NEWS: The Consumer Financial Protection Bureau, with support from Congress, plans to repeal it’s 2024 rule that would keep medical debt off of credit reports.

WHAT IT MEANS TO YOU: Medical debt, often an unexpected budget-buster, when on your credit report, can tank your credit score. This can make it difficult to get other credit, or drive up interest and fees on credit you do get, and even make it hard to get an apartment or job. The CFPB last year passed a rule that was supposed to go into effect in March that would keep medical debt off credit reports, but Congress and Trump’s CFPB are pulling that back.

Last year, the Consumer Financial Protection Bureau estimated last year in its annual report on debt collections that Americans owe around $220 billion in medical debt, much of it unpaid and a lot of finding its way to credit reports. Another study found that about 15% of households owe more than $250 in unpaid medical bills, 6% of Americans owe more than $1,000 and 1% of adults owe more than $10,000.

When medical debt isn’t paid it often goes to a debt collector aka “revenue management XXX.” And that means the debt can end up on the credit report of the patient, which has long-term financial effects on way more than just their medical bills.

We can all agree that people should pay their bills, but medical debt is often unexpected and unplanned. Having insurance certainly doesn’t make you immune to it, even though you think it’s going to.

Let’s take a look at some of the things you should know about medical debt. Hopefully they’ll help you navigate your own.

1) Medical debt is not like other debt. The CFPB in a massive study the agency did on the topic in 2023-24, found that medical debt, unlike other debt, is not an accurate predictor of risk. In other words, if you don’t make your credit card payments, a lender can reasonably assume you may have trouble paying back the credit you’re applying for. But if you’re socked with a big medical bill that’s not in your budget, and have trouble paying it, that doesn’t mean you’re a bad credit risk.

2) Rules on medical debt were evolving. Emphasis on WERE. In 2021, the three major credit reporting bureaus – Experian, Equifax and Transunion – agreed to a change in how medical debt in collections would be reported. The biggest part of the change is that collectors had to wait a year to report it, rather than 180 days, in order to let the person who owes the money make a good-faith attempt to pay it. In 2023, medical debts in collections of less than $500 were also removed from credit reporting. These changes resulted in a huge decrease of medical debt in collections reported on credit reports. See? People DO pay it back, eventually.

Another CFPB rule, which was due to go into effect in March, would’ve prohibited lenders from considering medical debt on credit reports when making lending decisions. Lenders, particularly those with credit cards, didn’t like this rule at all. The new CFPB, under the Trump administration, agreed that giving consumers a chance to pay off medical debt before it was used against them to charge higher interest and fees on credit isn’t fair to big-money banks. The CFPB put a pause on the new rule in early February, and there is a Republican-sponsored act in Congress to repeal it. It’ll likely pass.

By the way, the rule didn’t apply to employers, insurance companies, landlords, etc., that use credit reports to determine rates, hiring or renting to – it only applied to credit lenders.

3) More than a third of debt in collections is medical debt. Medical debt represented 36% of all debit in collections in 2023, the last year for which figures were compiled. That may seem like a lot, but it was down from 57% in 2022, once the new reporting rules went into effect.

4) Debt not owed, hospital financing plans gone awry and hospital financing changes in general can lead to iffy medical debt. About half of the complaints the CFPB gets about medical debit is about debt that the patient believes they don’t owe or is more than what they do owe, either because they or insurance paid it, or they didn’t even know it existed. Some of the issues that stem from the health care source and how people pay their bills, or are charged, are:

Health care providers, insurance carriers and debt collectors often don’t communicate with each other, and give consumers conflicting information, the study found. In many instances, the debt, as unpaid, continued to appear on a credit report at the insistence of a debt collector after it had been paid and both the consumer and healthcare provider had backed that up with the agency.
Most hospitals are nonprofit, and to continue to get federal funding, they must offer financial assistance to patients who can’t afford care. Yet many consumers who were approved for assistance that paid for some or all of their care find they’re still being charged for it, and when they don’t pay, it goes to debt collections. The debt collector will say they had no clue that the person got financial assistance, the hospital will insist they did, but it won’t solve the problem, and the consumer ends up having the negative information on their credit report.
Some low-income patients don’t get required financial assistance at all “because non-profit hospitals have requirements in their financial assistance policies that arbitrarily deny assistance to patients who would otherwise be eligible for such aid,” CFPB reported. Some of the rules hospitals have that make patients ineligible include a medical bill that’s not large enough, having insurance, or not being a resident of the area where they needed emergency care. A 2020 survey found that nonprofit hospitals get $28 billion in tax exemptions, but 77% of them don’t offer charitable care that equals their exemption.
The increase in medical payment products – apps, medical credit cards, etc. – offered by third-party companies and used by nonprofit hospitals and healthcare provides adds to the issue of medical debt as well. These often have high interest rates, as well as retroactive application of interest after a period of deferment, negative credit reporting and other aggressive collection tactics. Hospitals often steer patients toward these even if the patient is eligible for financial assistance instead. According to CFPB, “hospitals get compensated for bills when patients are enrolled in products that are collected on via practices that would be prohibited by IRS regulations if engaged in by the hospitals themselves.” And, accordingly, “The patient is set up to be pursued by debt collectors in ways that those hospitals are themselves prohibited from doing.”

5) Medical debt errors and federal law violations related to them abound on credit reports. The CFPB last year reported that many medical billing debt collectors, including those affiliated with health care systems, violate federal law, collecting on inaccurate or legally invalid medical debt. That’s one of the reasons why the CFPB wanted medical debt treated differently on credit reports. The CFPB found these companies violate federal law when “they collect or attempt to collect on medical bills that are inaccurate, unsubstantiated, or invalid under the law.”

Frequent federal law violations the CFBP found include specifically:

Double billing: Attempt to collect on medical bills that have already been paid by the consumer, insurance, or a government program such as Medicare or Medicaid.
Exceeding legal limits: Attempts to collect amounts that surpass federal or state caps, such as those set by the federal No Surprises Act or state laws on “reasonable” rates.
Falsified or fake charges: Attempts to collect on bills that include “upcoded” or exaggerated services, or charges for services the consumer did not receive.
Collecting unsubstantiated medical bills: Attempts to collect medical debts that are not substantiated and don’t include documentation of payments that have been made or financial assistance eligibility.
Misrepresenting consumers’ rights to contest bills: Misrepresenting the status of the amount being collected, including amounts that have been fully settled, or where the payment obligation may be uncertain.

6) You’re more likely to have unpaid medical debt if you’re: Black, female, uninsured, a veteran, have a disability. A Peterson-KFF study of medical debt found that:

13% of Black consumers had unpaid medical bills, as opposed to 7% of white consumers and 8% of Hispanic.
Overall, 9% of women have it, compared to 7% of men.
The lower your income, the more likely you are to have it: 11% of people who make 199% of the federal poverty guidelines or less have it, a number that decreases as incomes rise. At 600% or more, only 4% of consumers have it. The federal poverty guideline this year is $15,650 for an individual, $32,150 for a family of four. So, if you live alone and make less than $31,300, or your family of four income is less than $64,300, you’re much more likely to have medical debt than an individual who earns $93,900, or a four-person household that earns $192,900.
Some 14% of people without health insurance have medical debt, compared to 8% of people who have insurance.

After studies found that veterans may have up to $6 billion in unpaid medical debt, the Department of Veterans Affairs in 2022 changed its credit reporting rules on debt veterans owe the VA. The VA now only reports a medical bill after all other collection efforts have been exhausted, doesn’t report debt less than $25 and makes sure the vet wasn’t entitled to free care that they didn’t get. It also expanded installment payment plans. No studies have shown, though, if that’s all being adhered to.

7) Tribal populations are disproportionately hit with medical debt in collections. All members of recognized tribes are guaranteed medical care by the Indian Health Service, which is a unit of the U.S. Department of Health and Human Services. That sounds great, but the reality is that only 5.44% of the Native population lives in areas where the have access to an IHS primary care facility. On top of it, administrative red tape and the federal government’s inattention means that reimbursements or decisions on what’s covered are slow to non-existent, causing an estimated 53% of erroneous medical bills for people who are covered under the IHS, the CFPB found last year.

15% of members of recognized tribes have medical debt in collections.
Those in collections that appear on credit reports owe an average $4,056, compared to $3,166 for all people who have medical debt in collections and $3,040 for people who live in “comparative rural” communities.
25% of tribal members with medical debt in collections have no other accounts – in collections or not – on their credit reports, compared to 15% of the overall population.

8) Don’t assume insurance, Medicare, Medicaid, VA, IHS, or health care financing will cover your medical bills. If you’re planning a medical procedure or treatment, or are diagnosed with an illness, research your coverage as much as possible. Out-of-network services, copays, uncovered medications, procedures and medical devices aren’t always clear and your health care provider isn’t necessarily going to inform you whether you’re covered or not. You may not know you’re going to have to pay until you get a bill.

The No Surprises Act is supposed to protect people who are uninsured or have private health insurance by requiring a “good-faith estimate” of what it will cost for an emergency and non-emergency out-of-network service or treatment, including an ambulance bill, but there are a lot of loopholes and it’s not always followed. Do as much homework as you can, even if you have insurance and believe you are covered.

9) Ask for the “super bill.” Anyone with medical debt they don’t understand, or they think is unfair, should ask their healthcare provider or the debt collector for an itemized bill, which is also known as a “superbill.” It shows everything that’s charged, using the universal medical billing procedure codes. It also shows what your insurance paid, and what you owe. The CFPB points out that getting this bill, which you usually have to ask for, makes it easier to tell if the charges are accurate and helps you look for charges that can’t legally be collected.

Some of the examples of illegal charges the CFPB gives are:

Costs for a health care service you never received
Amounts inflated beyond legal limits
Charges for a more expensive service than the one you received
Bills you, your insurance, or a charity care program already paid
Details that are red flags that the bill has errors, like wrong dates, wrong medications, or wrong procedures

10) Be your own biggest advocate in attacking unfair medical debt. The CFPB, under the Biden administration, published a consumer advisory for anyone who has medical debt that’s in collections. As of now, that information is still available. Here’s a summary, in case it disappears:

Check the statute of limitations on medical debt collection. In New Hampshire, the statute of limitations on medical debt collection is three years from when the medical debt went into collections. It varies by state (yours, not the bill collector’s). Some actions can reset the clock, including agreeing with the debt collector to an installment plan, paying the collector a portion of the bill or even talking to them on the phone.
Negotiate with the provider. Medical charges can be negotiated, something the debt collector may not tell you. The CFPB advises that you start by asking the healthcare provider for reductions. If they agree, you can ask the debt collector to lower the amount you owe.
Find a patient advocate. The Centers for Medicare & Medicaid Services has information on finding a patient advocate that can help you understand your bill, apply for financial help, and request details about your medical charges. VA healthcare facilities have patient advocates on staff. Your healthcare provider or hospital may also have advocate information their website. Many Area Agencies on Aging also have healthcare specialists.
Don’t use credit to pay medical debt. A credit card or loan will add interest and fees to what you already owe. CFPB says instead, try working with the healthcare provider and debt collector on a payment plan.
Submit a complaint. Debt collectors must comply with federal law. As of now, CFPB still has information about your rights and debt collection on its website. It also still has a complaint portal, at consumerfinance.gov/complaint or by calling 855-411-2372, though it’s not clear if complaints are being followed up on.
Get legal help. You can sue debt collectors when they violate federal law. CFPB recommends talking to a lawyer about a medical charge you believe is illegal or a debt collector you believe is breaking the law. In New Hampshire, start with New Hampshire Legal Assistance.

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