Ballot measure to limit interest rates on medical debt will impact Arizonans with smaller debt amounts more than those with larger amounts

Proposition 209, the initiative to limit interest rates on debt from health care services, will be on the ballot for Arizona voters this November. Keith Joiner, MD, Professor of Medicine and Public Health at the University of Arizona, says the measure will benefit some populations more than others if it passes.

 

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The ballot measure would set a limit on interest rates for debt accrued from receiving health care services equal to either the weekly average 1-year constant maturity yield or 3%, whichever is less. This will lower the maximum interest rate on such debt from 10%. The measure would also increase the amount of value for certain property (including a home, household items, motor vehicles, and bank account funds) and earnings exempt from all debt collection beginning in 2024. 

According to a policy paper published by the Grand Canyon Institute, 30% of people across the state with a credit file have debt in collections. 23% of consumers in predominantly white communities have debt in collections, compared to 45% of consumers in majority communities of color. 16% of Arizonans with a credit file have medical debt in collections—this includes 13% of Arizonans in white communities and 22% of Arizonans in communities of color. 

The paper notes that Coconino, Gila, Graham, Greenlee, La Paz, Mohave, Navajo, and Pinal counties have higher rates of medical debt in collections than the state average.

Joiner explained that while he believes the measure is a step in the right direction, it will primarily benefit Arizonans with a small amount of debt than those with a large amount of debt, who are primarily people of color and underrepresented minorities, as well as Arizonans in rural areas where incomes are lower. 

“For somebody with $1,000 of medical debt and a low income, going from a maximum interest rate of 10% on that debt to a maximum of 3% on that debt is important, but [that debt] is not going to bankrupt them,” he said. 

“That’s not the case for somebody who has $100,000 of debt, for some sort of hospitalization because they were in an accident or had cancer or a heart attack or something that was beyond their control. Even if they have insurance, they’re going to have an enormous debt. Oftentimes, if they live in a rural area, even a 3% interest rate is unaffordable to them because they’re right on the margin to begin with.”

He said a proposition to instead minimize the source of the medical debt would benefit more populations, such as by limiting the amount that hospitals can collect from certain patients, as hospitals are the major source of large medical debt. 

Joiner, however, said he believes this alternative strategy is unfeasible in Arizona due to the state’s political climate.

“Arizona is too red a state to get a sufficient consensus, at least in the voting public, let alone among the credit agencies, the hospitals, and the legislature, to try to eliminate the debt altogether.”

Joiner also discussed his thoughts on the proposition’s chances of passing.

“An important thing about Arizona is that so much of the population lives in the Phoenix area, and legislation that is being looked at at the statewide level are sort of dependent upon what goes on in Phoenix, and Phoenix has a higher cost of living than the rest of the state,” he said.

“It’s also a huge urban area, where so much of the state is rural. Individuals from underrepresented minorities and people living in rural areas with lower incomes are not going to have as much influence at the ballot box, but those are the ones who are going to be most likely to have medical debt that they can’t afford. I’m not saying that there’s not plenty of people in Phoenix who are in that circumstance, but some of the rural counties in Arizona have a much higher percentage of individuals in these categories.”