US Credit Reports Contain $88 Billion in Medical Debt

Carolyn Crist

March 02, 2022

Consumer credit reports contain $88 billion in medical debt, which affects tens of millions of households across the US, according to a new report from the Consumer Financial Protection Bureau.

The bureau found that the nation's healthcare system is often supported by a billing, collections, and credit reporting infrastructure where mistakes are common, and patients often have a hard time getting errors corrected.

"When it comes to medical bills, Americans are often caught in a doom loop between their medical provider and insurance company," Rohit Chopra, director of the bureau, said in a statement.

"Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe," he said.

Medical debt is the most common collection tradeline found on consumer credit reports, the bureau said. About 20% of US households have medical debt, which appears on 43 million credit reports. As of June 2021, about 58% of bills that are in collections on people's credit reports are medical bills. What's more, Americans said they were contacted by debt collectors about medical debt more than any other type of debt.

Although medical debt has long been a concern, the COVID-19 pandemic has increased those concerns. Frontline workers appear to be more likely to have pandemic-related medical debt, since they've had more exposure to the coronavirus yet are less likely to have health insurance to cover costs. Medical debt is expected to increase after the pandemic as people resume the routine care they deferred for the past 2 years, the report found.

Uninsured and insured patients have faced "substantial costs" to cover pandemic-related expenses, including testing and hospitalization. Medical debt often stems from unexpected and emergency events, the bureau said, and can involve complicated pricing, insurance, or charity care coverage.

"In emergency situations, patients might not even sign a billing agreement until after receiving treatment," the bureau said. "In other instances, patients, including those with chronic illnesses or who are injured or ill, may desperately feel that the need for medical care forces them into accepting any costs for treatment."

Medical debt also tends to affect households unevenly, the report found. Past-due medical debt is more prevalent among Black (28%) and Hispanic (22%) patients than white (17%) and Asian (10%) patients. Medical debt is more common in the Southeastern and Southwestern US, in part due to states not expanding Medicaid coverage in those regions.

As a result, people with medical debt continue to be penalized with lower credit scores, which has wide-ranging effects. In a previous report, the bureau found that medical debt overly penalizes consumer credit scores and that medical billing data is less predictive of future repayment than other traditional credit obligations. Medical debt can lead to less access to credit, a higher risk of bankruptcy, avoidance of medical care, and a hard time getting a job, even if a bill has errors.

"These repercussions are especially acute for people from Black and Hispanic communities, as well as people with low incomes, veterans, older adults, and young adults of all races and ethnicities," the bureau said.

The Consumer Financial Protection Bureau, which enforces federal consumer protection rules, vowed to crack down on a system that is often "used coercively against patients and their families." Federal law requires credit reporting companies to have procedures to ensure that medical debt on credit reports is accurate, which includes acting against groups that routinely report inaccurate information. The bureau called for the Equifax, Experian, and TransUnion credit bureaus to cut off access to companies with inaccurate reports.

The agency is also working with the Department of Health & Human Services to prevent patients from being forced to pay bills that are higher than the amount due. In January, the bureau issued a bulletin that reminds debt collectors of their legal obligations under the No Surprises Act, which protects consumers from certain unexpected medical bills.

The bureau is also doing more research to find out if unpaid medical billing data should be included on credit reports at all. The study is looking into how medical billing, collections, and credit reporting practices affect patients and families.

Americans who are facing issues in resolving a medical debt or other consumer financial services can submit a complaint online or call the bureau at 855-411-2372.

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