What the White House's actions on medical debt could mean for consumers

Vice President Harris this week announced the federal government is taking several new measures to help people affected by medical debt.

Joined by Cabinet members and other federal officials at the White House, Harris spoke about the stress and fear of medical debt.

So many people have been "rushed to the hospital because their appendix burst or because they took a nasty fall and who are still paying off the bill years later," Harris said in remarks at the White House.

"Parents who have sat in a hospital parking lot, afraid to bring their child through those sliding glass doors of the emergency room because they knew if they walk through those sliding glass doors, they may be out thousands of dollars that they don't have."

The administration's new actions could help ease the burden of medical debts that Americans already have — they do less to prevent Americans from being saddled with high medical bills they can't pay in the first place, says Jenifer Bosco, a staff attorney at the National Consumer Law Center, a nonprofit organization that advocates for economic security for low income people.

Bosco's organization has been working to fight "abusive and aggressive" medical debt collection for some time. NPR asked Bosco for her perspective on the actions announced by the White House, and to explain how they might help and what's still missing.

This interview has been edited for length and clarity

What was your reaction to the White House's medical debt announcement and what parts do you think will be helpful to consumers with debt?

I was really pleased to see this announcement and to see the other recent steps that the administration has taken. I think they've been pretty creative in figuring out what can be done with the executive branch power to really help consumers.

It's been great to see that the CFPB, the Consumer Financial Protection Bureau, has really stepped up and has been focusing on medical debt quite a bit. And they just released a report earlier this year about medical debt that found that there's about $88 billion of medical debt on credit reports in this country, and that the burden falls more heavily on Black households and Latino households.

One of the things that can really help consumers here is the changes to the rules around reporting of medical debt, and then also the announcement from the three major credit bureaus that they're going to drastically reduce how much medical debt goes on credit reports.

When medical debt shows up on credit reports and credit scores, it hasn't been shown to be predictive of how creditworthy people are because it's not like a regular purchase, it's a different entity. Sometimes that's even a collection strategy — debt collectors know that people want to clear this off of their credit reports and [so they] will pay it to resolve the medical debt.

So I think it's great news that most consumers who have medical debt won't be penalized by having this appear in their credit report.

Of course, just because it doesn't appear on your credit report, it doesn't mean you don't owe the debt. There's still the issue of consumers being able to afford to pay for health care. So it won't eliminate medical debt, but it will eliminate some of the consequences associated with it.

Can you walk us through some of the big highlights from this week's announcement?

First, the CFPB had issued a bulletin to debt collectors and credit reporting agencies about the new protections against surprise billing — the No Surprises Act — reminding credit reporting agencies and debt collectors that they have to be very, very careful to make sure that they're not trying to collect debts that are prohibited by the No Surprises Act.

Veterans Affairs announced a plan to simplify medical debt forgiveness — those details haven't been worked out yet. The VA also announced that it has made changes about how it's going to report clinical debt for credit reporting purposes in the future.

The Department of Health and Human Services announced that they are going to aggressively enforce the No Surprises Act, which will protect consumers from many kinds of surprise billing. It doesn't capture every kind of surprise billing. For instance, [it] doesn't have any protections that apply to ground ambulance services, but overall, it's a great development.

One other announcement that was really encouraging to see was that the [Federal Housing Finance Agency] announced that it's looking at the credit models that Fannie Mae and Freddie Mac use for lending and that medical debt won't be counted against consumers in the way it had been in the past.

Your organization has worked on the issue of debt and veterans before — can you explain more about what happened on that front?

We've been advocating with the administration to take a look at how much medical debt is actually held by the federal government. Are there ways that that can be forgiven? And so we're very pleased to see that the VA is taking some steps to do that.

The Veterans [Health] Administration announced that it's going to stop reporting about 90% of the medical debt that they had previously been reporting. They're committing to do that and also to streamline the process that people can use to have their medical debts forgiven. There is an administrative process to do that for people who are struggling with VA medical debt, but it's been very cumbersome and it's not clear how to access it.

It's great to see that the federal government is going to take those steps to say: this is an area where we can help people who have medical debt and forgive it in certain circumstances.

The government also announced it's gathering and publicizing data on providers with aggressive billing practices. I understand that data is really hard to come by right now?

We don't really have a good look nationally at what's going on. How many people are facing debt collection lawsuits, wage garnishments, liens on their homes because of medical debt? We don't know which hospitals necessarily are contracting with debt collectors or selling debt or authorizing the use of these aggressive collection actions.

I think it's great that HHS will start to require that level of reporting and to see really what the hospitals and debt collectors are doing. It can help give us a better picture of what consumers are experiencing and figure out how to address some of the worst aspects of this problem.

Often people who are sued for medical debt or have their wages garnished – it's not that they don't want to pay their medical debts, they're just unable to pay. And in many cases, they are patients who should have been eligible for financial assistance or some other kind of financial help, possibly Medicaid, and instead they end up facing a lawsuit. This could help get at that problem of: How good of a job are we doing of screening patients who are lower income to figure out what other resources are out there to help them afford their medical expenses?

It's also important to try to get a picture of what these debt collections mean to the hospital's bottom line, because from the few states where there have been reports ... it's not something where the hospital can balance its budget on the 0.2% that they collect from wage garnishments and debt collection lawsuits. So I think it'll be important to get that information as well.

Beyond these new announcements, what other policy changes could make a bigger dent in the problem of medical debt?

You can put lots and lots of debt collection protections in place for consumers, which will help once the medical debt is accrued. But I think we also really need to look at: What can we do so that the medical debt doesn't accrue in the first place?

Although it's not a typical consumer law issue, I think expanding Medicaid in the states that have not yet expanded Medicaid would be just enormously helpful to the residents in those states, where there tend to be higher levels of medical debt. And those are also states concentrated in the Southeast — states with higher Black populations than a lot of the states that have expanded Medicaid — so it just continues to exacerbate the racial disparities in that area.

Under the Affordable Care Act, there's a requirement that nonprofit hospitals provide financial assistance to low income patients. That's enforced by the IRS, but it's been a challenge to get a grip on the problem. And we've heard that there are lots of hospitals that may have a financial assistance policy on the books, but don't do a good job of letting patients know that this is an option.

That's another way to get at the core of the problem: Identify patients who just aren't going to be able to pay and instead of chasing them for years for medical debts that really are unaffordable, [ask] what can we do instead to help these people?

There are other actions that could be taken. CFPB is looking at whether medical debt should be included at all on credit reports. There also could be some stronger protections against debt collection for certain kinds of debt, like one that had appeared in some legislation related to COVID-19 treatment. Should there be special rules in place to prevent aggressive collection actions for COVID-19 related debt? Or should there be a prohibition on selling debt to debt buyers if it's medical debt?

Ultimately, I think the problem of medical debt isn't going to go away unless at some point in our country's future, we adopt some sort of single payer or Medicare-for-All system. But I think that's very much a blue sky idea at this point.

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