The Medical Debt Crisis Isn’t Going Away… Deal With It

It’s no secret that medical bills in collection can ruin your credit. In  fact, it may lower a score by “100 points or more” for someone with a spotless  credit history, according to FICO. As tens of millions of Americans are  paying off medical bills over time, the potential for damaged credit is  great. Many government agencies are beginning to take notice of this  problem. Unfortunately, the consumer credit reporting industry is fighting these  efforts for consumer protection every step of the way.

Just last month, the Center for Public Integrity released a report — Cracking  the Codes — scrutinizing the use of electronic health records by doctors and  hospitals.  They documented improper billing of Medicare for more  complex and costly services than delivered.  Following this report, HHS  Secretary   noted “troubling indications” that some providers were billing for  services never provided and vowed to prosecute.  How many bills related to  these procedures hit consumer credit reports?

Earlier this summer four United States Senators asked the Consumer Financial  Protection Bureau (CFPB) to investigate the issue of medical collections. By  late August the CFPB responded, saying they had begun a review of “the  treatment of medical debt in both the debt collection and credit reporting  industries.” Their investigation is welcome news for the estimated one in four  Americans living in families where at least one family member is paying off  medical bills over time.

The CFPB is not the only federal body looking into the problem of medical  debt. In September, the Subcommittee on Financial Institutions and Consumer  Credit of the U.S. House of Representatives Committee on Financial Services held  a hearing entitled “Examining the Uses of Consumer Credit Data.”  The  topic of medical debt was prominently featured in the hearing.

While witnesses acknowledged the prevalence of errors in medical billing,  only one felt that it would be inappropriate to correct these errors by  suppressing them from credit reports once fully paid or settled.

Rather than acknowledge these errors, a representative of the consumer data  industry (which includes the credit reporting industry) chose to gloss over the  problems by raising the equivalent of the “Twinkie Defense.” In defense of the industry, the  representative cited the 2.4 million consumers who had undergone Botox  injections in 2010 and consumers who are making choices for elective procedures  and surgeries (noting procedures such as liposuction, cosmetic eyelid surgery,  facelifts, forehead lifts, lip augmentation, nose surgery, tummy tucks, laser  hair removal), arguing that they shouldn’t get special treatment.  Taking a  hard line, he said that “these choices are no different than making a purchase  in a retail store and the debts should not be deleted.”

Get real, this isn’t about Botox, it’s about cancer treatment, care of  chronic disease, and emergencies like a burst appendix.  And to make  matters worse, these illnesses are often followed by a pile of confusing  bills.  It is stunning that the consumer data industry simply cannot face  the fact that much of the medical payment data included on consumer credit  reports is erroneous.

During this election season, it’s reassuring that elected officials from both  parties can work together to call attention to a problem plaguing millions of  Americans.  It is also comforting to know that the CFPB is taking notice of  underlying factors that destabilize hardworking families; factors like medical  collections.  In the words of CFPB Director Richard Cordray, “Consumers who  have medical collection reported on their credit file face real-world  consequences, they can face a harder time getting a loan approved or even  getting a job.”

Hopefully, this federal attention will result in action that requires the  removal of medical accounts from credit reports.  One legislative proposal  currently enjoying rare bipartisan support is the Medical Debt Responsibility Act. It would require the  removal of medical collections within 45 days of being fully paid or  settled.

Given that the CFPB just initiated its investigation, it is not yet clear  what they might propose.  But one thing is clear, the need for the consumer  data industry to stop stonewalling efforts to address the unfair practice of  penalizing people who’ve had medical bills sent to collection. Hiding behind the  “Botox Defense” is an insult to the millions of Americans who are now paying the  price because of medical collections.

Mark Rukavina

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