An Arizona ballot initiative addressing medical debt collection could provide an important test next week of whether a populist progressive approach to health care costs can fly in conservative-led states.

Why it matters: The measure limiting how hard creditors can pursue people with outstanding medical bills could become a model in states unwilling to tackle the issue through their legislatures.

• It comes as medical debt is weighing on millions of Americans — particularly communities of color — and the aggressive collection tactics of some health systems are coming under heightened scrutiny.

What they're saying: "No one should be trapped in debt simply because they needed medical care, yet tens of millions of Americans are stuck with thousands of dollars of medical debt," Kelly Hall, executive director of the Fairness Project, an organization that pushes such ballot measures, told the Arizona Republic.

The big picture: Unpaid medical bills are the largest source of debt in America.

• A KFF analysis of government data earlier this year found about 9% of American adults owed more than $250. About 1% owe more than $10,000.
• The National Consumer Law Center estimates more than one in five individuals living in mainly non-white ZIP codes have at least one medical debt in arrears on their credit reports.

Zoom in: The Arizona measure, Proposition 209, would reduce the maximum amount of interest creditors can charge on medical debt to 3%, from a previous cap of 10%.

• It would also increase the assets exempt from debt collection and allow courts to reduce how much of a person's earnings can be garnished.

The big picture: More states are exploring expanded consumer protections through legislation or other means.

• Already, 14 states have some sort of cap on medical debt interest rates, Vox reports.
• In August, a law went into effect in Colorado which would block hospitals that are not in compliance with federal price transparency rules from pursuing debt collection against a patient, according to Fierce Healthcare.

Between the lines: The Biden administration last spring called for the Health and Human Services Department to evaluate providers' billing practices, which could factor in how much federal grant money they get. The administration directed all agencies to eliminate medical debt as a factor for participation in credit programs.

• In July, the three major credit reporting agencies, Equifax, Experian and TransUnion, stopped including medical collection debt that has been paid off in credit reports. Next year, they plan to eliminate the reporting of all medical collection debt under $500.

Yes, but: Critics have warned efforts targeting medical debt can have unintended and costly consequences.

• "It's marketed as a medical debt initiative but yet impacts all collection remedies across the board," Amber Russo, spokesperson for Protect Our Arizona, which is opposing the Arizona ballot measure, told Politico.