Consumer credit reports contained $88 billion in medical debt in June, an issue the federal agency that enforces financial protection rules is vowing to crack down on.
Medical debt is by far the most common type of liability in credit reports. On Tuesday, officials from the Consumer Financial Protection Bureau questioned whether he belonged there. As of last year, 58% of all third-party debt collections were for medical debts, the agency determined in a new report. About 20% of U.S. households have medical debt, which appears on 43 million credit reports, the CFPB found.
Medical debt is unlike other forms of debt in that few people choose it and there is little opportunity to shop around, CFPB director Rohit Chopra said in a call with reporters. . Navigating medical bills can feel like “full-time detective work” and patients and families are often caught in a “catastrophic billing loop” between their insurers and providers, he said.
“Even when a patient is trying to fight to get an accurate bill or an insurance claim paid, medical collectors have a weapon that’s hard to fight: the credit report,” Chopra said. “I worry that the credit reporting system is being used as a tool of coercion to get people to pay medical bills they may not even owe.”
The CFPB will take three actions in response to its findings, Chopra said.
For starters, the agency will determine whether unpaid medical bills should even be included in credit reports. To do this, the CFPB will conduct additional research on medical billing, collections and credit reports.
The agency will “closely review” the “big three” credit bureaus – Equifax, Experian and TransUnion – to ensure they have reasonable procedures in place to ensure the accuracy of medical debts recorded on health reports. credit, Chopra said. These procedures should include action against medical debt providers who regularly report inaccurate information.
The CFPB will work with other federal agencies to crack down on coercive credit reporting. The agency is already working with the Department of Health and Human Services to make sure patients aren’t intimidated into paying more than they owe, Chopra said.
The CFPB supports a recent Department of Veterans Affairs policy that will require all other methods of debt collection to be exhausted before veterans’ bills are reported to credit bureaus, he said. President Joe Biden will announce additional assistance for veterans during his State of the Union address on Tuesday. According to a White House fact sheet, the VA will simplify the process for applying for medical debt forgiveness and set an income threshold for receiving debt relief.
According to the CFPB report, medical debt is reported to credit reporting agencies disproportionately compared to other forms of debt, such as credit card balances.
In addition, medical bills sent to collections are often not accurate. “Attempts to collect unpaid debts” was the most common complaint received by the CFPB between 2018 and 2021, according to the report. One woman, for example, said she was sued by a debt collector over a medical bill her insurer had already paid.
There’s a lot of uncertainty in the medical billing process that leads to these inaccuracies, said April Kuehnhoff, an attorney at the National Consumer Law Center. People don’t know how much they’ll be charged for services, and uninsured patients pay different rates than those who are insured. Then there is the question of whether patients are eligible for financial assistance and, if they are, whether they are told about it, she said.
“There are a lot of questions about the right amount when you’re dealing with medical debt, and some of that carries over to billing or collection space,” Kuehnhoff said. “There are many reasons why the amount you may be charged for medical debt may be incorrect.”
Medical debt doesn’t belong on credit reports, said Mark Rukavina, program director overseeing Community Catalyst’s Economic Stability and Community Benefits Project. “We don’t think it’s fair for a variety of reasons,” he said.
Nonprofit hospitals are required to provide free or reduced-cost care to low-income patients, but the CFPB found that they often do not inform patients about these programs or facilitate application. Washington State Attorney General Bob Ferguson (D) is suing 14 hospitals owned by Renton-based Providence, alleging they trained employees to aggressively collect payments without regard to eligibility patients for financial assistance and that they did not notify patients who qualified for assistance.
“We are interested in what more the government can do to ensure that patients exercise their rights to access financial assistance programs and payment plans, as well as to obtain validation of debts allegedly owed,” Chopra said.
A bright spot in the CPFB report is that the total balance of medical debt collections on credit reports decreased by approximately 9% between mid-2018 and mid-2021. But the share of debt collections on medical bills remained high after falling from 60% to 58%.