As of June, consumer credit records contained $88 billion in medical debt, and the federal agency that enforces financial protection rules promises to fix the problem.
Medical debt is by far the most common liability on credit reports. On Tuesday, Consumer Financial Protection Bureau officials wondered if it belonged to them at all. As of last year, 58% of all third-party collections were for medical debt. agency identified in new report. According to the CFPB, about 20% of US households have health care debt, which appears on 43 million credit reports.
Medical debt is unlike other forms of debt in the sense that few people opt for it and there are few opportunities to look closely, CFPB director Rohit Chopra told reporters. Navigating medical bills can feel like “a full-time detective’s job,” he says, and patients and families often find themselves caught in a “doom loop” of billing between their insurers and providers.
“Even when a patient is trying to fight to get an accurate bill or insurance claim, medical collectors have a weapon that is hard to fight: the credit report,” Chopra said. “I’m concerned that the credit reporting system is being used as a coercive tool to get people to pay medical bills they may not even owe.”
The CFPB will take three steps in response to its findings, Chopra said.
First, the agency will determine whether unpaid medical bills should be included on credit reports. To do this, the CFPB will conduct further research into medical billing, fees, and credit reporting.
Chopra said the agency will be “taking a close look” at the “big three” credit bureaus – Equifax, Experian and TransUnion – to make sure they have reasonable procedures in place to ensure the accuracy of medical debts reported on credit reports. These procedures should include taking action against medical debt lenders who routinely misreport.
The CFPB will work with other federal agencies to combat mandatory credit reporting. The agency is already working with the Department of Health and Human Services to ensure patients are not forced to pay more than they should, Chopra said.
He said the CFPB supports the Department of Veterans Affairs’ recent policy that all other debt collection methods must be exhausted before veterans’ accounts are turned over to credit bureaus. President Joe Biden will announce further assistance to veterans during his speech on Tuesday. According to the White House newsletterThe VA will simplify the process of applying for medical debt relief and set an income threshold for debt relief.
According to the CFPB report, medical debt is reported to credit agencies disproportionately to other forms of debt, such as credit card balances.
In addition, medical bills sent to collectors are often not accurate. According to the report, “debt collection attempts” was the most common complaint received by the CFPB between 2018 and 2021. One woman, for example, said that she was being sued by a collector over a medical bill already paid by her insurance company.
There are many uncertainties in the healthcare billing process that lead to these inaccuracies, according to April Kuenhoff, staff attorney at the National Consumer Advocacy Center. People do not know how much they will be paid for services, and uninsured patients are charged at different rates than insured patients. The question then becomes whether patients are eligible for financial assistance and, if so, whether they are informed about it, she said.
“There are a lot of questions about what is the right amount when you’re dealing with medical debt, and some of it carries over into billing or into the debt collection space,” Kuenhoff said. “There are many reasons why the amount you may be charged for medical debt may not be correct.”
Medical debt is not a credit report, said Mark Rukavina, a program director who oversees the Community Catalyst Community Benefit and Economic Stability project. “We don’t think that’s fair for a whole host of reasons,” he said.
Non-profit hospitals are required to offer free or reduced-price care to low-income patients, but the CFPB has found that they often do not notify patients of these programs or make it easy to apply. Washington State Attorney General Bob Ferguson (D) sue 14 hospitals is owned by Providence of Renton, alleging that they trained employees in aggressive fee collection without regard to patients’ eligibility for financial assistance and failed to notify eligible patients.
“We are interested in what more the government can do to make sure patients are exercising their rights to access financial assistance programs and payment plans, and getting confirmation of allegedly owed debts,” Chopra said.
One of the highlights in the CPFB report is that the overall balance of medical debt collection on credit reports declined by about 9% between mid-2018 and mid-2021. But the share of debt collection on medical bills, after being reduced from 60% to 58%, remained high.