Monday, June 26, 2023, in Temple Hills, Maryland, for a medical bill. Jacqueline Martin/AP Hide caption
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Jacqueline Martin/Associated Press
The Consumer Financial Protection Bureau announced Tuesday that it will give millions of Americans a fresh start by removing medical debt from their credit reports.
About 15 million Americans will have an estimated $49 million in medical expenses removed from their credit reports, the agency said.
The CFPB's new rules prohibit credit agencies from listing medical debt on credit reports and prohibit lenders from using medical information against borrowers seeking loans. This is a further step forward from a previous agreement last year, when the three major credit institutions agreed to exclude certain types of medical debt from credit reports, including those under $500.
Advocates say having medical debt listed on credit reports is unfair, puts families in dire financial straits, prevents them from getting needed additional medical care, or leaves them homeless. The government has long advocated for the establishment of such rules.
“No one should have their financial future ruined if they get sick,” CFPB Director Rohit Chopra said in a statement announcing the new rules. “The CFPB's final rule would eliminate special carve-outs that allowed debt collectors to abuse the credit reporting system to force people to pay medical bills they were not owed.”
The CFPB says research has found that medical debt is not a good indicator of a borrower's ability to pay other debts, and that consumers are frequently required to pay bills that should be covered by insurance or other programs. states.
Benedick Ippolito, an economist at the American Enterprise Institute, a free-market think tank, believes the CFPB's new rules could have unintended consequences for health care consumers.
“By design, removing medical debt from credit reports reduces the impact of not paying medical bills. That, of course, is the point of this policy, but it reduces the incentive to pay medical bills. ” Ippolito told Morning Edition this week.
Eliminating these effects could change the way providers collect payments, Ippolito argues. For example, some health care providers already require high payments before providing medical services, he said.
“People who don't know if they can afford to pay their bills right now could suddenly find themselves without services if they can't pay more upfront than they currently are,” Ippolito said. “Therefore, there are important trade-offs to consider.”
He also said it's important to consider that much of the existing medical debt is due to routine medical services, rather than the exorbitant and unexpected medical bills that sometimes make headlines.
But for many adults, routine care is important for chronic diseases like cancer and diabetes, says Sarah Collins, who studies health insurance coverage, access and performance at the Commonwealth Fund, a medical research nonprofit. He said that it may be related to treatment.
In a November 2024 survey conducted by the Commonwealth Fund, around half of adults with medical debt said it was due to treatment for a pre-existing condition. The study also suggests that much medical debt is related to treatment for chronic conditions.
“Why should we make it impossible for people to come forward just because we've had a medical crisis?” Collins said.
Collins said the CFPB's new rules are an important step forward, but they won't eliminate people's debt. She believes the healthcare industry, especially hospitals, ultimately needs to address the cost driver, as they charge patients based on prices negotiated with insurance companies.
“The causes of medical debt don't go away. This rule treats the symptoms, not the causes,” Collins said.
Will this rule remain in place under the Trump administration?
CFPB rules could impose early testing on President-elect Donald Trump. He could reverse it, but he would be reversing a move that is popular with many Americans.
The agency estimates that the new rules could raise the credit ratings of Americans with medical debt by an average of 20 points.
The rule is expected to go into effect within about 60 days. Mr. Chopra has been serving as CFPB director since 2021, but Mr. Trump has not announced his nomination for CFPB director.
