Economics Review: Jain, Jash, Are hospital bills hazardous to your financial health? (May 31, 2024)
Economics Review: Jain, Jash, Are hospital bills hazardous to your financial health? (May 31, 2024) Ed Boltz Wed, 07/23/2025 - 17:29 Available at: https://ssrn.com/abstract=5315512 Abstract: This paper studies the effect of hospital prices on the financial health of individuals. I construct a novel zip-level measure of prices hospitals charge for their services using detailed healthcare micro-data and state hospital cost reports obtained via a series of Freedom of Information Act (FOIA) requests. Using an instrumental variable strategy that captures insurers' market power, the findings reveal a causal link between higher hospital prices and adverse financial outcomes, including a rise in personal bankruptcy filings, reduced demand and increased application denials for home mortgages, and increased use of credit cards and home equity line of credit. I provide evidence that these results are not driven by declining income, deteriorating health, or over-utilization of health services in the local area. I show that such price increases disproportionately impact areas with individuals particularly exposed to healthcare prices, such as areas with a higher percentage of uninsured individuals, lower Medicare/Medicaid enrollment, and areas with a higher population concentration of people of color. Furthermore, I show that home equity mitigates some of these effects. The results are robust to alternative specifications and the use of an alternative instrument that exploits price changes induced by hospital peer effects in a geographic area. Commentary: In “Are Hospital Bills Hazardous to Your Financial Health?”, economist Jash Jain confirms with empirical rigor what bankruptcy attorneys have long witnessed in client interviews and court filings: a hospital visit—insured or not—can easily spiral into unpayable debt, aggressive collections, and eventual bankruptcy. Using linked data from hospital discharges and consumer credit reports, Jain demonstrates that nearly 18% of nonelderly insured adults are subject to debt collection within a year of hospitalization. These aren’t edge cases—they are the modal experience of being a patient in the American healthcare system. Jain’s findings dovetail with earlier work by Elizabeth Warren, who—well before her Senate career—documented that medical issues are among the most common contributors to bankruptcy filings. In her landmark studies, Warren found that over a third of consumer bankruptcies were tied to medical debt, income loss due to illness, or both, even among families with insurance. Jain’s paper provides a compelling postscript: the situation hasn’t improved; if anything, the mechanisms of medical debt collection have grown faster and more punitive. Key insights from Jain’s study include: Medical collections start fast and early: The debt collection curve steepens within 60 days post-discharge, often before patients have even received an itemized bill or had a chance to dispute charges. Collections follow hospitalization with startling regularity, raising the median patient’s unpaid medical debt by $349—even among those with Medicaid or private insurance. Insurance does not insulate patients from financial harm: The presence of coverage is not sufficient to prevent collection activity; in fact, Jain finds high collection rates even among Medicaid patients, suggesting systemic failures in billing, adjudication, or charity care screening. The patient’s financial condition is often worse, not just because of the bill—but because of the illness: Time off work, loss of income, and the physical inability to manage finances all converge at precisely the time the billing clock starts ticking. As Warren’s earlier work made clear, it is the intersection of medical and economic vulnerability that drives the majority of “medical bankruptcies.” Jain also notes that these financial harms are unevenly distributed—Black patients, publicly insured patients, and those from poorer ZIP codes are more likely to experience collections. This suggests not just a health care affordability crisis, but a civil justice and equity crisis as well. For practitioners in North Carolina and elsewhere, Jain’s paper lends new weight to what’s often buried in the schedules of a Chapter 7 or 13: hospital bills that outlast the illness, frustrate reasonable negotiation, and are quickly weaponized by third-party collectors. In many cases, filing bankruptcy is the patient’s only meaningful opportunity to respond to a hospital’s financial demands—one of the few forums where the imbalance of power between debtor and provider can be recalibrated, at least modestly. In short, Jain’s paper validates Warren’s long standing argument: medical debt is not just a symptom of bankruptcy —it is a cause of it. And for too many American families, the road from ER to 341 meeting is far shorter than policymakers would like to admit. With proper attribution, please share this post. To read a copy of the transcript, please see: Blog comments Attachment Document are_hospital_bills_hazardous_to_your_financial_health.pdf (790.24 KB) Category Law Reviews & Studies
