Medical Debt Is Not the Disease; It Is a Symptom
The Legislature's medical debt relief bill creates a timely opening to discuss deeper affordability failures.
by David Isei, MPH, MAOL, PMP, Executive Director, Hawaiʻi Healthcare Task Force, June 12, 2026
You have insurance. You go where you are told to go. You wait for the referral. You call the number on the card. You assume the doctor is covered, the lab is covered, the hospital is covered, the paperwork will work the way the brochure said it would.
Then the bill comes.
Maybe it is a deductible that looked manageable on paper but collided with rent, groceries, gas, and a kūpuna's prescriptions. Maybe it is a denial you do not understand. Maybe the doctor was in-network but the facility, the lab, the anesthesiologist, or the follow-up was not. Maybe the only specialist was on another island, and the airfare and missed work were never part of the insurance calculation.
You pay what you can. The rest is sold to a company you have never heard of for about a penny on the dollar. The hospital records a loss. The collector records an asset. The insurer records nothing, because the insurer's obligation ended at your deductible. No ledger anywhere records that a covered family, in the best-insured state in the nation, could not pay a medical bill.
That ledger is medical debt. It is not the disease. It is the symptom.
It is the symptom that appears after a copay convinces a family to wait. It is the symptom that appears after someone with insurance learns that covered does not mean affordable. It is the symptom that appears after a patient cannot find timely primary care, waits until the condition worsens, and ends up in a setting that costs more than prevention ever would have.
What the Legislature Did, and Why It Matters
This year the Legislature decided to treat that symptom, and it deserves credit for it. Senate Bill 3025, now on Governor Green's desk ahead of a July 15 decision deadline, would put $500,000 into a medical debt acquisition and forgiveness program administered by the Office of Wellness and Resilience, working through Undue Medical Debt, the national nonprofit that buys medical debt on the secondary market and cancels it. Because old medical debt sells for roughly one cent per dollar of face value, that modest appropriation is expected to erase between $50 million and $91 million owed by about 50,000 residents at or below 400 percent of the federal poverty level, or carrying medical debt above 5 percent of their income. There is no application. A letter simply arrives saying the bill is gone (Honolulu Civil Beat, May 18, 2026).
The governor should sign it.
The Legislature already knows this is symptom care, because it wrote the diagnosis into the bill itself. The enacted findings of SB 3025 are unusually specific. They cite Peterson-KFF data showing that more than one in twenty adults in Hawaiʻi carry medical debt on their credit report. They state that in other states and cities that have acquired and forgiven medical debt, most of that debt was owed by people with health insurance. They describe medical debt as a social determinant of health that leads patients to delay needed care, struggle with employment and housing, stay trapped in poverty, and carry increased mental stress.
From the Bill's Enacted Findings
A single national nonprofit has already acquired the unpaid medical debt of 50,016 Hawaiʻi residents, totaling $91,310,664.
- Oʻahu 39,401
- Hawaiʻi Island 6,654
- Maui · Molokaʻi · Lānaʻi 3,597
- Kauaʻi 316
Source: SB 3025 CD1, enacted findings.
That is the case for signing this bill. It is also the case for refusing to stop there.
The Arithmetic Is the Indictment
A dollar of medical debt sells for a penny because the market has already concluded that the dollar was never going to be collected. Hawaiʻi's healthcare system generated more than $91 million in bills that everyone involved, the hospital that billed, the collector that bought, and the buyer that priced the debt, treated as uncollectible from the start. Undue Medical Debt's chief executive put it plainly to Civil Beat: the model "speaks to the brokenness of the way we finance health care." SB 3025 is the state buying back the wreckage of its own affordability failure at a 99 percent discount. That is worth doing. It is not the same thing as fixing the machine that produces the wreckage.
We know this is not the same thing because it has been tested by the very organization Hawaiʻi is about to hire. Researchers at Harvard, Stanford, UCLA, and LMU Munich partnered with Undue Medical Debt to run the largest randomized study of medical debt relief ever conducted. They canceled $169 million in medical debt for 83,401 people and tracked the outcomes. The results, published in the Quarterly Journal of Economics in April 2025, were sobering: no measurable average improvement in mental health, physical health, healthcare utilization, or financial wellness, and only a modest credit benefit for debts that would otherwise have remained on credit reports (Kluender, Mahoney, Wong, and Yin, QJE 2025).
The reason is structural. By the time a medical bill reaches the secondary debt market, the damage is already done. The care was delayed or skipped. The savings are gone. The credit score took its hit, and the family learned to fear the mailbox. Debt relief at that stage is mercy, and mercy matters. But it arrives years after the wound.
The Hawaiʻi Paradox
Hawaiʻi is the state where this problem is supposed to be solved. The Prepaid Health Care Act has required employer-sponsored coverage since 1974. Our uninsured rate is among the lowest in the country, and Peterson-KFF data places Hawaiʻi's share of adults with medical debt at 2.3 percent, the lowest in the nation (Peterson-KFF Health System Tracker, 2024). Undue Medical Debt has already retired nearly $40 million of Hawaiʻi medical debt through philanthropic funding alone, with The Queen's Health Systems among the participating providers, before the state spent its first dollar.
And still, Sen. Chris Lee, the bill's lead sponsor, estimates that 150,000 people in Hawaiʻi are carrying medical debt today. The bill itself documents more than $91 million of it already sitting with a single debt relief nonprofit. The state with the best coverage architecture in the country still produces medical debt at scale.
That is the tell. National data confirms it. KFF's Health Care Debt Survey found that 41 percent of U.S. adults carry some form of health care debt, and that most people with medical debt were insured when they incurred it (KFF, 2022). The Commonwealth Fund's 2024 Biennial Health Insurance Survey found that 23 percent of working-age adults with year-round coverage were underinsured, that 66 percent of the underinsured had employer coverage, and that 44 percent of underinsured adults carried medical debt (Commonwealth Fund, November 2024).
Coverage is not access. Access is not affordability. Affordability is not a system designed to keep people well.
Medical debt is what the gap between those four things looks like when it lands on a kitchen table.
Where the Debt Actually Comes From
The design failure has an architecture, and it is documented. In a Commonwealth Fund survey released on June 4, 2026, one in five privately insured U.S. adults reported that they or a family member had been denied coverage for doctor-recommended care in the past year. Among those who experienced a prior authorization denial, 41 percent said it delayed their care and 28 percent said their health problem worsened. Among those who experienced a claim denial, nearly 70 percent said the denial cost their household more money, and 43 percent said it led to medical debt they are still paying off, with more than half reporting the original denied bill was $1,000 or more (Commonwealth Fund, June 4, 2026).
This is medical debt being manufactured in real time, with a paper trail.
The patterns the Commonwealth Fund found in households show up on the provider side too. In the 2025 AMA Prior Authorization Physician Survey, 92 percent of physicians reported that prior authorization has a negative impact on patient outcomes, 95 percent reported that it causes care delays, and 79 percent reported that it can lead patients to abandon treatment entirely. The average physician handles 40 prior authorization requests per week and spends 13 hours weekly on the process (AMA, 2025). When a patient abandons treatment, the insurer records no claim. The household records the consequence in untreated illness, in the next hospitalization, and in the next bill it cannot pay.
Provider directories compound the failure. The U.S. Senate Finance Committee's 2023 secret shopper study found that more than 80 percent of listed in-network mental health providers in Medicare Advantage plans were unreachable, not accepting new patients, or not actually in network (Senate Finance Committee, May 2023). The HHS Office of Inspector General confirmed in October 2025 that the pattern persists (HHS OIG, October 2025).
Hawaiʻi is not exempt. Task Force research using Hawaiʻi Health Intelligence Platform data has found that 23 of 26 statewide network adequacy assessments fail at least one federal standard. In one Med-QUEST filing, the state's largest commercial insurer reported 4,867 primary care physicians statewide; independent National Provider Identifier validation produced 1,260 active primary care physicians actually seeing patients, an inflation of approximately 286 percent. A directory is not access. A card is not care. A network is real only if a patient can reach it.
The access failure compounds geographically. The 2025 Hawaiʻi Physician Workforce Report documents a statewide primary care shortage of 178 full-time-equivalent physicians, a 15.7 percent gap, with Maui County at 35.0 percent and Hawaiʻi County at a 42.6 percent overall physician shortage. The statewide physician shortage is 644 FTEs, rising to 833 once island geography is taken into account (Hawaiʻi/Pacific Basin AHEC, December 2025, Tables 9, 16, 25). For neighbor island families, the cost of care begins before the appointment. It begins with airfare, ground transportation, child care, and missed work. When 35 percent of Hawaiʻi households already live below the ALICE survival budget, a $2,000 bill is not an inconvenience (Aloha United Way ALICE Report, 2024). It is a cliff.
When a family puts medically necessary airfare on a credit card, that is not consumer debt. It is an access failure with an interest rate.
When a patient delays care because the deductible is too high, that is not personal irresponsibility. It is benefit design. When a prior authorization denial forces a patient to choose between paying now or fighting later, that is not utilization management. It is a cost shift. When a directory lists providers who are not actually available, that is not access. It is paperwork.
Medical debt is the receipt.
What Hawaiʻi Should Do After Signing
Sign the bill. Clear the credit reports. Give 50,000 families room to breathe. Then do the four things the bill cannot do, because erasing yesterday's debt without changing what creates tomorrow's is not reform. It is cleanup.
Recommendation 01
Treat every canceled account as evidence.
The bill itself requires the program to report to the Legislature before the 2027 session. Make that report count. The Office of Wellness and Resilience should publish de-identified relief data by island, income band, payer type, insured status, and service type, and should track how quickly new debt accumulates among the same households. The data should never expose patients. It should expose patterns. The randomized evidence predicts regeneration. Hawaiʻi should be the state that measures it rather than the state that declares victory.
Recommendation 02
Copy what North Carolina got right.
North Carolina relieved $6.5 billion in medical debt for more than 2.5 million residents in a single year, and it did so without spending state dollars on debt acquisition. Hospitals were incentivized through enhanced Medicaid hospital payments to relieve qualifying debt, presumptively screen patients for financial assistance, discount bills for households up to 300 percent of poverty, stop selling low-income patients' debt to collectors, and stop reporting medical debt to credit agencies (NC Governor's Office, October 2025). Relief was the headline. Prevention was the policy. Hawaiʻi should attach the same prospective conditions to its own hospital payment levers.
Recommendation 03
Close the credit reporting gap.
The federal CFPB rule that would have removed medical debt from credit reports was vacated by a federal court in July 2025. Fifteen states have enacted their own protections. Hawaiʻi is not one of them (Medicare Rights Center, July 2025). Without that shield, the same kind of debt the state buys back this year can reappear on residents' credit reports next year.
Recommendation 04
Treat the disease.
Hawaiʻi needs an affordability standard that measures underinsurance and out-of-pocket burden with the same discipline we apply to counting the insured, network adequacy rules that count only providers who actually see patients, travel cost protection for neighbor island referrals when care is unavailable locally, and sustained investment in the primary care that keeps people out of crisis. The federal AHEAD Model that Hawaiʻi enters in January 2027 already requires the state to set total cost of care targets, increase primary care investment, and design hospital global budgets that reward prevention rather than utilization (CMS Innovation Center). The lever is in our hand. The decision is whether to pull it.
SB 3025 will tell 50,000 families that yesterday's bill is gone. That is a good day's work, and it is humane work. But the test is not whether Hawaiʻi can buy old debt cheaply. The test is whether we can build a healthcare system that produces less of it.
Forgive the debt. Clear the credit reports. Give families room to breathe.
Then follow the evidence upstream.
Because medical debt is not the disease. It is the symptom that appears when insurance, access, and affordability fail at the same time.
Until Hawaiʻi measures those failures where families actually experience them, in deductibles, denials, waitlists, closed panels, airfare, missed work, and collection letters, we are not curing the problem. We are only buying the next symptom after it has already hurt someone.
---30---
David Isei, MPH, MAOL, PMP is the Executive Director of the Hawaiʻi Healthcare Task Force, a coalition of physicians, advanced practice clinicians, rural health advocates, and community partners working to ensure that everyone in Hawaiʻi can access the care they need. Reach the coalition at info@hawaiihealthcaretaskforce.org.