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Congress takes on medical debt

By Janna Herron · Bankrate.com
Monday, June 27, 2011
Posted: 2 pm ET

Earlier this year, I took a six-block ride in an ambulance to the emergency room, where I was treated for a tremendously painful herniated disc. My back is better, thank you for asking, but my credit is not.

A pesky $37.50 bill to cover that ER trip got paid too late and still scars my credit score.

That is, unless Congress passes a bill that would require the credit bureaus to remove paid or settled medical debt up to $2,500 from Americans' credit reports within 45 days. While medical debt isn't typically reported unless the account has been turned over to collections, it can live on your credit history for up to seven years.

Supporters of the proposed legislation say the change would clear up credit problems for many Americans who have suffered an illness or accident for which they were financially unprepared. It would also remove data that many consumer advocates say is prone to errors, is often disputed and is a poor predictor of credit risk.

"This is a good bill," says Howard Dvorkin, founder of Consolidated Credit Counseling Services Inc.  "Because it's so confusing for even trained professionals to figure out what's covered by insurance and what's not. And by the time you find out what is covered, the bill is at the collections agency."

A 2003 Federal Reserve study found that more than half of all accounts reported by collection agencies consisted of medical debt. Meanwhile, 72 million people said they had problems paying their medical bills or had accrued medical debt in 2007, according to a survey by The Commonwealth Fund.

The Consumer Data Industry Association, which represents credit reporting agencies, worries lenders could make less sound lending decisions if medical debt is omitted in credit reports. That, in turn, could lead to higher interest rates for consumers. The industry group also points out that many lenders do not consider any medical debt information in their underwriting.

This isn't the first time Congress has considered regulating how medical debt is reported. In the past two years, similar legislation has been proposed, but each time there wasn't enough backing.

For me, the bill would erase an afternoon of dumb luck. I left the payment on the checkout counter at a drug store. A nice man there said over the phone he'd mail it, but never did. Next thing I know, it's at collections and I'm a two-bit credit risk.

But more important, the bill could help many Americans cope with a medical catastrophe that morphed into a financial one -- making recovery less painful.

Do you think paid or settled medical debt should be quickly expunged from credit reports?

Twitter: @jannaherron

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9 Comments
Michael
July 28, 2011 at 7:43 am

I am definitely in favor of this. My partner got out of the hospital after a week-long stay, an ER trip, and a lot of medication and tests. He waited for statements (showing how much went to insurance versus how much he owed) that never came. He called; they said the statements were being processed. Then he started receiving collections notices. He had to retain the services of an attorney to force the hospital to withdraw it from the collection agency, submit it to insurance (which was never done, despite my having given them his insurance card), and wait for a statement.

Vicki Baker
July 26, 2011 at 8:17 pm

You don't get to find out your share of the cost of service until at least 45 days usually. If they've made a mistake, it takes one or two billing cycles to get it corrected. While it is being reviewed or changed, you are told not to pay it, yet some companies will still send it to collections. I paid the collection agency so it wouldn't go on my credit report, but the insurance paid the doctor instead of the agency. Now, the collection agency was still owed the insurance part but they didn't tell me or bill me. I thought it was paid, and it wasn't. It wasn't until I ran my credit report 2 years later that I found out they were reporting a balance still due. They told me agencies don't send a second bill. To remove it from my credit report, I paid the collection agency the insurer's portion to end the problem. By now, it's over 2 years old and I can't get reimbursed for it. Yes, it should be solved before it is sent to the collection agency, and the agency shouldn't be able to report it if they've been notified of an error or a pending change. They definitely shouldn't be able to report it if it's been paid, or the same period they gave me to fix it.

swampwiz
July 26, 2011 at 5:14 pm

How about we institute a universal heath care plan that covers everyone, funded in part by confiscatory taxes on the wealthy?

Ezra5
July 23, 2011 at 3:40 am

This is a nice law.... The timing for it's come uppance is off... We have some major political shin kicking going on today over raising the debt ceiling... Our childish elected officials are playing this game to hide all the nasty rules and regs they are putting together and passing behind their cloak of disagreement on how to handle the debt ceiling... And when I read that Boehmer and Obama are putting the final touches on a debt reduction bill I ask myself is this how a republican democracy works? Two elected officials deciding how to run our country? It's absurd and another way our government uses these tactics to hide what is really going on.. That is the purchase of America by special interest groups... Read and vote.. Earn your freedom... It is being taken away in broad strokes today.. Read and vote...

Marinealver
July 14, 2011 at 1:31 am

Only $40.00, heck I have a sister who was hospatalised for almost a week and got a $80,000.00 hospital bill. How about that for a medical debt. (I still don't think it is going to get paid as no one in my entire extended family could possibly come up with that much money.)

stephen
July 10, 2011 at 5:56 pm

"A pesky $37.50 bill to cover that ER trip got paid too late and still scars my credit score"

At the core of your story is your failure to accept that it was your personal lack of responsibility as the cause of your problems. The reason your bill went unpaid and you went to collections is no one else's fault other than your own. Calling an invoice/bill "pesky" your lack of concern over confirming that it went paid, after you admittedly left it somewhere and depended upon someone else to mail it isn't dumb luck, its just flat out dumb. Also, how many days late was your payment before you actually decided to pay the invoice? There may be a problem with the system with regards to credit reporting, however your story does little to support the need for change. Glad to hear your back is better.

veldie
July 02, 2011 at 4:40 pm

I would say don't get sick and stay healthy all your life. That would probably eliminate the need for the medical BS.

Joe Dunfee
June 29, 2011 at 7:18 pm

A Doctor bill went unpaid because the Doctor's office had an incorrect member number. Their billing office would not return my phone calls for some reason, and ignored messages I left with my correct member number. Note that by Florida law, an HMO cannot bill the patient if there is a problem like this. But, it took a year to get this paid, and the problem remained on my credit report for over 2 years.

This law is needed, and it needs to be actually enforced.