WASHINGTON — Bernie Sanders has long wanted to remake the health care system so no one will have to pay directly for medical care again. Now, he also wants to go back and cancel all the medical debts of people who have been billed under the current system.
In a plan set to be released Saturday, Mr. Sanders, the Vermont senator and presidential candidate, proposes wiping out an estimated $81 billion in existing debt and changing rules around debt collection and bankruptcy. He also calls for replacing the giant credit reporting agencies with a “public credit registry” that would ignore medical debt when calculating credit scores.
The proposals reflect Mr. Sanders’s concern that the medical system has placed financial hardships on too many Americans, by discouraging them from seeking needed medical care — but also by saddling them with expensive and unfair bills that can harm their financial security, ding their credit and, in some cases, lead to bankruptcy.
The plan is Mr. Sanders’s latest effort to transform the health care system in America, a goal on which he has staked not just his second presidential run, but much of his political legacy. His proposal also separates him from other presidential candidates: While several of them have come to embrace his “Medicare for all” plan to create a government-run health insurance system, he is the first top-tier contender to call for such drastic measures on medical debt.
“We’re addressing it on both ends,” Mr. Sanders said. “We’re addressing it now by trying to help the people who have past due medical bills. And we’re addressing it by finally creating a health care system that guarantees coverage to people without any premiums, without any deductibles, without any out-of-pocket expenses.”
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Medical debt affects Americans who lack health insurance, of course. But it is also increasingly affecting people who have insurance with holes, like high deductibles or limited networks of doctors whose care is paid for. Around 16 percent of adults with credit reports have at least one medical debt, according to a study published last year in the journal Health Affairs.
The plan calls for the government to negotiate and cancel the debts, though it does not specify the precise mechanism.
While eliminating every American’s medical debt would probably not come cheap, Mr. Sanders’s plan could wind up costing far less than the total amount of debt he is seeking to cancel. Craig Antico, a founder of the charity RIP Medical Debt, which buys and forgives medical debt, estimated that the market price for $81 billion in debt could be as low as $500 million. Most past-due medical debt never gets paid, which is why bill collectors are often willing to sell the debts for pennies on the dollar.
The plan would also create a public credit rating agency to “replace” for-profit companies like Equifax, and it would exclude medical debts from credit ratings. It would establish a new legal process, managed by the bankruptcy court system, to help adjudicate medical debts that are not yet in collections.
Studies suggest that medical debts can be less damaging to people’s credit than other kinds of debt, in part because the credit reporting agencies treat people’s ability to pay medical bills as less predictive of creditworthiness than, say, their ability to pay credit card bills or car payments. And, despite the news media’s focus on particularly large medical bills, the typical bill in collections is less than $600, according to the Health Affairs article.
But medical debts do affect credit somewhat, and they can cause psychological stress, beyond the financial consequences. A survey of people with medical debts conducted by The New York Times and the Kaiser Family Foundation in 2016 found that 44 percent of adults under 65 who had problems paying medical bills said those bills had a “major effect” on their lives.
Fear of medical debts causes some people to avoid needed medical care. And medical bills can affect other parts of people’s finances that are harder to measure, showing up as an unpaid credit card bill or a missed loan payment.
“I have a belief that if a plan like this could eliminate the debt that’s causing hardship, it could make a huge difference in people’s lives,” Mr. Antico said.
The Sanders campaign circulated statistics suggesting that more than 500,000 Americans declare bankruptcy each year because of medical bills. That number, derived from a survey of bankrupt individuals, overstates the impact of medical bills on bankruptcy. The study itself noted that health problems can cause bankruptcies in two ways, through direct medical bills and through lost income due to illness itself. The 500,000 figure includes both groups.
Other research has shown that income losses due to illness are often the bigger financial hit than medical bills. Neither Mr. Sanders’s “Medicare for all” plan nor his medical debt program would address that secondary issue.
The plan “is well targeted,” said Neale Mahoney, a professor of economics at the University of Chicago, who studies medical debt. “It just may not be that much relief.”
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Mr. Sanders said that, in conversations with people around the country, he had come to see medical debt as the most consistent and visceral manifestation of a broken health care system.
At an event this month in Carson City, Nev., for instance, he heard from a veteran who said he had $139,000 in medical debt. When Mr. Sanders asked the man how he would pay off the debt, the man responded: “I can’t. I can’t. I’m going to kill myself.”
Those kinds of deeply moving moments, he said, drove him to seek a new way to ameliorate that particular pain as part of his overall vision for changing the health care system.
“I have always believed that health care is a human right, and it has always disturbed me immensely that so many of our people are uninsured or underinsured and can’t go to the doctor,” Mr. Sanders said. “But I have learned in this campaign something else, which I didn’t talk about previously, and that is the financial pain that this dysfunctional health care system is causing people.”
The new plan is part of a burst of policy-related activity from the Sanders campaign, which also released a housing plan last week that included a proposal to establish a national rent control standard.
Margot Sanger-Katz reported from Washington, and Sydney Ember from New York.