A proposed new regulation would ban medical debt from credit reports.
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Smith Collection/Gado/Getty Images/Archive Photos
Americans would no longer have to worry about medical debt lowering their credit scores under federal regulations proposed Tuesday by the Consumer Financial Protection Bureau.
If enacted, the regulations would significantly expand protections for tens of millions of Americans saddled with medical bills they cannot afford.
The regulations would also fulfill the Biden administration’s commitment to address the health care debt scourge, a uniquely American problem involving estimated 100 million peopleforcing many people to make sacrifices such as limiting food, clothing and other necessities.
“No one should be denied access to economic opportunity simply because they experience a medical emergency,” Vice President Kamala Harris said Tuesday.
The administration continues to call on states to expand efforts to limit hospital collections and require hospitals to provide more charity care to low-income patients, a move that could could prevent more Americans from incurring medical debt.
And Harris urged state and local governments to continue buying medical debt and repaying it, a strategy that is becoming increasingly popular across the country.
Credit reporting, a threat often used by medical providers and debt collectors to convince patients to pay their bills, is the most common debt collection tactic used by hospitals. use, analysis by KFF Health News showed.
While an unpaid bill on a credit report may not have much of an impact on some people, the impact can be devastating for those with large health care debt.
For example, there is growing evidence that credit scores are impaired by medical debt threaten people’s access to housing and causes homelessness. People with low credit scores may also have difficulty getting loans or may be forced to borrow at higher interest rates.
“We’ve heard stories of individuals who can’t get a job,” said Mona Shah, senior director of Community Catalyst, a nonprofit that pushes for expanded medical debt protections. because medical debt affects their credit score and they have poor credit.” for patients.
Shah said the proposed regulations would have a major impact on patients’ financial security and health. “This is a really big deal,” she said.
Administration officials said they plan to consider public comments on their proposal for the remainder of this year and hope to issue final regulations early next year.
CFPB researcher find, find, find out That medical debt — unlike other types of debt — does not accurately predict a consumer’s creditworthiness, raising questions about its usefulness on credit reports.
The three largest credit bureaus – Equifax, Experian and TransUnion – said they would stop including some medical debt on credit reports starting last year. Excluded debts include paid bills and debts under $500.
Those moves have significantly reduced the number of people with medical debt on their credit reports, government data shows. But the agencies’ voluntary action has left many patients with larger medical bills on their credit reports.
ONE recent CFPB report found that 15 million people still had such bills on their credit reports, despite voluntary changes. According to the report, many of these people live in low-income communities in the South.
The proposed regulations would not only prohibit future medical bills from appearing on credit reports; They will also forgive existing medical debt, according to administration officials.
Officials said the prohibited debt would include not only medical bills but also dental bills, the main source of health care debt for Americans.
Even though debts do not appear on credit scores, patients will still owe them. That means hospitals, doctors and other providers can still use other collection tactics to try to persuade patients to pay, including using the courts.
Patients who have used credit cards to pay medical bills — including medical credit cards like CareCredit — will also continue to see those debts on their credit scores because they will not be charged. proposed payment.
Hospital leaders and debt collection industry representatives have warned that limiting credit reporting could have unintended consequences, such as causing more hospitals and doctors to demand upfront payments before take care of.
But consumer and patient advocates continue to call for more action. The National Consumer Law Center, Community Catalyst and about 50 other groups last year sent letters to the CFPB and IRS calling for stronger federal action to limit hospital debt collection.
State leaders have also taken steps to expand consumer protections. In recent months, a growing number of states, led by Colorado and New York, have enacted laws banning medical debt from being included on people’s credit reports or counted in their credit scores. Other states, including Californiaare considering similar measures.
Many groups are also calling on the federal government to ban tax-exempt hospitals from selling patient debt to debt-buying companies or denying medical care to people with overdue bills, practices that remain common. across the United States, KFF Health News said.
KFF health news is a national newsroom that produces in-depth journalism on health issues and is one of the core operating programs at KFF – an independent source for health policy research, polling and journalism.
