Three of the US’ top credit bureaus have announced that many consumers will soon have their medical debt wiped from their credit reports.
Medical debt is extremely prevalent in the US. This claim can be supported by findings from a report conducted by the American Journal of Public Health, whereby the majority of those filing for bankruptcy between 2013 and 2016 cited medical expenses as in part contributing towards their financial distress.
From July 2022, medical debt that has been paid will no longer be included on credit reports from Experian, TransUnion and Equifax, despite if it has been on a report for several years.
Additionally, these three credit bureaus will increase the amount of time before medical debt in collections will no longer appear on credit reports. This currently stands at six months, but will be stretched to a year from July.
This move is particularly poignant for many, especially those in the process of negotiating or paying off medical student loan debt – allowing those extra time to work with providers or collectors to find a suitable payment solution.
Finally, from the first half of 2023, the three named bureaus will no longer include medical debt in collections amounting to under $500 on credit reports.
This change will be welcomed by many. According to a Kaiser Family Foundation report released in March, nearly one in 10 adults, equating to 23 million Americans, owe at least $250 in medical debt. Furthermore, around one-fifth of US households were unable to pay for their medical care upfront in 2017.
Errors in medical billing make matters worse. Medical bills frequently include coding errors, which could result in the patient’s financial burden being far larger than originally anticipated.
The announcement from the three credit bureaus came shortly after the Consumer Financial Protection Bureau announced that it would scrutinise credit bureau practices regarding medical debt and investigate potential improvements that could be made to the medical billing and collections system.
There are a number of steps that can be taken in an attempt to deal with medical bills before they reach the collection stage. For instance, itemised bills should be requested – especially in instances of unexpected bills or higher costs than predicted. Further, hospitals may offer cash discounts when paying in cash, or offer payment plans through healthcare providers.
Debt collectors who have added illegal fees to medical bills should be immediately reported to the Federal Trade Commission, the Consumer Financial Protection Bureau, and the State Attorney General. There is also an option to sue the debt collector to have additional fees removed.