Watchdog questions whether credit reports should include medical debt

When my daughter’s right lung collapsed two years ago, she needed emergency surgery. Even as she was struggling to breathe, she was concerned about how much of her care would be covered by her health insurance provider.

That’s the state of health care in the United States — making sick folks worry themselves sicker about the cost of their care.

Purely by chance, my daughter ended up at an in-network hospital. The majority of her medical expenses — minus some copayments — were covered.

But a reader made a prophetic observation after I wrote about the ordeal, asking me to write a follow-up on “how she coped with the medical bills … and perhaps inadequate insurance.”

The dizzying flood of billing statements caused my now-26-year-old daughter a lot of stress. She had received services from out-of-network medical professionals at the in-network hospital. Eventually, some of the charges were removed, yet she’s still in financial limbo, waiting to see whether her insurance will cover thousands of dollars in charges for services she received during her nine-day hospitalization.

Such situations are typical, according to the Consumer Financial Protection Bureau, which recently issued a report critical of the byzantine medical billing system in the United States.

The CFPB questioned whether this debt should even be reported to the credit bureaus and thus factored into credit scores, which are used to determine people’s creditworthiness for loans, apartments or insurance.

As of the second quarter of 2021, 58% of bills that were in collections and on people’s credit records were medical bills, according to the CFPB.

“When most of us think about credit reports, we think about obligations where we signed up for a specific loan or a credit card,” CFPB Director Rohit Chopra said in an interview. “You go to a provider or a hospital, you have no idea sometimes what services are being performed on you. All you know is you’re in-network.”

But when consumers can’t pay, the accounts end up with a debt collector.

Delinquent medical debt reported by a collection agency or debt purchaser should not show up on a consumer’s credit report until 180 days from the date of first delinquency. This is supposed to allow time for insurance companies to process payments, according to the CFPB.

When bills finally come, people often end up in a “bureaucratic nightmare,” Chopra said.

The CFPB’s research shows $88 billion in medical debt on consumer credit records as of June 2021.