Medical debt will be removed from all Americans’ consumer credit reports under a final rule announced Tuesday by Vice President Kamala Harris.
The rule will affect more than 15 million Americans, who will see an estimated average increase in their credit scores of 20 points. Zero Americans will have medical debt on their credit reports, down from the approximately 46 million Americans who had this type of debt on their credit reports in 2020.
The Vice President also noted that state and local governments have already leveraged American Rescue Plan (ARP) funds to help more than 700,000 Americans eliminate more than $1 billion in medical debt, and that The district also announced that it is on track to eliminate approximately $15 billion in U.S. medical debt. Up to about 6 million Americans.
“No one should be denied economic opportunity because they get sick or experience a medical emergency,” Harris said in a statement Tuesday. “This will be life-changing for millions of families, making it easier to get approved for auto loans, mortgages, and small business loans.” As someone who has spent a lot of time, I know my historic rules will help more Americans save money, build wealth, and prosper.”
Harris previously announced efforts to remove medical debt from credit reports last summer. They may continue to face legal and political challenges from credit reporting agencies, debt collection companies and even President-elect Donald Trump.
Medical debt is the largest source of debt collected in the United States and is more likely to be held by women, people with disabilities, and Black Americans.
Previous coverage:
Biden administration’s new rules will ban medical debt from credit reports
National credit bureaus such as Equifax, Experian, and TransUnion have removed medical debts of less than $500 from consumer credit reports as of April 2023. However, in April, the Consumer Financial Protection Bureau (CFPB) found that 15 million Americans, especially those in the American South and low-income areas, still have medical debt on their credit reports.
Estimates of medical debt vary, but an analysis from last year’s KFF Health Policy Survey found that 20 million people owe a total of $220 billion in medical debt. The analysis found that 13 percent of people with disabilities reported having medical debt, compared to 6 percent of people without disabilities. They also found that non-Hispanic blacks had more medical debt than other races and ethnicities, and women had more medical debt than men. A separate analysis found that 14% of those who had given birth in the past year and a half reported having medical debt, compared with 7% of those who had not given birth. .
“We know that Black adults and women are at higher risk of incurring medical debt, so we expect this policy to benefit those groups,” said KFF Vice President and Foundation Director of Health Care Expenses said Cynthia Cox, Affordable Care Act program director. Research the cost, affordability, and accessibility of health insurance.
Undue Medical Debt, a nonprofit organization formerly known as RIP Medical Debt, contacts hospitals and health systems to ask them to sell or donate a portion of a patient’s debt. Perry Undem, a nonpartisan polling firm, also surveyed more than 2,600 adults in August 2023. Of those, 229 were black women. 27% of black women said they had delayed or refused medical care because they were worried about incurring medical debt. A study published in March by the American Cancer Society suggested that “medical debt is associated with poorer health outcomes, more premature deaths, and higher mortality rates at the U.S. county level.”
The federal effort to remove medical debt from credit reports would require the CFPB to remove medical bills from credit reports and prohibit creditors from using them to make underwriting decisions. , which began in 2023 after Harris announced she would take initial steps to create rules to prohibit collection agencies from using medical billing. Medical debt that consumers are forced to pay. These proposals would narrow the scope of a 2005 exemption in the Fair Credit Reporting Act that allowed creditors to use medical debt in underwriting credit decisions. Creditors may have access to medical debt and billing information in certain cases, such as evaluating loan applications for medical services.
Other federal efforts to control medical debt include the No-Surprises Act, which goes into effect in July 2022 and prohibits surprise charges for most emergency and non-emergency services rendered out of network. Included.
In 2022, YouGov, a research data and analytics technology group, reported that 66 percent of Americans support government medical debt relief. Eva Stahl, vice president of public policy and program management at Undue Medical Debt, believes this assistance is because it can impact anyone.
“This is not debt by choice, it’s debt by necessity. There’s a general consensus about it, so it’s not really a partisan issue,” she said.
Stahl said he has received interest from lawmakers across the country, including in the South, and some jurisdictions in Texas and Kentucky have expressed interest in eliminating medical debt for their residents. Several state-level efforts have been passed or proposed to eliminate medical debt for state residents, some in partnership with Unjust Medical Burden.
In June 2023, Colorado became the first state to ban medical debt from being included on residents’ credit reports. A similar bill passed in Connecticut last year and was proposed in New Jersey.
In 2023, the Connecticut General Assembly will provide $6.5 million in American Rescue Plan (ARP) funds to eliminate medical debt for residents whose medical debt is 5 percent of income or whose household income is up to 400 percent of federal poverty. Approved the budget to allocate. line. Last year, Arizona Governor Katie Hobbs (D) announced an initiative to use $30 million in ARP funds to cancel medical debt for up to 1 million Arizonans, using criteria similar to those used in Connecticut. did. Both states partnered with Wrongful Medical Debt.
For Stahl, there are limits to removing medical debt from credit reports.
“Patients will still feel the stress of receiving multiple calls a day from debt collectors asking when they’re going to pay their medical bills, and they may end up signing up for payment plans they can’t actually afford,” she said. say.
