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Where does debt come from? How does it get so out of hand? And why is it such a difficult topic to discuss?On South Carolina Public Radio's InDebted, host Scott Morgan explores the issue of debt in the Palmetto State, including medical debt, student loan debt, short-term loan services, financial literacy, and more. According to research by the Urban Institute on the amount of personal debt burden across the U.S., eight of the top 50 counties with the most debt were in South Carolina, with more than half of the residents living with excessive debt. Join us for a deep dive into the factors that make our state one of the worst places for debt in the country and the stories of real South Carolinians living in this ecosystem of debt.Interested in sharing your personal story with debt? Learn more about our InDebted Profiles series here.

InDebted: South Carolina’s medical debt is 2nd-worst in the US (and hospitals don’t always make it better)

Medical debt is South Carolina's largest individual debt problem. A higher share of residents than any state except West Virginia have medical debt in collections here, but the real amount of medical bills owed isn't known; it's often masked as credit card debt or in short-term loans.
Scott Morgan
South Carolina Public Radio
Medical debt is South Carolina's largest individual debt problem. A higher share of residents than any state except West Virginia have medical debt in collections here, but the real amount of medical bills owed isn't known; it's often masked as credit card debt or other loans.

If you took everyone in South Carolina and smooshed us all down into 100 total people, 22 of us would have medical debt that’s ended up in collections.

And if none of us where white and you smooshed us down into 100 total people, 28 of us would have medical debt that’s ended up in collections.

That overall rate – 22 out of every 100 – is the second-worst rate of residents with medical debt in collections in the country, trailing only West Virginia, according to 2022 data from the Urban Institute.

The rate for communities of color – 28 out of every 100 – places us sixth among states with a sizeable enough nonwhite population to measure. (New Hampshire, Vermont, West Virginia, and Maine are not counted.)

And now for the nuances:

Overall, South Carolina’s communities of color have lower median medical debts in collections -- $917 – than white communities – $860, but ….

  • That’s an aggregate set of median totals when everyone in the state gets smooshed together. In fact, there are only nine counties where a direct comparison between white and nonwhite communities is measured, and communities of color have higher median amounts in debt in seven of them.
  • Average household (not individual) incomes for white households are significantly higher in every South Carolina county than it is for households of color, per the U.S. Census. In many cases, nearly twice as high. So medical debt amounts in collections are harder for households of color to pay than for white households because bills take up a larger share of income in nonwhite households.

Eight South Carolina counties are among the 100 worst counties in the United States for medical debt in collections. They are, in order of worst-first, Marlboro, Laurens, Cherokee, Dillion, Marion, Newberry, Bamberg, and Barnwell.

All these counties are rural. All but two – Laurens and Newberry – have average overall household incomes below $58,234, the statewide average household income, according to the U.S. Census. All but one – Laurens – has an average nonwhite household income below $43,000.

None have comparable median medical debt totals in collections between white and nonwhite communities, but Laurens County has the highest median in collections overall among the bottom eight ($1,647, white); Bamberg County has the highest median total among communities of color in the bottom eight, with $1,123.

Debt in collections is only one measure of the state’s medical debt problem. Urban Institute’s numbers only show the averages of medical debt sent to collections (which are easier to measure) and not the overall amount of medical debt burden in the state.

The true extent of what’s owed by South Carolinians to the state’s healthcare providers is practically unknowable. That’s partly due to the fact that a lot of what starts as medical debt – and that includes dental bills and prescriptions – ends up becoming consumer debt.

“Kaiser [Health News] put out some numbers that a lot of healthcare debt is actually unaccounted for in their numbers, because so much of it is put on credit cards,” says Bailey Parker, director of communications at the South Carolina Department of Consumer Affairs.

Parker herself ended up putting more than $2,200 on her credit card to cover what her insurance wouldn’t pay for a NICU stay for her newborn son.

“I put it on my credit card because I had to pay or else it was going to go to collections,” she says.

Kaiser Health News, or KHN, released the results of a poll it took with NPR in 2022, looking into how healthcare debt in the United States is getting so high. While not South Carolina-focused, the national picture of medical debt is not a pleasant one.

According to KHN, 100 million Americans are saddled with healthcare debt, often disguised as credit cared debt, bank loans, and money borrowed from friends and family. Half of respondents said they had exhausted (or almost exhausted) their savings to pay healthcare bills, while 63 percent said they had cut back on food, clothing, and other basics because they couldn’t afford them and the medical bills.

And while it’s not easy to extrapolate South Carolina-specific data from the aggregate, it’s likely those kinds of numbers are at play in the second-worst place for measurable medical debt in collections in the United States.

South Carolina’s hospitals are among the most active debt collectors, and they might report you to a credit bureau. Hospital debt might not get transferred to an outside agency. Private medical practices might sell debt, but in South Carolina, hospitals have in-house collectors. And this could spell financial trouble for a few reasons:

  • Hospitals in South Carolina can garnish your wages and tax returns. Lenders are not allowed to do that to collect on consumer debt in this state – South Carolina has some tight laws on what debt collectors can and cannot do here – but medical providers are not lenders. Their bills are not consumer debts, so healthcare providers can, and often will, sue for permission to garnish wages or take money owed them out of your tax return.
    KHN’s look at U.S. hospitals’ billing, financial assistance, and collections practices shows two-thirds of South Carolina’s hospitals that are tracked by KHN will take legal action to collect bills.
    Sue Berkowitz, director of SC Appleseed Legal Justice Center, says that people often don’t know that this can happen until it happens.
    “They get a letter saying their tax return is being taken,” Berkowitz says. “Or that their wages are being garnished.”
    And garnishment is not something you want to happen. South Carolina law allows healthcare providers to take up to 25 percent of your paycheck until the debt is satisfied.
    “That’s the maximum allowed,” Berkowitz says, “and I’ve never seen where they haven’t gone for the maximum.”
    And the consequences of losing a quarter of your check, even for a little while, she says, can be heavy – having to sacrifice food, clothing, or prescriptions, perhaps; maybe even foregoing additional medical or routine preventative care like physicals and dental visits.
  • Most hospitals in South Carolina can and will report you to a credit bureau. According to KHN’s data, only one hospital in the state won’t report you to a credit bureau: Coastal Carolina Hospital in Hardeesville. Coastal Carolina, in fact, is the only hospital in the state that will do none of the four collections practices tracked by KHN: It won’t report credit, won’t sell your patient data to an outside source, won’t deny nonemergency care based on outstanding medical debt, and will not sue to collect money owed.
  • No hospital in South Carolina sells your debt to an outside agency, but … Beaufort Memorial Hospital allows for it. Spokesperson Dee Robinson told KHN that selling patient data isn’t current practice, but it is allowable under hospital policy. All hospitals, however, have in-house collections departments.

‘Zombie debt’ is not as fun and Halloweeny as it sounds. The statute of limitations to collect unpaid medical debt in South Carolina is three years (same as for credit card debt, which, as we’ve learned, often masks a lot of medical debt). If you do not pay on a medical bill for three years, you can’t legally be made to pay it – but you might end up on the hook for it anyway.

“Zombie debt” is a catchy term for how it happens. Zombie debt is a debt that has legally expired, but one that a collector will contact you about, or even file a lawsuit against you to get you to pay. If you acknowledge that debt by paying on it, even a few dollars, you have legally acknowledged that you owe on that debt and will now be pursued to pay all of it.

Generally, this is more common for consumer debt, but healthcare systems can and will sue you for dead debt.

Berkowitz warns that if any healthcare provider advertises a billing amnesty for patients with outstanding balances, beware – if you acknowledge the debt, you will owe on it.

If you are sued by a debt collector, the Federal trade Commission offers some tips:

  • Answer the lawsuit. The letter informing you that you’re being sued will have court details on it. Show up for court or get an attorney to represent you.
  • Study your records. Make sure the debt you’re being sued for is actually yours. If you inherit an estate, for example, you might get sued for someone else’s debt.
  • For the love of all things holy, do not ignore the letter in hope that it will blow over. You can’t just ditch a lawsuit. That’s TV, not life. If you don’t show up in court, the court will 100 percent of the time side with the collector. Your failure to show is essentially considered acknowledgement that you owe the money. Don’t. Ignore. The letter.

Some good news about hospitals in South Carolina. You can get care and you could get help paying.

  • Financial assistance is generally available from South Carolina hospitals – if you qualify and if you ask. You do have to ask, yes, Hospitals are businesses, after all, they’re not going to go out of their way to save you money.
  • You usually need to meet income requirements. Generally, to qualify for financial assistance, you have to meet certain income requirements – in South Carolina hospitals, that’s generally income within 200 percent of the federal poverty line. Hospitals that do offer financial assistance also generally aid patients when bills exceed income by a certain amount – anywhere from 10 percent above annual income (Coastal Carolina) to twice annual income (Prisma).
    Again, you have to ask.
  • Negotiate. Berkowitz recommends always negotiating for a lower price on your care – which is something she says a lot of people do not know they can do (and which is how insurance companies do it on your behalf, actually).
    You can try programs like Goodbill, too. Goodbill is a website that negotiates your hospital bill on your behalf. The company takes a percentage based on how much money it saves you. If it cannot negotiate a savings, it takes no money.
  • In South Carolina, you can get care even if you already owe for care. No hospitals in South Carolina will deny emergency care based on outstanding medical bills. Mostly ditto in North Carolina, though some hospitals’ policies on this are not clear. Several hospitals in Georgia, however, will deny nonemergency care to patients who owe money already.

Debts dropped from 2018 to 2022, but medical debt is still king. A February 2023 report from the Consumer Finance Protection Bureau (updating a report from 2019) has a lot to say about the state of debt collection in the United States. But amid concerns about data integrity and contingency fees on collections, CFPB found that overall debt collections reported dropped from 261 million tradelines (a tradeline is just an item on a credit report) in 2018 to 175 million tradelines in 2022.

Also, the share of consumers with a collection tradeline on their credit report decreased by 20 percent in the same timeframe, CFPB reported.

However, medical debts still make up more than half – 57 percent – of all tradelines.

But the drop (and any future declines in medical debt reporting) does not mean debts are going to necessarily be reduced.

“Upcoming changes to medical collections reporting, as previously announced by the nationwide consumer reporting companies, will remove small-dollar (less than $500) and paid medical collection tradelines from consumer credit reports,” CFPB wrote.

The nuance?

“While this will reduce the total number of medical collections tradelines,” the report states, “an estimated half of all consumers with medical collections tradelines will still have them on their credit reports, with the larger collection amounts (representing a majority of the outstanding dollar amount of medical collections) remaining on credit reports.”

South Carolina is far behind on health insurance. In 2018, almost 13 percent of South Carolinians (514,772 residents) had no health insurance and 15.1 percent lived below the federal poverty line.

Both those stats are worse than the national averages and they help put South Carolina in a bad spot – second-worst in the nation – when it comes to healthcare debt in collections.

And as one of 10 holdouts to expanding Medicaid access, South Carolina also is in an especially vulnerable position now that pandemic-era protections against disenrolling Medicaid beneficiaries are over.

You can read more about that in this companion piece from South Carolina Public Radio. But the bottom line is this: Getting sick is costly in this state, paying for medical care is proportionally harder than it is in most other states, and things might not change here for a long time.

Scott Morgan is the Upstate multimedia reporter for South Carolina Public Radio, based in Rock Hill. He cut his teeth as a newspaper reporter and editor in New Jersey before finding a home in public radio in Texas. Scott joined South Carolina Public Radio in March of 2019. His work has appeared in numerous national and regional publications as well as on NPR and MSNBC. He's won numerous state, regional, and national awards for his work including a national Edward R. Murrow.