A few months after a nonprofit organization announced it was erasing millions of dollars of medical debt in the Finger Lakes region, a team of researchers has begun studying what that debt forgiveness means for the people affected.
It seems like a pretty straightforward question: If you face thousands of dollars of medical debt, and then you get a nondescript yellow letter in the mail saying your debt’s been bought and forgiven by a philanthropic group, what effect does it have on your life?
It’s obviously a big help, right?
Ray Kluender, a post-graduate fellow at the National Bureau of Economic Research, laughed at that question.
“Broadly speaking, we actually know very little about how medical debt affects households,” Kluender said.
He said, for example, that we don’t really know how forgiving medical debt affects people’s financial decision-making, or their mental or physical health.
And ethical considerations make it pretty tough to do the research necessary to confirm what the effects are.
“It’s a really hard thing to study,” Kluender said. “As social scientists, we’re always trying to approximate something close to an experiment, where you randomly assign one group one treatment and one group the other treatment. But, obviously, it’s kind of unethical to randomly assign medical debt.”
Now, though, Kluender and a team of three other researchers have an opportunity to do almost exactly that. Because of legal requirements to maintain nonprofit status, the organization that bought and forgave medical debt in the Finger Lakes needed to do it randomly.
RIP Medical Debt bought what they call “portfolios” of debt, rather than picking specific people who owe money for medical expenses.
That means the research team has a ready-made sample of people who have medical debt but didn’t get it forgiven, and they can compare that sample to a group whose medical debt was erased.
“We want to understand whether, you know, some of the people who hospitals and debt collectors are going after are actually particularly vulnerable,” Kluender said. “For some people, there’s maybe this massive benefit for forgiving their debt.”
Carolyn Kenyon, who helped raise the money that enabled RIP Medical Debt to purchase the debt portfolio, said she was particularly interested in what the research would uncover about the emotional impact of having debt forgiven.
"What will they find about anxiety, about stress or relief or worry," she wondered.
Kluender said the research team is designing a survey that will gather that sort of data. "I think the largest consequences of medical debt are likely to be on precisely these types of effects," he said.
Emotional impacts are "harder to quantify" than financial ones, "but just as important," said Kluender.
“That can help hospitals inform their debt collection practices. That can help regulators inform the policies that they make around who hospitals are supposed to go after. It can help policymakers design insurance policies that have eligibility rules.”
Kluender also said figuring out who’s most affected by medical debt relief can help inform some of the most controversial policy discussions underway in the U.S., like how effective single-payer health care might actually be at reducing people’s financial burdens.
The team’s research is expected to run through 2020.