MEDICAL DEBT
ders to increase financial aid. And the three largest credit agencies – Equifax, Experian and Transunion – said they would stop including some medical debt on credit reports as of last July.
But consumer and patient advocates say the actions, while important, still leave millions of Americans vulnerable to financial ruin if they become ill or injured. “It is critical that the CFPB take additional action,” the groups wrote to the federal agency created in 2010 to bolster oversight of consumer financial products.
The major credit rating companies, for example, agreed to exclude only debts that have been paid off and unpaid debts of less than $500. Patients with larger medical bills they can’t pay may still see their scores drop.
The groups also are asking the CFPB to eliminate deferred interest on medical credit cards. This arrangement is common for vendors such as CareCredit, whose loans carry no interest at first but can exceed 25% if patients don’t pay off the loan in time.
Collection industry officials have lobbied against broader restrictions on credit reporting, saying limits would take away an important tool that hospitals, physicians’ offices and other medical providers need to collect their money and stay in business.
“We appreciate the challenges, but a broad ban on credit reporting could have some unintended consequences,” said Jack Brown III, president of Florida-based Gulf Coast Collection Bureau, citing the prospect of struggling hospitals and other providers closing, which would reduce care.
Brown, a past president of ACA International, the collection industry’s leading trade association, warned that more medical providers would also start demanding upfront payment, putting additional pressure on patients.
To further protect patients from out-of-pocket costs like these, many advocates say hospitals, particularly those that are exempt from taxes because they are supposed to serve the community, must make financial aid more accessible, a key demand in the group’s letters.
Charity care is offered at most U.S. hospitals.
And nonprofit medical systems must provide aid as a condition of being tax-exempt. But at many medical centers, information about this assistance is difficult to find.
Standards also vary widely, with aid at some hospitals limited to patients with income as low as $13,590 a year. At other hospitals, people making five or six times that much can get assistance.
The result is widespread confusion that has left countless patients who should have been eligible for aid with large bills instead. A 2019 KHN analysis of hospital tax filings found that nearly half of nonprofit medical systems were billing patients with incomes low enough to qualify for charity care.
The groups are asking the IRS to issue rules that would set common standards for charity care and a uniform application across nonprofit hospitals. (Current regulations for charity care do not apply to for-profit or public hospitals.)
The advocates also want the federal agency to strengthen limits on how much nonprofit hospitals can charge and to curtail aggressive collection tactics such as foreclosing on patients’ homes or denying or deferring medical care.
More than two-thirds of hospitals sue patients or take other legal action against them, such as garnishing wages or placing liens on property, according to a recent KHN investigation. A quarter sell patients’ debts to debt collectors, who in turn can pursue patients for years for unpaid bills. About 1 in 5 deny nonemergency care to people with outstanding debt.
KHN (Kaiser Health News) is a national newsroom that produces indepth journalism about health issues.