The Consumer Financial Protection Bureau (CFPB) has released a report outlining 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 is likely much higher because not all medical debt is reported to consumer reporting companies.
Other findings included:
Fifty-eight percent of all third-party debt collection commercial lines were for medical debt, far outpacing the next most common line of telecommunications debt at just 15%.
Blacks and Hispanics, youth, 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 most prevalent in the Southeast and Southwest. A separate study conducted in 2018 by the Census Bureau found that the South leads the country 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. And yet they can limit a person’s access to credit and result in other negative consequences that can include difficulty renting a home, increasing the cost of insurance, making it difficult to find a job, and leading to physical and mental problems.
In prepared remarks accompanying the report, Rohit Chopra, 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’m concerned that the credit reporting system is being weaponized as a coercion tool to get people to pay medical bills they may not even owe,” and referred to the medical billing and collection system as ” Ruined, confused, and labyrinthine error.”
Shortly after the CFPB released 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 in consumer credit reports.
The time period before unpaid medical collection debt appears on a consumer’s credit report will increase from six months to one year. This will give consumers more time to work with insurance companies and/or health care providers to address the debt.
Starting in the first half of 2023, credit reporting companies will no longer include medical collection debt under $500 on credit reports.
The changes will result in about 70 percent of medical debt collections no longer being included on credit reports.
The No Surprises Act that went into effect in January provides additional protection from unexpected medical bills, including services received from a health care facility or provider that a patient did not know was out of network. It prohibits 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 must get a “good faith” estimate of the cost in advance.
You can help yourself by checking bills to make sure they’re accurate and asking the provider to explain any charges that aren’t clear. Ask debt collectors to verify that a debt is legitimate.
Randy Hutchinson is president and CEO of BBB of the Mid-South. This column is published in partnership with the Better Business Bureau of Middle Tennessee and Southern Kentucky.