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In a move signaling its intention to ease the burden of medical debt, Biden White House did just that. he said will instruct the Ministry of Health and Human Services to evaluate the provider’s billing practices and how they take into account the affordability of health care and debt accumulation.
HHS will request data from more than 2,000 providers on medical bill collection practices, patient litigation, financial assistance, financial product offerings, and third-party contract or debt market practices.
The department, for the first time, will weigh this information in its grant decisions, publish data and policy proposals to the public, and share potential breaches with law enforcement.
Separately, the Office of Consumer Financial Protection will investigate credit reporting companies and debt collectors that violate the rights of patients and their families and hold offenders accountable. The CFPB has already issued a bulletin to prevent the illegal collection and reporting of medical debts.
The CFPB will target compulsory credit reporting and determine if unpaid medical billing data should be included in credit reports.
The goal in all of this is to eliminate medical debt as a credit card agent whenever possible.
“Medical debt is not a credible indicator of credit quality and its impact should be reduced or eliminated to allow more American families to thrive,” the government wrote on its website on Monday.
WHAT IS THE IMPACT?
One in three adults in the US has medical debt, according to Inventory data. It is now the largest source of debt in arrears – more than credit cards, utilities and car loans combined. Black and Hispanic households are more likely to have medical debt than white households.
Medical debt is not just a financial issue – it can also have a detrimental effect on health. A study found that almost half of people with medical debt deliberately avoided seeking care.
Americans with medical debt can apply for USDA rural housing loans without fear that their medical debt could prevent them from getting a mortgage. This week, the USDA announced it would discontinue any recurring medical debt in borrowers’ repayment calculations that measure a borrower’s ability to repay their home ownership plans – more than $ 20 billion in lending activity.
The Department of Veterans Affairs has also taken steps to secure credit reporting and sponsorship of medical debt, including finalizing a rule for effectively ending medical debt reporting for veterans with VA Care accounts. The VA will also review sponsorship guidelines to ensure that it minimizes or eliminates medical debt reporting as a power of attorney, where possible.
Small Business Administration, meanwhile, is committed to ensuring access to credit and accurate credit reporting and sponsorship. The SBA will work with colleagues and associates to reduce the financial burden of medical debt on families and review SBA lending programs to identify ways to reduce the negative impact of medical debt on small business access to capital.
And the Federal Housing Finance Agency is reviewing the credit models used by Fannie Mae and Freddie Mac and looking for ways to ensure creditworthiness measures are accurate, reliable and predictable, the administration said.
The CFPB said it would strengthen consumer education tools aimed at helping families navigate the complex, which often confuses the medical billing landscape, including more materials designed specifically to help patients access financial assistance. .
THE BIGGEST TREND
New research from American Enterprise Institute found that medical debt is not a reliable predictor of overall financial health. And one analysis of 5 million anonymous credit records found that consumers who owed medical debts paid their bills at the same rate as those who did not. In fact, including paying off medical debt causes credit scores underestimate credit capacity up to 22 units.
As a result, the inclusion of medical debt in credit reports and credit scores and borrowing can deprive Americans of financial opportunities, while not improving the accuracy and predictability of lending programs.
The private sector has taken some steps to address this problem. Last month, the three largest credit reporting companies – Equifax, Experian and Transunion – announced that they would no longer include certain forms of medical debt in their credit reports, removing billions of dollars in debt from consumer reports. This change covers borrowers with already paid debts, unpaid debts less than one year old and debts that have been paid or have not been paid less than $ 500.
However, this change leaves out one-third of Americans with medical debt in excess of $ 500. For example, 11 million Americans’s medical debt of more than $ 2,000 and 3 million Americans owe more than $ 10,000.