Government Officials Push to Remove Medical Debt From Credit Scores

October 05, 2012

Government Officials Push to Remove Medical Debt From Credit Scores

Medical debt not only brings down a credit score when unpaid, it can continue to hurt one's credit even after the account is settled. The account may be settled in a variety of ways, through payment or various debt relief options, but the fact that the debt existed can continue to impact one's credit score years later.

A number of senators are pushing the Consumer Financial Protection Bureau (CFPB) to change this practice by calling for credit bureaus to update how they compute credit score calculations.

The legislators argue that medical debt is unique. Credit card debt, automobile or housing debt all relate to a consumer's ability to make payments. Medical debt, on the other hand, often results from a failure to communicate. Many consumers find their credit scores negatively impacted by medical debts they didn't even know existed. This lack of information can result in a devastating blow to one's credit score.

The New York Times recently ran a piece outlining one such story. The article gave an account of an emergency room visit for a young child who ran his bicycle into a tree. The parents were assured by their health insurance company that the $200 ambulance fee was covered, but the insurance provider never paid the bill.

After many months passed, the father paid the bill himself. Unfortunately, though, the debt had already been reported to the credit bureaus and was included in their credit score calculation. Not only did the bill negatively impact their credit score when it was unpaid, it continued to bring their score down even after the account was settled. In fact, the late bill resulted in almost 100 points of deduction on their credit score six years after the bill was paid.

Unfortunately, this situation is not uncommon. It is often difficult for those with medical bills to determine what is and is not covered by insurance. By the time an insurance holder is aware that a bill has not been paid, it may already have been sent to collections.

Legislators Push for Change

Many senators argue that those who settle their medical debts should receive a clean slate for their credit score. In a push for change, they are taking this complaint to the next level.

In March 2012, a group of senators proposed a bill that would officially require medical debts to be excluded from consumer credit reports. The bill, called the Medical Debt Responsibility Act of 2012, focuses specifically on medical debt that was sent to collection but has since been paid or settled.

The senators in support of the bill argue it should be passed because of the unique nature of medical debt. Medical bills often result from necessary care and medical debt is more likely to be disputed due to inconsistent reporting by hospital billing agencies or questions about the actual price of the services received.

In addition, medical bills are often surrounded by confusion. Hospitals, health care providers and insurance companies often take months to determine what is covered and what the final cost of care to the patient is. At times, as highlighted in the New York Times story, insurance companies are not able to make the payment before the bill is sent to collections.

Whether or not the bill is passed, it is important to try to manage and reduce any forms of debt that may be negatively impacting your credit score -- including medical debt. There are many options available, ranging from negotiating with creditors to bankruptcy relief. If you or a loved one is struggling with medical debt, it is important to contact an experienced debt relief attorney to discuss your legal options.

Article provided by Peoples Law Group
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