The Consumer Financial Protection Bureau (CFPB) has released a report describing the burden of medical debt in the United States. It found that roughly 43 million people had medical bills totaling $88 billion on their credit reports in June 2021. The total amount is likely much higher because not all medical debts are reported to consumer reporting companies.
Other findings included:
Fifty eight percent of all third-party debt collection tradelines were for medical debt, far exceeding the next most common tradeline of telecommunications debt at only 15%.
Black and Hispanic people, and young adults and low-income individuals of all races and ethnicities, are more likely to have medical debt than the population as a whole.
Medical debt is more prevalent in the Southeast and Southwest. A separate survey conducted in 2018 by the Census Bureau found that the South leads the nation in medical debt. Just over 22 percent of households in the South reported having it.
The COVID pandemic has increased the burden of medical debt.
The CFPB says medical debt collections are less predictive of a person’s future payment problems than other debt collections are. And yet they can restrict a person’s access to credit and result in other negative consequences that may include making it difficult to rent a home, raising the cost of insurance, making it hard to find a job, and leading to physical and mental problems.
In prepared remarks accompanying the report, Rohit Chopra, the Director of the CFPB, expressed how strongly he felt about the negative consequences of reporting medical debt collections to credit reporting companies. He said, “I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe” and referred to the medical billing and collections system as “Error-plagued, confusing, and labyrinthine.”
Shortly after the CFPB issued its report, the three major credit reporting companies – Equifax, Experian and TransUnion – announced changes to how medical bills will be reported on credit reports:
Paid medical debt will no longer be included on consumer credit reports.
The time period before unpaid medical collection debt appears on a consumer’s credit report will be increased from six months to one year. That will give consumers more time to work with insurance companies and/or healthcare providers to address the debt.
Starting in the first half of 2023, the credit reporting companies will no longer include medical collection debt under $500 on credit reports.
The changes will result in approximately 70 percent of medical debt collections no longer being included on credit reports.
The No Surprises Act that took effect in January offers additional protection from unexpected medical bills, including for services received from a health-care facility or provider a patient didn’t know was out-of-network. It bans many such bills for participants in a group health plan or individual health plan. People who don’t have health insurance or pay for care without using it should receive a “good faith” estimate of the cost beforehand.
You can help yourself by checking bills to be sure they’re accurate and asking the provider to explain any charges that aren’t clear. Ask debt collectors to verify a debt is legitimate.
Randy Hutchinson is president & CEO of BBB of the Mid-South. This column is published in partnership with the Better Business Bureau of Middle Tennessee and Southern Kentucky.
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