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Medical debt is a problem in need of a smart solution

Written by Diane Archer

Most people with medical debts reflected on their credit reports show no signs of financial distress or inability to pay financial obligations, according to the Consumer Financial Protection Bureau (CFPB).  Yet, these debts are treated like all other debts when they are looking for credit. What is to be done?

According to the CFPB, people incur “medical debts in collections without certainty about what they owe, to whom, when, or for what.” If they understood the charges and believed they were responsible for them, they would pay them. Instead, while they search for clarity, they can jeopardize their credit.

Unlike other bills, the costs for medical services are often not clear until after the services are provided. Health care needs may arise as patients are receiving treatment. Prices tend not to be transparent. And, it is often hard to know who is responsible for the charges on the medical bill.

Many people who complain to the CFPB about medical debt believe that they have paid their bills or cannot verify that a charge is accurate. Because people often receive multiple bills for the same illness or complication and insurers are expected to pay most of the cost, their medical debts can as easily be a product of confusion, erroneous billing or insurer failure to pay than lack of financial wherewithal. States currently all set different rules as to when medical bills can go into collection, which can hurt consumers with complex or confusing bills.

The CFPB argues that people with only medical debts in collection differ from people with non-medical debts in collection in that they tend to owe less and to meet other financial responsibilities in a timely way. Standardization of rules as to when medical bills go into collection would bring more “accuracy, integrity and consistency” to the system.  They might help ensure better predictability of how an individual would meet other financial obligations. IRS rules that would standardize hospital collection practices have been proposed at the federal level.

Today, almost one third of credit reports in this country (31.6 percent) reveal that an individual has a debt in collection. More than half the time (52.1 percent), debts on credit reports are medical in nature.  All in, almost one in five Americans with credit (19.5 percent) is reported to owe money to a medical provider. Of note, the amount people owe to medical providers averages $579, far less than many other providers.


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