On March 1, 2022 the Consumer Financial Protection Bureau (“CFPB”) issued a 54 page report regarding the impacts of medical debt on consumers.[1] “Medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous. The report outlines how these repercussions are especially acute for people from Black and Hispanic communities, as well as people with low incomes, veterans, older adults, and young adults of all races and ethnicities.”

Key findings of the report include:

• “CFPB research shows $88 billion in medical debt on consumer credit records as of June 2021. The total amount of medical debt in collections in the U.S. is likely higher, since not all medical debts in collections are furnished to consumer reporting companies.
• “Most medical debt collection tradelines on consumer credit reports are under $500, although many people with medical debt have multiple medical collection tradelines.
• “As of 2021, 58 percent of all third-party debt collection tradelines were for medical debt, making medical debt the most common debt collection tradeline on credit records. The next most common collections tradeline was telecommunications debt, at only 15 percent of tradelines.
• Past-due medical debt reported to consumer reporting companies can appear on a person’s credit reports and lower their credit scores. This may reduce their access to credit and make it harder to find a home or a job.
• “Medical debt collections are less predictive of future payment problems than other debt collections are. Certain newer credit models take this into account, but some widely-used models still weight medical and nonmedical collections equally.
• “Black and Hispanic people, and young adults and low-income individuals of all races and ethnicities, are more likely to have medical debt than the national average. As a result, these populations may be more heavily impacted by outdated credit models that overestimate the predictiveness of medical debt. Older adults and veterans are also heavily impacted by medical debt. Additionally, medical debt is more prevalent in the Southeastern and Southwestern U.S.
• “Medical bill amounts can be unpredictable and often vary widely based on patient and provider characteristics. Uninsured and out-of-network patients are often charged prices that are much higher than what in-network insurers pay—even though the uninsured may have little ability to pay. The prices charged to uninsured and out-of-network patients sometimes significantly exceed providers’ costs. Markups are especially high for emergency care, and for-profit investor-owned hospitals charge higher average markups.

The CFPB concluded that ‘[f]or tens of millions of Americans, medical debt is an unexpected, unwanted, and financially devastating expense … [that] practices in medical debt collections and reporting can cause significant harm to people with medical debt … [that] can impose serious costs on people’s financial, physical, and emotional health.” Based on its findings and conclusions, the CFPB vowed to hold credit reporting agencies accountable, vowed to support enforcement of the No Surprises Act and conduct further investigation and research, and, most importantly, vowed to “[d]etermine whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether.”

A mere 17 days later, Equifax, Experian, and TransUnion (the “NCRAs”) announced they would change how medical debt will be reported on credit reports commencing on July 1, 2022. Three changes were announced:

• Any paid medical collection debt will no longer appear on a consumer’s credit report;
• The NCRAs will extend the period before an unpaid medical debt can be reported from the current period of six months to one year; and
• In the first half of 2023, the NCRAs will no longer include medical collection debt under $500 on credit reports.

The NCRAs claim the changes in reporting will eliminate almost 70% of medical collection debt records from credit reports.

The CFPB’s report and the response by the NCRAs give rise to many questions. Will the CFPB still bar the reporting of medical debt on credit reports altogether? We believe it likely for the simple reason that debt above the CFPBs’ $500 threshold still gives rise to all the issues cited by the CFPB in announcing its intended action.

And what unintended consequences may arise? Will the elimination of the threat of reporting lead to increased delinquency in everyday point of purchase cost sharing (deductibles, copayments, coinsurance)? Why pay a $100 copay if there is no risk in the impairment of a credit report since the debt could always be paid later if it is sent to collection? If delinquencies do increase, will that in turn cause providers to raise prices – to shift the burden to those who do pay? Will lesser non-payment risk reduce participation in Health Savings Accounts and other savings in anticipation of out of pocket costs? One thing that does appear certain, is that the ever changing health care landscape does little, if anything, to reduce cost.

[1] A link to the report, in PDF format, can be found at: https://www.consumerfinance.gov/about-us/newsroom/cfpb-estimates-88-billion-in-medical-bills-on-credit-reports/.