One-in-three adults in the United States are saddled with medical debt, which now counts as the largest source of debt in collections – more than credit cards, utilities and auto loans combined. According to a White House fact sheet, Black and Hispanic households are more likely to hold medical debt than white households.
As part of the fight to help people contend with high costs, Vice President Kamala Harris plans to announce reforms to help ease the burden of medical debt. The White House said this should help provide more families with opportunities to thrive.
“Together, these actions will help hold medical providers and debt collectors accountable for harmful practices, reduce the role that medical debt plays in determining whether Americans can access credit – which will open up new opportunities for people with medical debt to buy a home or get a small business loan, help over half a million of low-income American veterans get their medical debt forgiven and inform consumers of their rights,” said the administration.
The White House said medical debt isn’t just a financial issue – it can have negative health effects. One study found that almost half of individuals with medical debt intentionally avoided seeking care.
“Getting sick or taking care of loved ones should not mean financial hardship for American families,” administration officials stated. “That is why the Administration is taking new action to ease the burden of medical debt and protect consumers from predatory collection policies.”
The White House said the planned actions build upon President Joe Biden’s April 5th Executive Order on strengthening access to affordable, quality health care coverage, which directed federal agencies to take action to reduce the burden of medical debt.
“Vice President Harris is announcing reforms in four areas that will lessen the burden of medical debt, protect consumers, and open up new opportunities for Americans looking to buy a home or start a small business,” the White House said.
The actions include holding providers and collectors accountable. “Providers have a responsibility to offer non-predatory payment plans or financial assistance to all eligible patients,” the White House noted. “While many do, far too many eligible patients report not receiving help. Worse, lawsuits against patients over medical bills are on the rise. And when hospitals sell outstanding bills to third party debt collectors, patients can be subjected to persistent and aggressive collections practices.”
The administration noted that the federal government pays roughly $1.5 trillion a year into the health care system to provide patients with quality care and services. Providers receiving that funding should make it easy for eligible patients to receive the financial assistance they are entitled to and should not directly or indirectly subject patients to illegal and harassing debt collection practices, the White House stated.
Department of Health and Human Services Secretary Xavier Becerra plans to direct the agency to evaluate how providers’ billing practices impact access and affordability of care and the accrual of medical debt. Officials said HHS will request data from more than 2,000 providers on medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings and third party contracting or debt buying practices.
The Department will, for the first time, weigh that information in their grantmaking decisions, publish topline data and policy recommendations for the public, and share potential violations with the relevant enforcement agencies of jurisdiction. Separately, the Consumer Financial Protection Bureau (CFPB) will investigate credit reporting companies and debt collectors that violate patients’ and families’ rights and hold violators accountable.
The White House added that the administration plans to improve government underwriting practices as the latest research found that owing medical debt is not a reliable predictor of overall financial health. They said an analysis of 5 million anonymized credit records found that consumers who owed medical debt paid their bills at the same rate as those who did not. Including paid-off medical debt causes credit scores to underestimate creditworthiness by as much as 22 points.
“As a result, the inclusion of medical debt on credit reports and in credit scores and loan underwriting can hold Americans back from financial opportunities while failing to improve the accuracy and predictiveness of lending programs,” the White House said.