Americans will 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 rules would dramatically expand protections for tens of millions of Americans burdened by unaffordable medical bills.
The regulations would also fulfill the Biden administration’s commitment to address the scourge of health care debt, a uniquely American problem that affects about 100 million people, forcing many to make sacrifices such as cutting back on food, clothing and other essentials.
“No one should be denied access to financial opportunity simply because they experienced a medical emergency,” Vice President Kamala Harris said Tuesday.
The administration further called on states to expand efforts to limit hospital debt collection and make hospitals provide more charity care to low-income patients, a step that could prevent more Americans from ending up with medical debt.
And Harris urged state and local governments to continue buying medical debt and retiring it, a strategy that is becoming increasingly popular nationally.
Credit reporting, a threat traditionally used by medical providers and debt collectors to get patients to pay their bills, is the most common collection tactic used by hospitals, a KFF Health News analysis showed.
While a single unpaid bill on a credit report may not greatly affect some people, the impact can be devastating for those with large healthcare debt.
There is growing evidence, for example, that credit scores lowered by medical debt can threaten people’s access to housing and fuel homelessness. People with low credit scores may also have trouble getting a loan or be forced to borrow at higher interest rates.
“We’ve heard stories of people who couldn’t find work because their medical debt was affecting their credit score and they had poor credit,” said Mona Shah, senior director at Community Catalyst, a nonprofit pushing for expanded medical debt protection . for patients.
Shah said the proposed regulations will have a significant impact on the financial security and health of patients. “This is a really big deal,” he said.
Administration officials said they plan to review public comments on their proposal through the rest of this year and hope to issue a final rule early next year.
CFPB investigators found that medical debt — unlike other types of debt — doesn’t accurately predict a consumer’s creditworthiness, calling into question how useful it is on a credit report.
The three largest credit bureaus — Equifax, Experian and TransUnion — said they would stop including medical debt on credit reports starting last year. Excluded debts included payoff bills and those 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 actions left out many patients with larger medical bills on their credit reports.
A recent CFPB report found that 15 million people still have such accounts on their credit reports, despite the voluntary changes. Many of these people live in low-income communities in the South, according to the report.
The proposed rules would not only prohibit future medical bills from appearing on credit reports. they would also write off current medical debt, according to administration officials.
Officials said the prohibited debt would include not only medical bills but also dental bills, a major source of Americans’ health care debt.
Even though the debts would not show up on credit scores, patients would still owe them. That means hospitals, doctors and other providers could still use other collection tactics to try to get patients to pay, including using the courts.
Patients who used credit cards to pay medical bills — including medical credit cards like CareCredit — would also continue to see those debts on their credit scores, as they would not be covered by the proposed regulation.
Hospital leaders and debt collection industry representatives have warned that restricting credit reporting could have unintended consequences, such as prompting more hospitals and doctors to require a down payment before providing care.
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 the IRS urging stronger federal action to curb 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 legislation that prohibits medical debt from being included on residents’ credit reports or factored into their credit scores. Other states, including California, are considering similar measures.
Many groups are also urging the federal government to prohibit tax-exempt hospitals from selling patient debt to debt-buying firms or denying medical care to people with delinquent bills, practices that remain widespread across the U.S., according to the KFF Health News.
About this project
“Diagnosis: Debt” is a reporting partnership between KFF Health News and NPR that explores the scale, impact and causes of medical debt in America.
The series is based on original polling by KFF, court records, federal data on hospital finances, contracts obtained through solicitations of public records, data on international health systems and an annual survey of the financial assistance and collection policies of more than 500 hospitals in the whole country. .
Additional research was conducted by the Urban Institute, which analyzed credit bureau and other demographic data on poverty, race and health status for KFF Health News to explore where medical debt is concentrated in the U.S. and what factors are associated with it. high levels of debt.
The JPMorgan Chase Institute analyzed records from a sampling of Chase credit cardholders to examine how customer balances can be affected by major medical expenses. And the CED Project, a Denver nonprofit, partnered with KFF Health News on a survey of its clients to explore the relationships between medical debt and housing instability.
KFF Health News reporters worked with KFF public opinion researchers to design and analyze the ‘KFF Health Care Debt Survey’. The survey was conducted from February 25 to March 20, 2022, online and by phone, in English and Spanish, to a nationally representative sample of 2,375 US adults, including 1,292 adults with current health care debt and 382 adults who had health care debt in the last five years. The margin of sampling error is plus or minus 3 percentage points for the full sample and 3 percentage points for those with current debt. For results based on subgroups, the margin of sampling error may be higher.
Reporters from KFF Health News and NPR also conducted hundreds of interviews with patients across the country. spoke with doctors, health industry leaders, consumer advocates, debt lawyers and researchers. and reviewed dozens of studies and research on medical debt.
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This article was reprinted by khn.orga national newsroom that produces in-depth health journalism and is one of the core operating programs at KFF – the independent source for health policy research, polling and journalism.
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