moment of profound vulnerability. They’re having a heart attack, they’re having a stroke, they’re in pain, they’re, you know, sometimes unconscious. And the fact that they also have to worry that going to the hospital may lead to them having to go to the courtroom months later, would lead them into a jail cell months later — that was a revelation for me that I should have known before, but was shocked to learn, nonetheless.

Astra Taylor

But I guess my question to you is, you know, why should socialists be concerned about medical debt and examine it in this kind of depth, when we might be tempted to feel like we know everything we need to know, like we know the solution is public health care? We know that medical debt is a symptom of a for-profit health care system. Why study this topic?

Luke Messac

Yeah, it’s a fair question, because at the end of the day, I think a lot of the thought about what the solution is — single-payer health care — is right on. I mean, that would eliminate payments at the point of care, if designed correctly, and largely eliminate the problem of medical debt. It’s a problem that has, to a greater or lesser extent, been solved by every other country in the Organisation for Economic Co-operation and Development (OECD) and many low- and middle-income countries as well.

So, it’s not necessarily a mystery where we should be driving. But I do think there are a few reasons why socialists would want to understand this better and to focus their energies on it. There is a large tapestry of injustice in the United States and in medicine in general. But this is a particularly egregious kind of predation on a particularly vulnerable population that arouses the ire of most everyone studying this. I was heartened to learn how easily this crosses ideological boundaries. I mean, people have varied solutions for this, some of which would, you know, only tinker at the edges and some of which would, I think, solve the problem in a much more meaningful way. But when confronted with the reality of what is going on, folks on the center right, folks in the center, people of faith, people of no faith, socialists, anarchists, and even some pretty conservative voices are horrified.

Medical debt collection is a particularly egregious kind of predation on a particularly vulnerable population that arouses the ire of most everyone studying this.

They are horrified that a nonprofit, voluntary, what used to be known as a charity hospital is taking patients to court, seizing their assets, and placing them in jail. That is not something that tends to divide audiences. It is an entry point for folks to understand how far we have gone into the era of financialization and privatization, how it has corrupted even our most charitable institutions, our institutions that we would think were most communal in nature, most devoted to fellow feeling, most overtly outside the capitalist system. These are nonprofit hospitals that have forsworn profits, that have no shareholders, that are descendants of the medieval almshouse tradition — those are now places where people can be expected to be hounded to the ends of the earth for their debts. I think that does help bring people into the fold. The history of transformation is one that often draws on this sense of ire, this sense of anger, this sense that things can be better.

I mean, Tommy Douglas, when he became the head of a socialist government in Saskatchewan and proposed the Canadian single-payer health care system, doctors went on strike. Doctors said, “We will not stand for this.” They went on strike only for a time, only for a few weeks before that effort was defeated. Within ten years Douglas had helped spread Medicare to the entirety of Canada. I mean, Margaret Atwood, in her Massey Lectures, talks about her own family’s experience with this. When her brother was born, her parents had difficulty leaving the hospital because the hospital was essentially detaining them because they couldn’t pay.

They had to wait until her father got his paycheck and was able to scrape by and pay that bill in order to even leave the hospital. That problem of medical detention continues to exist today in countries around the world, but it does not exist in Canada because of the efforts of folks like Douglas and the folks who organized with him to change the system. So, I do think this is a rallying cry. This is something we can organize around, and it’s something that can be a bulwark for change.

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Weaponizing Debt

Astra Taylor

I was going to mention the doctors going on strike in Canada to prevent public health care. Doctors play a paradoxical, contradictory role. And I do think it’s just worth flagging for the audience that this issue of medical detention was actually also another way you got into this project, right?

Luke Messac

Yeah. I mean, I didn’t start out thinking that I was going to spend most of my time studying medical care in the United States. I always knew it was a pretty dismal subject, and a lot of the folks who inspired me to go into medicine were people like Paul Farmer, who work in, you know, former colonized countries or places like Haiti, which has its own revolutionary tradition, where my own father was born. And so those were the places that I was most interested in working in.

When I finished college, I worked in Rwanda and then in Malawi during graduate school, and I wrote my first book about the British colonial system and postcolonial medicine in Malawi. And those were the places I was most interested in practicing, because I thought that honestly, when you care for patients in a place where they’re not made to pay at the point of care — actually, Malawi is one of those places that you are a member of a public system and can be a part of helping patients without burdening them with that concern — it makes you feel like you can go to work and wake up in the morning a little easier. So those were the places I was interested in working, interested in studying. But as a result of going to medical school in the United States and seeking my specialty training here, you know, I was ensconced in this total institution of the American hospital for about a decade and could not ignore what I was seeing as a result.

Astra Taylor

So, to go back to why socialists should care about the medical debt question, I have a horse in this race. Some listeners will know that I’m the cofounder of the Debt Collective. We call ourselves the first union for debtors. We’re most known for our work around student debt and student debt cancelation. But the truth is, we actually began trying to organize around medical debt. This was between 2012 and 2014. We found it challenging to find a strategic foothold because the health care system in this country is so, as I said, decentralized. There are thousands of nonprofit hospitals. There are federal programs that provide health care and regulate health care. There are veterans’ hospitals. There are private practices. Figuring out a target can be a bit challenging, but there’s some incredible moral and political clarity around medical debt. Just as you said, it unites people with a kind of outrage. And as we said, already, one hundred million people have some kind of medical debt. That’s a huge number of people to mobilize for economic and political change. As the years have gone on, we have developed some, I think, really promising strategies at the Debt Collective that we are going to put front and center actually in 2024. I’m feeling really energized about it.

But I think part of the power of medical debt and why it’s important to think about is that it sticks with people when they’ve left the hospital, right? That’s what we’re saying. It stays with people. It continues to have these adverse consequences. But that also means that that interaction with the health care system is still impacting their lives and might motivate them to become politically engaged. And so, it brings a new constituency into the fight for a single-payer health care system. So, I think it’s important for us to think about because it’s a strategic point of leverage in lots of ways.

And even though I have been thinking about medical debt for quite a while, and I got to be interviewed by you for your book (I should say I do make an appearance in this book, so I’m not a total neutral observer), I learned so much from it. You begin with just a really tidy explanation of the sort of three problems with medical debt in the introduction. You’ve touched on some of them, but maybe just name them briefly here and then we’ll dig in even further.

Luke Messac

These are three problems particular to patients and the patient experience, which is a particular concern of mine because I am a doctor and I treat patients in the emergency department. One is that medical debt ruins patients’ financial lives. We know that folks who have their debt reported to credit bureaus face tremendous burdens in seeking employment, in getting homes. We know that one hundred million Americans, as we went over, have medical debt, and it is the largest single source of debt on patient’s credit reports. It’s a tremendous burden on patients. Secondly, it’s one that we know affects patients’ health, that patients in debt are less likely to seek care.

There have been a number of studies on this that patients who have medical debt are six times more likely to skip a doctor’s visit or a prescription and are more likely to die. Patients with cancer who experience financial toxicity, as it’s known, who have problems with medical bills, die sooner, and we have ample evidence to support this. It’s filled the medical literature. We really don’t need to understand it too much more than we do already before we solve it. And the third is that it destroys trust. Sometimes it doesn’t sound materialist enough to talk about things like trust in the relationships in medicine, but I do think it’s important.

Patients who have medical debt are six times more likely to skip a doctor’s visit or a prescription and are more likely to die.

So much of what we do in medicine asks people to submit themselves — it’s a weird way of saying it — to really terrible procedures and medicines that have side effects and long hospital stays. These are not easy things to ask of people. If they do not trust that you have their best interests at heart, they will not submit themselves to these things, and they shouldn’t. I think that we have to work a lot harder, as physicians and nurses (nurses have done a lot better job of this than physicians have), to make sure that patients do know and do have reason to know that we have their best interests at heart. A recent survey found that still, even today, 70, 77, 78 percent of Americans trust that their physician has their best interests at heart, at least most of the time. Not everyone, but still a vast majority of the population. We don’t have the same numbers as nurses, but we’re not terrible. For hospital administrators, that figure is 22 percent, and there’s reason for that as we go into greater detail in the history. But I think physicians and even nurses risk getting dragged down to those levels if we don’t ally ourselves with patients relatively quickly.

Astra Taylor

Right, right. Just to linger there for a second, I mean, patients have a reason to be mistrustful because the financial motive is real, right? And staffing is shaped by those incentives, what treatments are recommended or not. So I don’t think it’s not material enough to focus on that. I mean, the corrosive effects of a profit-driven system are profound.

If you want to say more on that, I want to invite you to, but I also want maybe to use that as a stepping stone to my next question, which is: Could you describe the different types of hospitals? Because as you’ve said already, most hospitals that Americans visit are nonprofit; you would think they were outside. So, there’s a landscape of nonprofit hospitals, public hospitals, and for-profit hospitals just.

Luke Messac

Perhaps I’ll get at the first part of your question by getting at the second. The majority of the around six thousand hospitals in the United States, about 57 percent of them, are private, nonprofit hospitals. These are the hospitals that draw their histories from almshouses, from ethnic associations, from religious orders. They also are known as voluntary or charity hospitals. They’re not the only hospitals in the United States. The federal government runs hospitals. The Department of Defense runs hospitals; the Indian Health Service runs hospitals.

And there are for-profit hospitals that often bought up closing charity hospitals and public hospitals in the ’70s and ’80s and built these mammoth conglomerates of for-profit facilities that compose a large portion of hospitals in the United States today. But still, most hospitals in the United States are private, nonprofit hospitals. And the distinctions are sometimes lost on people.

People have reason to not know the distinctions, because hospitals have worked pretty hard to narrow them. For the longest time, private nonprofit hospitals justified their existence and their tax exemptions because they claimed to care for poor patients, often without seeking recompense. Even in the 1950s, the Internal Revenue Service (IRS) had a standard that said that a private nonprofit hospital would only receive a tax exemption from the agency if it agreed to provide care to indigent patients, as they call them, to the extent of its financial ability.

And for the next fifteen years, hospitals worked mightily to change that standard, and they did, so that what was known as the “charity care standard” became the “community benefit standard,” a far laxer standard that the IRS took up at the behest of a single a single IRS attorney, Robert Bromberg, who said that the charity care hospital was an anachronism, that with the passage of Medicare and Medicaid and the rise of private insurance in the mid-twentieth century, no one would really even need it anymore. Who would even need care that was free at the point of service? He changed the standard so that a hospital could receive a tax exemption and retain its nonprofit, tax-exempt status; as long as it agrees to accept all paying patients, it could turn away nonemergent care, and even at that time, emergent care for patients who were not paying. And so those distinctions between private, for-profit hospitals and nonprofit hospitals, at the end of the day, for a lot of patients, don’t matter as much as you’d think it would any longer.

Astra Taylor

The majority of hospitals, which are nonprofit private entities, get their nonprofit status, which is a massive tax benefit, in return for providing public benefit, including providing free or reduced-cost care to patients who need it. That obligation is enshrined in law, but it is not followed to the letter of the law.

Luke Messac

Yeah, absolutely. I mean, it is still a part of the law that hospitals are supposed to provide community benefits. And those can come in multiple forms, including care for low-income patients without charging them — so, either free or discounted care often on a sliding scale. But the wild thing is that there’s very little regulation of how much or at what level that care should be provided. Some of the organizing that’s already been done has helped to change this in different states. Maryland, due to the great organizing efforts of community organizations and unions and nurses, passed a series of laws about medical debt in 2020 and 2021.

It is still a part of the law that hospitals are supposed to provide community benefits. Those can come in multiple forms, including care for low-income patients without charging them. But there’s very little regulation of how much or at what level that care should be provided.

There is a floor below which every patient is supposed to have free care. And then hospitals are supposed to take a number of measures to make sure they’re never sending bills to folks who fall below that floor. But in most places in the country, hospitals have completely free rein. They can say at what level of income someone should qualify for free care. So, in some places in the country, in some hospitals, that’s 75 percent of the federal poverty level. That’s $22,000 for a family of four in 2023. At other hospitals, it’s 600 percent of the federal poverty level. That’s $180,000 for a family of four. So, these wide, wide disparities really do impact patients’ financial outcomes, patients’ ability to access care in the future. There’s a historical logic to it. There’s a racial logic to it, but there’s not a reasonable logic to these differences.

You’re totally right that this is a leverage point. This is a point at which we should be holding hospitals accountable to their legal obligations. And I would say also to the obligations that we still collectively hold of them, even these extralegal obligations that hospitals are still subject to some measure of shame, some measure of public accountability beyond their legal obligations.

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Limited Progress

Astra Taylor

In your book, you go back to the early nineteenth century and talk about how the relationship between the service provider and the patient, the doctor and the patient, was much more, we could say, artisanal. The bill collection, as you said, had to be negotiated in a very direct way. You had to treat somebody and then personally chase them down for payment. Can you talk about that, some of the moral ideas that emerged from that situation? There was this sense that people should be treated even if they were poor. But there’s a tension as well, because doctors need to be paid. So, doctors got organized. Can you talk a bit about that history and early kinds of hospitals, what rights patients did or didn’t have? Where did this all sort of begin?

Luke Messac

Yeah, it’s difficult sometimes to imagine what that world was like. But today, three-quarters of physicians work for large corporate entities like large hospital systems, private equity companies, health insurers. But in the early nineteenth century, most physicians were private solo practitioners, and the medical marketplace was replete with different kinds of practitioners. And allopathic providers didn’t have a monopoly on people’s thoughts about who they should seek care from when they were sick. And even among those providers, there was a lot of competition. And so, it was hard for patients. It was hard for physicians to charge whatever price they wanted or to always get the payments that they thought they deserved after providing care.

So physicians would often either have contracts for annual attendance (you pay annually for your family to get care) or on a fee-for-service basis (you would pay for every visit). Those bills would often be presented on a quarterly, semiannual, or annual basis. The physician would be the one presenting them to the patient and saying, “What can you pay of this bill?” And they would complain frequently to whoever who would listen — medical journals and elsewhere — about their difficulty in collecting these payments. They worried that patients would often tell them their crops didn’t come in, or another family member was sick, and that they just didn’t have the money at the moment.

Nineteenth-century physicians themselves talked about their own debts and the prospect of dying in debt because they weren’t able to collect adequately from their own patients.

And physicians themselves talked about their own debts, and the prospect of dying in debt because they weren’t able to collect adequately from their own patients. They would write these plaintive verses in medical journals: “Book, o doctor, book your fee. Charge, I’ll pay it futurely.” They really worried about this. And it drove some of the first medical societies to organize largely around trying to have standardized fee schedules and standardized policies about patients who did not pay. Some physicians wanted to come down hard on those patients and cut them off from care or even seek legal action against them. Most of the medical societies continued to include some statements about the need to treat patients for free, or for discount, if they could not afford to pay, that it was the doctor’s duty to do so. This remained in the language. It wasn’t always honored; it wasn’t always practiced. But this was part of the moral imaginary of being a physician in the United States for much of the nineteenth century.

All this began to change by the twentieth century, as hospitals became more common places to seek care for nonpoor patients. Before that, hospitals were really places you would only go if you didn’t have anyone else to care for you. They were derived from almshouses. They weren’t centers of high-tech scientific inquiry, and they weren’t often frequented by people who had any means. That started to change in the twentieth century. New surgical techniques, X-rays, new forms of organization of physicians and nurses made hospitals much more appealing to middle- and upper-income patients, and hospitals strove to make themselves appealing to them.

Private rooms, new linens: hospitals would advertise their amenities to upper-income patients. And hospitals became kind of a locus of where physicians worked, where nurses sought employment. And they, too, started to change their practices instead of seeking to care only for what they called “charity cases” or the “worthy poor”; they were never providing care for everyone. There were many people whom they wouldn’t allow in their doors, but they sought to move from caring for the worthy poor in these large open wards to caring for the paying patient in private rooms. And so, they became changed institutions as well. But that was the backstory — that the nineteenth century was a different country. It was a different world in which physicians themselves had to negotiate with patients in these fraught interactions about how much would be paid and what would happen if the payment wasn’t made.

Astra Taylor

And then these hospitals that you’re describing, as you say, became more hospitable. They started to appeal to upper- and upper-middle-class folks. Some patients did not have the right to be treated in them. And of course, we can imagine in the Jim Crow South, these hospitals were not open to all by any means. There was no right to care.

Luke Messac

There was affirmatively a right to refuse care, in fact. I mean, this came from the case of Geraldine Cruz in 1934, in Birmingham, Alabama. This went to one of the state courts. It’s a really tragic case of a two-year-old whose father brought her to the hospital, where he noted she was extremely sick. She was having difficulty breathing. She was suffering from diphtheria disease, which we don’t see very often thanks to vaccines in the United States. But this is a terrible disease. It’s basically a bacterial illness that causes this sickly gray film to coat your throat until you cannot breathe, and you suffocate. A terrible illness, but one for which, even at the time, in 1934, there was an antitoxin and other forms of treatment available. But instead of admitting her for treatment, the hospital told his daughter to go home.

The hospital refused care. Its justification for doing so was that this was a contagious disease, and it worried about infecting other patients. But when he brought his daughter home and she died shortly thereafter, he sued the hospital. And the decision that the court made wasn’t this narrow ruling that it was a contagious case, and the hospital has a right to try to prevent contagion. They spoke: the hospital has the right to refuse care to whomever it wishes, on whatever grounds it wants. And that was the reigning ideology of the day, and one that continued for a long time, basically, until we got to the 1980s. Hospitals could refuse on whatever grounds they wished. And as you mentioned, I mean, hospitals were, until the 1960s, until the passage of Medicare, largely segregated in the United States. And so black patients had to seek care either at black hospitals or in segregated wards. The voluntary charity hospital at which every patient could seek care was not a reality for everyone, even then.

Astra Taylor

So, Medicare in the 1960s and then the Emergency Medical Treatment and Active Labor Act (EMTALA) in the 1980s were, limited though they were, real breakthroughs.

Luke Messac

Yeah, absolutely. I mean, the ’60s were watershed moment in this story. By the 1950s–60s, you have the rise of private insurance. Gabriel Winant talks about this in his book. These were islands of social citizenship, in which some, but not all, Americans could achieve some measure of social protection. The passage of Medicare and Medicaid in 1965 did afford a measure of protection to some low-income Americans and Americans over sixty-five. You saw a rapid decrease in the number of Americans who were uninsured. The pace of that decrease would not be matched again until the Medicaid expansion of the 2010s.

I mean, President Lyndon B. Johnson basically said it was like the end of medical debt for elderly patients. That’s not true. Medicare does not cover everything all the time. It leaves patients with significant debts. But it was a huge breakthrough. The funding from that law was used as kind of a battering ram to desegregate hospitals throughout the country. A small team of folks in the federal government basically ensured that hospitals would not receive the funding they desperately needed until they desegregated. And so, it did speed the desegregation of American hospitals. But hospitals could still refuse care for nonpaying patients.

And they did. One of the major tipping points in this history is the early 1980s, when Medicare and Medicaid payments were pretty drastically cut — a deceleration in reimbursements for care, even as care became more expensive. And so, hospitals started to suffer from shortfalls in the 1980s at the start of Reagan-era deregulation and privatization, because they couldn’t afford to care for these publicly insured patients. As a result, they turned away patients at the door, or private hospitals would start dumping patients — that is, transferring them directly to the public hospital on nonmedical grounds. This would happen often while they were quite unstable: so, patients in active labor who are about to deliver, folks who had been shot or were in trauma and were bleeding to death. This was an outrage for the physicians working at these public hospitals, who saw this tie to patients coming in from private facilities at which they could have been treated and could have been saved, basically dying en route. Some of the folks who wrote about this at the time, young physicians like David Himmelstein, would go on to start Physicians for a National Health Program and push for single-payer health care for the rest of their careers.

Hospitals started to suffer from shortfalls in the 1980s at the start of Reagan-era deregulation and privatization, because they couldn’t afford to care for publicly insured patients.

But as a result of some of their documentation of what was going on and publicizing what was happening, this patient-dumping phenomenon, EMTALA was written by Pete Stark, a Democrat from Oakland, in part because thirty-two-year-old Eugene Barnes, an Oakland resident, had been stabbed and then refused care at a hospital nearby and died as a result. EMTALA required hospitals and emergency departments, in particular, to provide screening exams to whoever walked in their door and to stabilize any emergent conditions.

They didn’t have to treat these patients thereafter, but they did have to treat emergent conditions. And this is a law with which we still live today. Hospitals complained with some reason that they had another unfunded mandate. They weren’t given additional money to live by this edict. And patients were not relieved of debts as a result of the care they sought that was protected by EMTALA. They could seek care, but they could still be hounded to the ends of the earth for it. But those two moments, you know, Medicare and Medicaid passage and EMTALA, were steps forward, but vastly incomplete.

Astra Taylor

The picture you paint in the book is one of patients in shock and in pain being turned away from hospitals, a process that leads to the wasting of critical moments. I mean, it’s something that we do take for granted today: at least if you go to the emergency room, you might have to wait eight hours, but you know, they’re not going to put you back in the ambulance.

Luke Messac

Yeah, it’s almost unthinkable. You can see why the physicians, the young physicians, writing about this at the time were so outraged. So much of our medical training involves an appreciation and a respect and a fear of time. Time is in some ways our greatest enemy. When someone comes in with a heart attack, we know that every hour, every minute we delay more of their heart muscle dies and will not be recovered. The same is true of stroke. The fact that you could take a patient coming in with one of these sicknesses and put them in an ambulance to make their way to some public institution somewhere else instead of caring for them is just almost unthinkable now. But it wasn’t unthinkable then. And I’m hoping that there’s so much that’s thinkable now that will be unthinkable soon.

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Buying and Selling Paper

Astra Taylor

I agree. I asked you to describe some of the positive pieces of legislation — Medicare, Medicaid, EMTALA — that show that we do actually have a public health care system, right? I mean, there are lots of rules governing the provision of health care. There’s lots of public money flowing into it. It’s just a system that enables a lot of privatization-caused inefficiency and facilitates the insurance industry.

But there are two moments you’ve touched on that were critical in moving us toward a system that was even more cruel toward debtors. So, one was 1969, when the IRS changes its standard for nonprofit hospitals’ tax exemption. So that’s the IRS attorney, Robert Bromberg, who kind of created new rules out of thin air. I mean, this guy has nothing to do with health care provision, right?

Luke Messac

Yeah. Although the American Hospital Association (AHA) really appreciated his work and hired them as a special tax counsel after he left the IRS. So, he became an expert on health care provision, thereafter, working for the AHA. But at the time, he was just, you know, a thirty-two-year-old IRS attorney who rewrote these regulations without public comment.

Astra Taylor

Right. So, he takes this idea of nonprofit hospitals having to provide charity care and turns it into a vaguer community benefit standard. The other point is that in the early 1980s, when reimbursements changed for Medicare and Medicaid, these help set us on a course for an explosion of medical debt. Despite some of these changes, medical debt is still a major problem. People are still sounding the alarm about medical debt. You even tell this wild story of a guy in 1972 who hijacks a plane and holds a stewardess hostage with a fake gun, trying to ransom $200,000 so he can pay for his child’s medical treatment because he has a congenital heart defect. So medical debt is in the news. But the problem just keeps getting worse. And you say the 1980s and 1990s in particular are a period of rapid growth of uninsured people and also of medical debt as a response. What’s going on in that period? Why, even after these breakthrough reforms, when medical debt is something, people are actually talking about, “Why does the problem just keep getting worse?”

Luke Messac

The 1980s are really a seminal moment in this story. I mean, before the 1980s, medical debts were held, usually by hospitals, on their books for years and even decades. And so even if a patient wasn’t immediately given free or discounted care, that debt would sit on their books, and it wouldn’t be pursued too aggressively.

Most often by the 1980s, things had changed. We mentioned the change in reimbursement for Medicare and Medicaid: Medicare went from reimbursing what were called “all reasonable costs.” Basically, the hospital just sent its bill to Medicare and said, “This is what we need for this procedure, this hospitalization.” And Medicare didn’t ask too many questions to a prospective payment system where hospitals could only get a certain amount and couldn’t really dictate the terms of how much they were given. Similar things happened to Medicaid, and states began to be much stricter in who would qualify for Medicaid.

So as a result you had, at a time of increasing poverty, a decrease in the number of people enrolled in Medicaid across the country and hospitals facing losses. Essentially every time they cared for a Medicare or Medicaid patient, the cost-to-charge ratio, or the amount of cost they had to the reimbursement they got, fell to the point where they were losing about ten to twelve cents on the dollar every time they took care of a Medicare or Medicaid patient.

And so this was this was harmful to a number of hospitals, especially ones that took care of a lot of publicly insured patients. Hospitals, even today, seek to optimize what they call their “payer mix.” They want those privately insured patients. The privately insured patients will give them the most reimbursement for any given episode of care. Different kinds of private insurance, or more or less remunerative. But in general, private insurance is better for hospital bottom lines. But hospitals that took care of publicly insured patients were in deep trouble; 9.7 percent of them closed their doors.

During the 1980s, a number of public hospitals that closed sold themselves to for-profit hospitals that began to spring up in the ’70s and ’80s. What it did for folks in debt was it abandoned that era of lenience.

During the 1980s, a number of public hospitals that closed sold themselves to for-profit hospitals that began to spring up in the ’70s and ’80s. So that was a hugely influential moment. And what it did for folks in debt was it abandoned that era of lenience. Hospitals said, “We’re not going to wait for that money anymore.” I mean, it’s amazing when you read the trade journals; hospital administrators and folks involved in the debt-collection process are much more honest and candid about what their concerns are, what their motivations are.

And in those trade journals, every time they interviewed a billing executive in a hospital, they said, “We’re not going to wait for that money anymore. We’re going for it.” And so, they would, in increasing numbers, assign their debts to third-party collection agencies on a contingency basis. So, hospitals would assign the debt to a third-party collection agency. The collection agency would seek to collect for a given amount of time, maybe a year, maybe two, and then anything that the collection agency was able to collect, they’d keep a portion of that. Often at that moment it was between 30 and 40 percent. It was a pretty high number.

Alternatively, the hospitals would sell the debt outright: for pennies on the dollar they would sell the debt outright and hand the paper over to the third party. And that third party would then keep anything that it was able to collect thereafter. Those arrangements became much more common after the ’80s and ’90s, after some of those structural changes we talked about. The changes accelerated further after one more law, which I think is worth mentioning, which is the Medicare Modernization Act in the early 2000s, which promoted the use of high-deductible health plans. This was the George W. Bush administration.

The reigning ideology there was that patients needed skin in the game in order to be discerning consumers of health care. And that was the line they, you know, gave to the American public, even as subsequent studies would find that a lot of the folks who were pushing this stood to benefit a lot from the sale of high-deductible health plans.

Those became the most common health plans that Americans had. The deductibles that patients have to pay before any insurance kicks in started to rise rapidly. They’ve tripled over the last decade. So, they continue to rise. And patients, insured patients, faced increasing out-of-pocket costs. And hospitals, which were really built to collect from insurance companies, not from individual patients, started to have this wave of bad debt. They called it a tide of bad debt that they couldn’t collect from insurance companies. They were supposed to collect it from individual patients, and they weren’t built to do that. Their billing departments weren’t built to do that. And so, they increasingly turned toward debt collectors to help them do that as well. That was the sales pitch from the debt-collection companies: “We will do this for you.” The debt-collection agencies benefited from both of those changes, the changes in the ’80s and the changes in the 2000s.

Astra Taylor

And just to go back to the theme here of the connection to patients trust. I mean, the point is that these debt collectors have no relationship to providing health care. And so, it’s not just once removed to being in the hospital administrator office; now you’re out with some private debt collector who has nothing to do with health care. Provision is simply in the business of hounding people to pay.

Luke Messac

The patient becomes a figure on a spreadsheet. I go into detail about some of the individual debt-collection companies in the book. I devote a whole chapter to chronicling the careers of a few of them, not because I think they’re individually heinous actors. I think we do a disservice to ourselves when we privilege individual agency over structure. But the careers of these debt collectors do highlight some of these structural changes.

For a lot of these prominent debt collectors, they’re buying and selling paper. They really have nothing to do with health care.

For a lot of these prominent debt collectors, they’re buying and selling paper. They’re making relationships with hospital executives to sell them or assign patients’ debts. They really have nothing to do with health care. They’ve never been doctors. They’ve never been nurses. They’ve never been techs. They’ve never been involved in the health care process, but they hold sway over the fates of so many of our patients. It is increasingly a story of financialization, of alienation, of increasing distance between patient and physician and the bill. Those things become increasingly divorced. Physicians, for our part, have completely divorced ourselves from this process and basically left patients to the devices of these third parties.

Astra Taylor

So much of what antidebt organizers have to do is cast away stigma, cast away shame. There’s a long history of debtors being painted as unworthy, as deadbeats. And that’s even true for medical debt, which should be the sort of exception to the rule. When I was involved in Occupy, we began discussing the fact that our economy was financialized. I mean, this was, of course, in the aftermath of the bank bailouts. You know, the old slogan of Occupy was, “Banks got bailed out, we got sold out.”

A group of us wanted to have what we called a bailout of the people, by the people. Getting our hands on debt was n