Proposed rule would remove medical debt from credit reports : Shots - Health News
What specific changes are proposed by the Biden administration regarding medical debt on credit reports?
The Biden administration has proposed federal regulations that would remove medical debts from credit reports, preventing medical bills from affecting Americans' credit scores. The Consumer Financial Protection Bureau (CFPB) plans to develop rules that would bar credit reporting agencies from including medical debt on credit reports. The proposal aims to protect consumers from predatory collection policies and lessen the burden of medical debt on American families. If enacted, the rules would dramatically expand protections for tens of millions of Americans burdened by medical bills they can’t afford. The regulations would also fulfill a pledge by the Biden administration to address the scourge of health care debt, a uniquely American problem that touches an estimated 100 million people5.
Can you explain the role of credit reporting in medical debt collection and its impact on patients?
Credit reporting plays a significant role in medical debt collection as it is often used as a threat by medical providers and debt collectors to induce patients to pay their bills6. Credit reporting agencies collect information on individuals' credit history, including any medical debts that have been sent to collections. This information is then used to calculate credit scores, which are used by lenders, insurers, landlords, and employers to evaluate an individual's creditworthiness.
Medical debt on a credit report can negatively impact a patient's credit score, making it harder for them to access financing, housing, and employment. Even a single unpaid medical bill on a credit report can have a significant impact, especially for those with large healthcare debts. This can lead to a cycle of debt and financial insecurity, forcing many individuals to limit other essentials such as food and clothing.
However, credit reporting agencies have started to make changes to how medical debt is reported. As of last year, Equifax, Experian, and TransUnion announced they would stop including some medical debt on credit reports, including paid-off bills and those less than $500. These changes have reduced the number of people with medical debt on their credit reports, but many patients with larger medical bills are still affected2.
The Biden administration has proposed regulations that would remove medical debts from credit reports and prevent future medical bills from appearing on credit reports. This would provide relief to millions of Americans burdened by medical bills and improve their access to economic opportunities. However, it is important to note that patients will still owe the debts, and hospitals, physicians, and other providers could still use other collection tactics to try to get patients to pay.
What evidence exists to show that medical debt on credit reports can affect people's access to housing and employment?
There is growing evidence that medical debt on credit reports can negatively impact people's access to housing and employment4. Credit scores, which are influenced by medical debt, play a crucial role in determining eligibility for housing and employment opportunities.
Research has shown that credit scores depressed by medical debt can threaten people's access to housing, and in some cases, even fuel homelessness4. People with low credit scores can also face difficulties in securing loans or may be forced to borrow at higher interest rates4.
Furthermore, medical debt can also affect a person's ability to find a job, as some employers conduct credit checks on potential hires. Individuals with medical debt on their credit reports may be seen as financially risky, leading to them being passed over for job opportunities.
In summary, medical debt on credit reports can have far-reaching consequences, affecting not only individuals' financial well-being but also their access to essential resources such as housing and employment.