Medical Debt Collection
A strong rule from the Consumer Financial Protection Bureau (CFPB) is needed to protect
consumers from abusive debt collection tactics, especially those carried out by collectors of
medical debt―the leading source of debt borne by most consumers.
Medical debt is the
top reason
consumers are
contacted by debt
collectors. According to
the CFPB, 59% of
consumers contacted
about a debt reported
receiving calls and letters
regarding a medical debt
in collections. Many
consumers were
contacted about more
than one type of debt.
More Americans fear medical debt than serious illness. A survey by the West Health
Institute and NORC at the University of Chicago found that 4 in 10 respondents fear the costs
associated with a serious illness, more than those who say they fear a serious illness itself.
Medical debt collection blemishes the credit reports of one in five consumers.
A separate CFPB study found that 19% of adults have one or more collections tradelines
originating from a medical service provider on their credit report. Medical debts accounted for
52% of all collection items on consumers’ credit reports.
Medical debt is a leading cause of U.S. bankruptcies. In a survey of randomly sampled
bankruptcy filers from 2013-2016 published in the American Journal of Public Health, 59% of
respondents very much agreed or somewhat agreed that medical debt was a contributor to their
bankruptcy. In 2013, NerdWallet Health estimated medical debt was the biggest cause of
bankruptcies―ahead of credit card bills and unpaid mortgages.
Two-thirds of consumers with medical debt have
health insurance. The Kaiser Family Health/New York
Times Medical Bills Survey found that in 2015, 62% of
consumers with medical debt had health insurance at the
time of their first treatment and an additional 13% of
indebted consumers obtained insurance at some point
during their treatment. Among those who remained
uninsured throughout treatment, many tried to get
coverage through Medicaid, the health insurance
marketplace, or private insurance companies and were
told they were ineligible or were priced out of coverage.
Medical debt will likely worsen as uninsured rates climb. Since 2016, the uninsured
rate has climbed from 11% to 14%, a net increase of about seven million adults.
Medical debt can cut patients off from the healthcare services they need. In 2015,
three in ten consumers facing problems paying medical bills reported avoiding healthcare
services as a result of their debts while 62% of survey respondents reported relying on home
remedies and over-the-counter drugs rather than seeing a doctor. 43% of respondents said they
passed on medical tests and treatments recommended to them while one in three cut
medications in half and skipped doses.
Families struggle to pay medical bills. According to a Kaiser Family Health/New York
Times Medical Bills Survey, roughly 25% of Americans ages 18-64 reported having problems
paying medical bills in 2015. 70% of individuals with medical debt reported cutting back
spending on food, clothing, and basic necessities to try to manage debts in collections. More
than half reported using up some or all of their savings to meet their obligations.
Medical debt disproportionately impacts
communities of color. An Urban Institute study found
that 21% of consumers living in predominately non-White
zip codes had a medical debt in collections compared
to just 16% of consumers living in predominately White
zip codes.
The financial well-being of elders is impacted by medical debt. In a 2015 National
Council on Aging survey, older adult advocates indicated that medical debt is the most
significant barrier to economic well-being for more than half of their clients. More than 85% of
survey respondents said their older clients frequently encounter medical debt they feel is
unmanageable or that significantly impacts their financial security.
Millennials are more likely to carry medical debt than
older consumers. A 2016 study published in Health Affairs
found that among all people with at least one medical bill in
collections, 11% were 27 years old, the largest share observed.
That’s one year after young adults lose eligibility for a parent’s
health insurance coverage under the Affordable Care Act.
The CFPB should protect consumers with medical debt from abusive
debt collection practices by:
Requiring collectors and health care providers to wait 180 days
after issuing a bill before reporting a debt to a credit reporting
agency.
Preventing unpaid medical bills from harming patients’ credit
reports and scores if the unpaid bills are due to billing errors or
insurance disputes.
Requiring collectors to provide a warning notice before placing
negative information about a medical bill on a patient’s credit
report.
Prohibiting collection of medical debt from low-income patients
eligible for financial assistance or based on inflated
“chargemaster” prices that are several times what private and
government insurers pay.
