A report from the Consumer Financial Protection Bureau (CFPB) estimates that consumer credit reports include $88 billion in medical debt as of June 2021. The cause is a “complicated and burdensome” medical billing system that creates hard-to-fix errors that increase patient debt and reflect poorly on credit scores.
According to CFPB Director Rohit Chopra, “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.” Chopra describes Americans as often being “caught in a doom loop between their medical provider and insurance company.”
The report describes a variety of circumstances that feed this doom loop, including:
- Unexpected and emergency events that are subject to opaque pricing and involve complicated insurance or charity care coverage and pricing rules.
- Patients in emergency situations who cannot sign a billing agreement until after receiving treatment.
- Patients with chronic illnesses or who are injured or ill, whose desperation for medical care forces them into treatment at any cost.
The Unfortunate Impact on Consumers
The report notes that the impact of medical debt is especially harmful for Black and Hispanic communities, low income individuals, veterans, older adults, and young adults regardless of race or ethnicity.
Consider these statistics:
- Tens of millions of U.S. households (about 1 in 5) report having medical debt
- 58% of bills in collections are medical bills
- The distribution of past-due medical debt is uneven: Black (28%), Hispanic (22%), White (17%), Asian (10%)
- Medical debt is more common in the southeastern and southwestern U.S., in part because states in these regions did not expand Medicaid coverage
CFPB Action Plan
The CFPB intends to take decisive action to ensure that the consumer credit reporting system is not used coercively against patients and their families to force them to pay questionable medical bills.
Specific actions include:
- Holding credit reporting companies accountable. The CFPB expects the Big Three credit agencies to adhere to Federal law by blocking hospitals that routinely report inaccurate information and contaminate the credit reporting system from accessing their systems.
- Working with federal partners to reduce coercive credit reporting. In addition to partnering with the U.S. Department of Health and Human Services to ensure that patients are not coerced into paying bills more than the amounts due, the CFPB issued a compliance bulletin in January reminding debt collectors, credit reporting companies, and others, that it is illegal to collect or report as owing a debt that is not legally due and owing, including where the billed amount violates the No Surprises Act.
- Determining whether unpaid medical billing data should be included in credit reports. The CFPB will conduct additional research to assess whether consumer credit reports should include data on unpaid medical bills.
Consumers having issues resolving medical debts or facing problems with other consumer financial products or services can submit an online complaint or call the CFPB at 855-411-CFPB (2372).
