Proposed rule would remove medical debt from credit reports : Shots

Americans wouldn't have to worry about medical debt hurting their credit scores under federal rules proposed Tuesday by the Consumer Financial Protection Bureau.

If enacted, this rule would dramatically expand protections for tens of millions of Americans struggling with medical bills they cannot afford.

The rule also fulfills the Biden Administration's pledge to tackle the problem of health care debt, a uniquely American problem. Estimated 100 million peopleMany people are being forced to make sacrifices such as restrictions on food, clothing and other necessities.

“No one should be denied access to economic opportunity simply because they experience a medical emergency,” Vice President Kamala Harris said Tuesday.

The administration also urged states to expand efforts to limit hospital debt collection and require hospitals to provide more charity care to low-income patients — measures that would help prevent more Americans from falling into medical debt.

Harris also urged state and local governments to continue buying up and paying off medical debt, a strategy that has become increasingly popular across the country.

Credit reporting is a threat that has traditionally been used by health care providers and debt collectors to encourage patients to pay their bills, and it is the most common collection tactic used by hospitals. KFF Health News Analysis is showing.

While having one unpaid bill on your credit report may not have a big impact on some people, it can be devastating for those with significant medical debt.

For example, if medical debt lowers your credit score, Threatening people's access to housing This leads to an increase in homelessness. People with low credit scores may have a hard time getting loans or may be forced to borrow at higher interest rates.

“We've heard stories of people whose medical debt has affected their credit scores and they can't get a job because they have bad credit,” said Mona Shah, senior director at Community Catalyst, a nonprofit that advocates for expanding medical debt protections for patients.

Shah said the proposed regulations would have a major impact on patients' financial stability and health. “This is a really big issue,” she said.

Administration officials said they plan to consider public comment on the proposal through the end of the year and hope to issue a final rule early next year.

CFPB Researcher i got you Medical debt, unlike other types of debt, is not an accurate predictor of a consumer's creditworthiness, raising questions about how useful it is on credit reports.

The three major credit reporting companies, Equifax, Experian and TransUnion, announced last year that they would stop including some medical debt on credit reports. The excluded debts included paid bills and debts under $500.

The measures have significantly reduced the number of people with medical debt on their credit reports, according to government data, but the voluntary agency measures left out many patients with larger medical debts.

a Recent CFPB Reports Despite the voluntary changes, 15 million people were found to still have such charges on their credit reports, many of whom live in low-income areas of the South, the report said.

Administration officials said the proposed rule would not only bar future medical expenses from appearing on credit reports, it would also erase current medical debt.

Officials said the banned debts would include not only medical bills but also dental bills, the leading cause of medical debt for Americans.

Although the debt won't show up on credit scores, patients still owe it, which means hospitals, doctors and other health care providers may try to get patients to pay using other collection methods, including going to court.

Patients who used credit cards (including medical credit cards such as CareCredit) to pay for medical bills would also be exempt from the proposed regulations and would continue to see those debts on their credit scores.

Hospital leaders and debt collection industry representatives have warned that limiting credit reporting could have unintended consequences, such as encouraging more hospitals and doctors to demand payment up front before providing care.

But consumer and patient advocates continue to call for more: The National Consumer Law Center, Community Catalyst and about 50 other groups wrote letters to the CFPB and the IRS last year calling for stronger federal action to rein in hospital debt collection.

State leaders are also taking steps to expand consumer protections. In recent months, a growing number of states, including Colorado and New York, have enacted laws banning medical debt from appearing on residents' credit reports or credit scores. Other states have also enacted laws banning medical debt from appearing on residents' credit reports or credit scores. Including Californiaare also considering similar measures.

A KFF Health News investigation found that numerous groups are calling on the federal government to ban tax-exempt hospitals from selling patient debts to debt collectors and refusing care to patients who are behind on their payments, practices that remain widespread across the US.

KFF Health News is a national newsroom that produces in-depth journalism on health issues. KFF — An independent source of health policy research, polling and journalism.