New medical debt reporting practices should remove any medical debts already paid or under $500 from any American’s credit report.
The nationwide credit reporting companies – Equifax, Experian, and TransUnion – said that starting in 2023, they would exclude debt under $500, and that has now taken effect. They also announced a little more than a year ago that they would change reporting on medical debt by excluding debt that was paid after it was sent to collections from credit reports, and also debt that was less than a year old.
Nearly one in five American households has medical debt, the Consumer Finance Protection Bureau reports, and in 2021, 43 million people had allegedly unpaid medical bills on their credit reports. The credit bureaus’ reporting changes came after the C.F.P.B. issued its report and said it would determine whether it is appropriate for medical debt to be included on credit reports.
The Texas Tribune, citing a Kaiser Family Foundation report, said more than 100 million people in America ― including 41% of adults — have medical debt. That debt on a credit report can affect a person’s ability to get a home or car loan or a credit card, for example. And if you can get such consumer credit, the presence of medical debt often means that the interest rate is higher than it would be without debt.
“Congress, federal agencies, and others have taken steps to respond to the medical debt crisis confronting millions of families,” the C.F.P.B reported on May 4. “Congress passed the No Surprises Act to help protect Americans from certain unexpected medical bills, including surprise medical bills for emergency services from out-of-network providers. In addition, the C.F.P.B. told debt collectors and consumer credit reporting companies that they can’t collect, furnish, or report any invalid medical debt.
“The three nationwide credit reporting companies – Equifax, Experian, and TransUnion – also removed all paid medical debts from consumer credit reports and those less than a year old. They have also taken steps to remove all medical collections under $500. This last step went into effect on April 11, 2023, and with this change, it’s estimated that roughly half of those with medical debt on their reports will have it removed from their credit history.”
Medical debt is a substantial problem, and it is increasing nationwide with the growth of health costs and the downstream consequences of the pandemic on an already dysfunctional system. Those most likely to have medical debt include the uninsured, parents, those with lower incomes, Black and Hispanic adults and women, the Kaiser Family Foundation report says.
This problem is one we examined with our partners at KXAN TV in Austin, in an investigation titled “Medical Debt Lawsuits.” People in Texas were being sued by the hundreds by a Texas hospital. In the wake of the investigation, consumer protection legislation has been working its way through the Texas Legislature, and appears to be close to being sent to the governor for his signature.
Medical credit cards and other loans
Also this spring, the C.F.P.B. warned that hospitals, doctors and other providers of healthcare are increasingly offering medical credit cards and financing plans to people wanting to pay for healthcare, though they might qualify for other forms of aid. The report, “Medical Credit Cards and Financing Plans,” details the landscape.
“To help cover out-of-pocket or surprise medical expenses, patients may turn to medical credit cards or loans offered by their medical providers if they don’t have sufficient cash, have limited access to credit, do not realize they are eligible for a hospital’s financial assistance program, or simply want to ensure they can receive treatment quickly,” the report says. “In some cases, patients report being signed up without their consent or knowledge. In general, it is more difficult for patients to process complex information when in pain or under stress.”
The report quotes one man as saying: “I am a senior citizen and went to a dentist office in my area to have them do a routine check up on my wife’s teeth. They only did two x rays, yet I received a bill for $14,000 for services she never received or we agreed for. The dentist office opened up a credit card in my name in order to pay for these services without my consent. I do not speak good English, and they deceived me of the services we would receive, and I never received any receipts or copies of anything until I received a bill
in the mail from the credit card company.”
Some of these promotions offer zero or low interest, the report says, but that’s typically for a promotional period: “Once the promotional period expires, the rates can increase significantly. If a borrower is unable to pay off the full balance of their purchase before the end of the promotional period, they will owe interest on the full purchase amount, not just the remaining balance.”
These may seem like a good deal at the time, but it pays to read the fine print, the report notes.
“As an example, a root canal procedure and dental crown could cost a patient $2,400. If the
patient uses a medical credit card with a six-month promotional period, they may pay $400 each month for six months, and incur no interest. If the patient does not pay off the full balance at the end of the six-month promotional period, interest is incurred at a rate of 26.99 percent from the purchase date. If the patient were to instead use a general purpose credit card with 16 percent APR for the purchase, their monthly payment would be slightly higher each month, but the amount they would pay in interest would be significantly lower than what they would pay with the medical credit card if they were not able to pay off their balance in full by the end of the six-month period,” the report says.
Also, additional credit on your credit record can serve to increase the rates you are charged on existing and future loans.
Applying for ‘charity care’ and getting a loan instead
Many Americans qualify for “charity care,” which is what financial aid is called at hospitals and other medical providers, the report notes.
Often it’s hard to find the provisions for financial aid on a hospital website, or even by calling the hospital. Financial aid policies differ from place to place and may be more charitable than you think. They may also be hard to find, so ask specifically, look on the website or both.
When you are looking for financial aid, some places will try to direct you to “financing,” which might be that application promising that interest-free or low-interest credit. This can be tricky. The financing application is basically an application for consumer credit, and it might have similar terms and conditions to credit card debt – hefty interest and penalties, for example.
Certain hospitals, especially nonprofit ones, are regulated as far as financial aid. For instance, Texas requires non-profit hospitals to provide financial assistance to patients with income between 21% and 200% of the federal poverty level. You can find federal poverty income guidelines here.
The National Consumer Law Center has more details in its recent review of hospital financial assistance policies across the country.
What you can do
Not sure you have benefited in the way that the credit reporting practices are supposed to work?
Check your credit reports for outstanding medical bills. Equifax, Experian, and TransUnion are offering free online credit reports once a week through AnnualCreditReport.com, the C.F.P.B reports.
“If you previously had a medical collection under $500, a paid medical collection, or a collection less than a year old on your credit report, check to make sure they no longer appear on your reports,” the bureau reports. “Be aware, however, that this doesn’t include credit card collections, even if you used your credit card to pay for a medical expense under $500.
“If you find a medical collection under $500, a paid medical collection, a collection less than a year old, or errors on your report, you can dispute that information with the credit reporting company.
“In addition, the nationwide credit reporting companies have announced that they’re extending the amount of time you have to dispute, negotiate, or pay for any outstanding bills before they can be reported. Previously, unpaid medical bills were generally furnished to credit reporting companies after 60 to 120 days, but the nationwide credit reporting companies are now waiting one year from the time you saw a doctor before they’re allowing medical debt to appear on your credit report.”
The bureau also emphasized that some people who are unable to pay medical bills may qualify for financial assistance programs, often called “charity care.” The National Consumer Law Center has more details in its recent review of hospital financial assistance policies across the country.
If you have a problem with this or other consumer issues, you can file a complaint with the C.F.P.B.
Local nonprofits may be helpful. For instance, in Texas, you have certain state-mandated rights. For example, even if there is a judgment against you, the creditor may not be able to take your home, your car or many forms of income including alimony, child support, Social Security, disability payments and others. There are details on your debt collection rights in this toolkit from Texas Appleseed, a public interest justice center.
Nationwide, this National Consumer Law Center report shows state-by-state what can and cannot be confiscated in a debt collection case.
A national nonprofit, DollarFor, says it advocates for patients with medical debt, and also has do-it-yourself tools on its site.
We compiled this resource list for our partnership with KXAN TV in Austin, Tex., on medical debt. It gives Texas-focused resources; similar ones are available in other locales.
