Medical debt is a 'uniquely American problem' caused by a 'very broken' system, expert explains

The cost of health care in the U.S. has grown worse in recent years as Americans continue taking on unprecedented levels of medical debt.

The issue has gotten so bad that one New York-based 501 charity, RIP Medical Health, uses donations to buy up people’s medical debt. The organization recently announced a purchase of $278 million in medical debt owed by roughly 82,000 patients in the Tennessee and Virginia regions.

“Medical debt is the no. 1 cause of bankruptcy in the United States, which is something that’s obviously a uniquely American problem,” Allison Sesso, executive director of RIP Medical Debt, said on Yahoo Finance Live (video above). “So we’re out there trying to give people relief from this economic burden. We’ve got donors that are excited across the country to do more of this debt relief. That number — 278 million — we’re very proud of that, but we have a lot more debt relief ahead of us.”

RIP Medical Debt’s recent purchase involved buying people’s medical bills directly from the Ballad Health hospital system, which has previously been criticized for using lawsuits to collect on medical debt. Sesso noted that most of the patients affected by RIP Medical Debt’s latest move are considered low-income.

“You don’t actually have to spend all that much money to buy a whole lot of debt for people that the hospitals know can’t pay those bills,” she explained. “That’s exactly how it works. It’s a great return on investment. But also, importantly, it’s a huge indicator that our health care financing system is very broken.”

Dan Maccoux, his wife Cathy Maccoux(L) and daughter Olivia Maccoux look at papers on January 16, 2020 in Brooklyn Park, Minnesota - He may be insured and has a six-figure salary but after spending hundreds of thousands of dollars on care for his daughter Olivia, Dan Maccoux expects to be in debt for the rest of his life -- victim of a ferociously expensive US health system that Donald Trump's challengers for the presidency have pledged to overhaul or scrap. (Photo by Kerem Yucel / AFP) (Photo by KEREM YUCEL/AFP via Getty Images)
Dan Maccoux, his wife Cathy Maccoux, and daughter Olivia Maccoux look at medicla debt papers on January 16, 2020 in Brooklyn Park, Minnesota. (Photo by KEREM YUCEL/AFP via Getty Images) (KEREM YUCEL via Getty Images)

Roughly 21 million Americans holding $46 billion of medical debt as of April 2021 face collections — meaning that a third-party debt collector is trying to obtain the money owed — according to Credit Karma data previously provided to Yahoo Finance.

“What we do is we’re able to buy debt for pennies on the dollar because of the way that the debt market unfortunately works,” Sesso said of RIP Medical Debt's model. “It’s a way that they know that people can’t pay. The value of those debts, if they were to be sold to a for-profit debt buyer, are very little. $1 can buy $100 worth of debt that somebody owes.”

'We’re letting people have insurance plans they can’t afford'

The U.S. spends significantly more money per capita on health care — $10,586 — while the next three countries of Germany, the Netherlands, and Australia trail far behind.

“What I think has to happen is we really need to look at our health care system writ large and think about the financing part of it,” Sesso said. “Are people really insured in a way that they need to be? Why are we allowing people to have health insurance plans that they can’t afford, meaning that the deductibles are clearly higher than what their income is and what their means are?”

Almost everything costs more in the U.S. (Chart: Health Care Cost Institute)
Almost everything costs more in the U.S. (Chart: Health Care Cost Institute)

According to the Kaiser Family Foundation, the average single deductible in 2019 was $1,931 while the average family deductible was $3,655. (Another major problem is surprise billing.)

Americans are paying the price: Quality health care is unaffordable for an estimated 46 million Americans, according to a recent Gallup survey, and a LendingTree survey of 1,550 people in March found that a majority of Americans (60%) have been in medical debt at costs averaging between $5,000 to $9,999.

LendingTree found that emergency room visits (39%), visits with doctors and specialists (28%), childbirth and related care (22%), and dental care (20%) were the leading causes.

ER visits are the leading cause of medical debt. (Chart: LendingTree)
ER visits are the leading cause of medical debt. (Chart: LendingTree)

Sesso likened the overall situation with medical debt to that of the subprime mortgage crisis back in 2008.

“We’re letting people have insurance plans they can’t afford and that don’t meet their income level,” she said. “So I think we need to take a hard look at that and build on the ACA to ensure that people walking into the hospital are truly covered and make sure that people across the board do have coverage to begin with.”

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells. If you would like to share your story of dealing with medical bills and other health care costs, you can reach her at


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