Medical debt is devastating the credit integrity of American consumers. The Consumer Financial Protection Bureau (CPFB) has taken steps to mitigate this doom loop and the three major credit reporting agencies are now taking action as well, no doubt in response to a greater focus on medical debt.
Transunion, Equifax, and Experian have decided in unison that:
- All paid medical debt will be removed from credit reports.
- Effective July 1, 2022, the time in which to report any outstanding medical debt will be increased from six to 12 months.
- Effective July 1, 2023, outstanding medical debt less than $500 will not be reported at all.
Do No Harm
Consumer healthcare debt is most often incurred by those who are least able to afford it and are most vulnerable to being persecuted for payment. In fact, much healthcare debt should not even be classified as such.
A large proportion of this so-called debt should have been covered from the beginning by hospital financial assistance programs (FAPs), which are mandated by law for non-profit hospitals. These hospitals receive immensely valuable tax-exempt status in return for their commitment to provide services of equal value to patients with financial need.
Research has shown that hospitals fall egregiously short of these charitable commitments. Many neglect to even inform patients that such FAP programs are available to them. Multiple articles and studies, including research conducted by Johns Hopkins University, reveals a “wide variation in charity care provision” and that “many government and nonprofit hospitals’ charity care provision was not aligned with their charity care obligations arising from their favorable tax treatment.”
Personal credit report relief and similar efforts by the CFPB are promising progress in an area of significant collateral damage caused by the dysfunctional U.S. healthcare business machine. However, bigger strides are needed to protect individuals from the predation and profiteering inherent in our healthcare system.
It’s time to eliminate the financial injury caused by medical debt that’s endured by working Americans. Patients will benefit from next-generation health plans that use advanced, fair market payments for providers, and offer advocates to help patients receive all hospital financial assistance for which they are eligible.