Legislators take closer look at medical debt protections

Medical debt can deal a crushing blow to the finances of Hoosiers struggling to keep up with payments while also meeting their basic living and housing needs.

Indiana lawmakers are hearing testimony this summer from groups representing low-income residents and families, as well as debt collectors that also deal with the issue on a daily basis.

Sen. Fady Qaddoura D-Indianapolis, introduced a bill earlier this year that sought to reduce the impact of medical debt on credit ratings and curb aggressive collection practices.

The bill failed on a close 26-23 vote in the Republican-dominated Senate. But Qaddoura told the Indiana Lawyer he intends to reintroduce a similar bill in the 2026 session and is working with Indiana Senate Republicans.

House Speaker Todd Huston joined Qaddoura in proposing medical debt as an interim study topic this summer.

“I was pleasantly surprised when I heard the Speaker was interested in this topic,” Qaddoura said.

Qaddoura said he has heard many stories from constituents about unanticipated bills and sky-high deductibles for fully-insured individuals.

“For so many families, even fully-insured, they may not be able to afford to pay bills,” Qaddoura said.

Qaddoura cited a statistic from an Indiana Community Action Poverty Institute survey that more than $2.2 billion in medical debt is owed across Indiana.

The study committee heard testimony earlier this month from community advocates on the impacts of medical debt and possible legislative solutions.

Members of the Indiana Collectors Association also weighed in, with one member arguing that failure to pay debt shifts the burden to places like rural hospitals that already operate on razor-thin margins.

Erin Macey, the poverty institute’s director, testified about medical debt in front of the Interim Study Committee on Courts and the Judiciary.

Macey focused on improvements her group would like to see with state exemption laws and Indiana’s wage garnishment protections.

She told committee members that 47% of Hoosiers that responded to the institute’s debt survey of nearly 6,000 low-income residents reported they had medical debt, with nearly one-third reporting medical debt in collections.

“Medical debts are typically from a one-time or unexpected health issue and both the insured and uninsured grapple with bills they can’t afford,” Macey said.

Sam Snideman, of the United Way of Central Indiana, said Indiana ranks 11th nationally for overdue medical debt.

He said even families with insurance can find themselves with medical debt due to high deductibles and costly procedures.

Richard Rainho, immediate past president of the Indiana Collectors Association, said collections are not the real problem regarding medical debt, but rather the high cost and inefficiency of health care.

Rainho said attacking collection doesn’t address those root causes.

“If we dismantle debt collection tools, the entire health care system becomes unstable,” Rainho said.

Bankruptcy attorney sees impact

Eric Lewis, an attorney at Lewis Legal Services in Indianapolis, told The Indiana Lawyer that the amount of medical debt in bankruptcy cases may not be patently obvious because in many cases, the medical debt was paid with a credit card.

So when courts and various groups try to keep statistics on just how many cases involve medical debt, it is very likely the statistics underrepresent the true amount of medical debt that is being incurred— and probably by a lot, he said.

Lewis said he would not say that more people are filing for bankruptcy due to medical debt alone.

However, he said medical debt is the one consistent type of debt that tends to be prevalent in the majority of bankruptcy cases, even if it’s not the driving factor motivating a person to file bankruptcy.

“Many people are financially squeezed just by everyday cost of living. So any time you add an unexpected expense, which medical issues tend to be, it can make everything unmanageable and can be the final straw to break the camel’s back. In terms of the main reason people file bankruptcy, consumer debt and credit card debt continue to be the main reason, but medical debt isn’t far behind,” Lewis said.

Lewis said what drives people to file bankruptcy the most is how aggressive the debt collection effort is.

With credit card defaults and things like rental evictions, creditors tend to be very aggressive in how often they contact the debtor and what measures they take to escalate the matter into litigation to collect, Lewis said.

He said many medical providers work with people with very reasonable payment arrangements, even on large balances.

“So when that happens, someone might not be motivated to file bankruptcy because despite the medical debt being very large or even insurmountable, they can afford to maintain some kind of small minimal payment to keep the creditor from escalating the matter,” Lewis said.

The attorney noted that sometimes the debts get turned over to collections and then the collection firm escalates things to a point that people file bankruptcy for the sole reason that they can’t afford to have 25% of their wages garnished to pay a single debt.

Lewis said there are certainly some cases where the debt is almost entirely medical due to a major medical event, a catastrophe like an automobile accident in which the person was uninsured or underinsured, for example. But, he said, the vast majority of cases involving medical debt are simply an accumulation of out-of-pocket medical expenses, tests and procedures that the person simply doesn’t have the ability to financially manage.

“The lack of transparency is not only how much people will be billed but by whom (which is) often is a source of confusion for many people and they struggle with keeping track of it all. Even for people with insurance, they expect certain things to be covered, and it turns out they are not, either in whole or in part, and then it comes as a surprise. And a whole bunch of little surprises add up fast and people file bankruptcy in response,” Lewis said.

Is debt protection ahead?

The interim study committee is slated to reconvene in September, with further discussions on protecting debtors’ homes from liens or sales and putting caps on salary garnishments and monthly payments.

Macey said she is hopeful legislation will have more success next year.

“I am optimistic we will make some progress on this issue,” Macey said.

Qaddoura said he is working with Republican colleagues to craft appropriate language for next legislation.

One change being considered is to limit the scope of medical debt relief to chronic illness and medically needed procedures, Qaddoura said.

He stressed that medical debt is different than a mortgage, a student loan or credit card debt.

“Patients never choose to get cancer or ALS or Alzhiemer’s or any of those chronic diseases,” Qaddoura said.•