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The Effects of Medical Debt Relief: Evidence from Two Randomized Experiments

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Listed:
  • Raymond Kluender
  • Neale Mahoney
  • Francis Wong
  • Wesley Yin

Abstract

Two in five Americans have medical debt, nearly half of whom owe at least $2,500. Concerned by this burden, governments and private donors have undertaken large, high-profile efforts to relieve medical debt. We partnered with RIP Medical Debt (now Undue Medical Debt) to conduct two randomized experiments that relieved medical debt with a face value of $169 million for 83,401 people between 2018 and 2020. Our experiments focused on downstream medical debt that had been sold to debt collectors, and one of our experiments straddled an industry-wide pullback in the reporting of medical debt to the credit bureaus, allowing us to estimate the effects of debt relief with and without counterfactual reporting. We track outcomes using credit reports, collections account data, and a multimodal survey. There are three sets of results. First, we find a modest improvement in credit access when there is counterfactual credit reporting, but no impact on credit report outcomes when there is not. Second, we estimate that debt relief causes a moderate but statistically significant reduction in payments of existing medical bills. Third, we find no effects on survey measures of mental and physical health, healthcare utilization, and financial wellness. Taken together, our results indicate that the strong correlations documented in prior research do not translate into causal effects for downstream medical debt relief.

Suggested Citation

  • Raymond Kluender & Neale Mahoney & Francis Wong & Wesley Yin, 2024. "The Effects of Medical Debt Relief: Evidence from Two Randomized Experiments," NBER Working Papers 32315, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:32315
    Note: AG CF EH IO LS PE
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    References listed on IDEAS

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    1. Will Dobbie & Jae Song, 2015. "Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection," American Economic Review, American Economic Association, vol. 105(3), pages 1272-1311, March.
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    6. Alyce Adams & Raymond Kluender & Neale Mahoney & Jinglin Wang & Francis Wong & Wesley Yin, 2022. "The Impact of Financial Assistance Programs on Health Care Utilization: Evidence from Kaiser Permanente," American Economic Review: Insights, American Economic Association, vol. 4(3), pages 389-407, September.
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    Cited by:

    1. Christa N. Gibbs & Benedict Guttman-Kenney & Donghoon Lee & Scott Nelson & Wilbert Van der Klaauw & Jialan Wang, 2024. "Consumer Credit Reporting Data," Staff Reports 1114, Federal Reserve Bank of New York.

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    More about this item

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I1 - Health, Education, and Welfare - - Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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