In its final days in office, the Biden administration finalized a rule to eliminate nearly $50 billion in medical debt from 15 million Americans’ credit reports. But the rule betrays a complete misunderstanding of health economics — and like former President Biden’s other market interventions, it may only serve to make Americans worse off.
Medical debt simply isn’t the crisis many have made it out to be. A recent analysis from the Peterson-KFF Health System Tracker found that just 8% of American adults hold medical debt. Among those with outstanding healthcare bills, roughly half owe less than $2,000. Just over one in seven of those with debt — roughly 1% of American adults — owe more than $10,000.
Many debtors have solid plans to pay unexpected medical bills, according to KFF polling. More than one-third of respondents with current healthcare debt said they’d put a $500 medical bill on a credit card and pay it off over time or in full at the next statement. Another 15% said they’d pay the bill immediately using cash, check, debit card, or a Health or Flexible Savings Account. Around 7% said they’d make a payment plan with their provider.
So it seems that medical debt is at least manageable for most of those who hold it. And considering the average American holds more than $90,000 in total debt, medical debt is far from the largest source of financial strain.
That explains why past actions to forgive medical debt haven’t resulted in meaningful improvements to Americans’ lives. Indeed, a recent National Bureau of Economic Research paper found that large-scale healthcare debt relief had no effect on patients’ mental health, physical health, or financial wellness.
There’s a strong chance that the Biden administration’s last-minute move to minimize medical debt will have a negative impact on those who have it. Without an accurate picture of the debts people owe or have paid, lenders may become more cautious about offering money to borrow in the first place.
The result would be less available credit for many Americans — not more.
Obscuring medical debt could lead some lenders to approve loans for people whose credit scores wouldn’t have been high enough to qualify otherwise. But if those borrowers aren’t prepared to repay the loans, they could end up defaulting and face even more financial hardship.
Either scenario will increase uncertainty around loan repayment — and thereby incentivize lenders to raise interest rates. That will disproportionately harm low- and middle-income Americans, who already face a tougher time getting approved for loans and consistently making payments.
Some may even need to turn to alternative sources of funding, such as high-interest payday loans.
Then there’s the possibility that the rule could compel providers to ask for payment up front. If that happens, some patients could find it harder to access care.
The NBER paper found that policies related to medical debt forgiveness led to reductions in payments of existing healthcare bills. That makes sense. If patients know their medical debt might be forgiven — or, at the very least, won’t appear on their credit report — they’ll prioritize paying their other debts first.
The Biden administration claimed its medical debt rule would offer financial relief to millions of Americans. It may have just the opposite effect — and make it harder for people to access care to boot.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The World’s Medicine Chest: How America Achieved Pharmaceutical Supremacy — and How to Keep It (Encounter 2025). Follow her on X @sallypipes.
