Medical debt relief could help millions of Americans if President Trump allows it – Nonprofit News

“While I was in the hospital, I was wondering how I was going to come up with the money and pay the incoming medical bills while staying home with a medically complex child.”

This is how Mallory Rose described her first weeks with her newborn daughter. After several hospitalizations, her daughter was finally diagnosed with a serious infection known as staphylococcal scalded skin syndrome. In an interview with People magazine, Rose posted a video of herself holding her 6-week-old daughter on TikTok in hopes of monetizing the video to help reduce her $31,000 medical bill. admitted that.

Although her monetization idea didn’t work out because of the ever-changing rules for making money with a TikTok account, Rose’s videos helped many well-intentioned people and those with similar high medical costs. The story reached thousands of viewers.

Such bills can have a dramatic impact on a family’s credit ranking, which can have serious ramifications for housing stability and general financial well-being. Approximately 1 in 5 American families is burdened with medical debt, which causes millions of people to suffer from poor credit scores.

In early January, President Biden announced sweeping changes to remove medical debt from credit reports. As MSNBC reported, “The new rules are a win for consumers and a small but important step toward correcting this country’s backward thinking about health care.”

Medical debt is fundamentally different from other types of debt that appear on your credit report.

With President Trump entering office for the second time just weeks after the Biden administration’s announcement, will the rule excluding medical debt from credit scores survive?

Byproduct of a broken system

According to MSNBC, “The purpose of a credit report is to summarize an individual’s ‘credit worthiness’ and assign a score based on characteristics such as credit accounts and loan repayment status and history.” In this regard, medical debt It doesn’t show up on your credit report for multiple reasons. Medical debt collections often result from unexpected charges by out-of-network medical providers or facilities, so-called “surprise medical bills.”

A complex and frustrating healthcare experience that is out of the patient’s control can result in surprising healthcare costs. For example, an anesthesiologist at an in-network hospital where a patient’s surgery is performed may be out-of-network. Or, a patient may be tested at an in-network laboratory, but there may not be a physician in-network to read the results.

Medical debt is fundamentally different from other types of debt that appear on your credit report. MSNBC wrote: “This does not reflect how someone wants to spend their money, but rather the decision to seek care or endure pain and potentially life-threatening hardship. Medical debt stems from our broken health insurance system, which leaves tens of millions of people uninsured and remains expensive even for those with ostensibly “good” insurance. costs continue to accrue. ”

Medical debt is also often incorrect. The Consumer Financial Protection Bureau (CFPB), the independent government agency that proposed the new rule, said, “Consumers may receive inaccurate bills or miss payments on bills that should be covered by insurance or financial assistance programs.” “I frequently report what I am asked to do.”

If medical debt were removed from credit reports, about 15 million Americans would see their credit scores rise by an average of 20 points, making it easier for them to get a loan and own a home. The rule, finalized by the CFPB on January 7, prohibits the use of medical information in lending decisions, strengthens privacy protections and limits the power of debt collectors.

Industry reaction

Shortly after the rule was finalized, several industry groups had already filed two lawsuits against the rule. Both complaints were filed in Texas. One, filed in the U.S. District Court for the Southern District of Texas, by ACA International, which represents debt collectors, argues that the CFPB is going too far with the rule. As reported by CNN, “Americans are frustrated with the cost of health care. But frustration does not justify illegal activity,” the complaint states. He also described the CFPB as a “federal agency with no medical experience.”

Meanwhile, the Consumer Data Industry Association, which represents credit reporting companies such as TransUnion, Experian, and Equifax, filed a complaint in the U.S. District Court for the Eastern District of Texas. “Consumer debt is important to insurance underwriting, and eliminating consideration of medical debt would undermine the value of consumer credit reports,” their complaint states.

The rule is scheduled to become effective 60 days after publication in the Federal Register. As CNN reported, “Congress has only a limited amount of time to review and cancel the final rule, which typically occurs when a new president takes office.”

Many people postpone treatment and care due to fear of cost.

Timelines are tight. The rule was originally proposed in June, but according to NPR, “By finalizing this rule now, the CFPB is effectively giving the incoming Trump administration and its Republican allies in Congress a wide-reaching… It emboldens us to roll back rules that could help millions of people burdened by medical debt.” ”

The legal challenge by industry groups appears to be a tactic to block the rule without antagonizing the Trump administration. Jarrett Seiburg, a financial services analyst at TD Cowen Washington Research Group and supporter of repealing the rule, told CNN that the Texas lawsuit “makes it difficult for the Trump campaign and the Republican Congress to both deny voters access to health care.” “The political risk is reduced because it will not be seen as supporting the inclusion of debt.” on your credit report. ”

popular rules

This rule is already very popular among Americans, about 14 percent of whom have medical debt. According to a White House press release, removing this debt from credit reports would result in approximately 22,000 new mortgages being approved each year. The press release also states that “under the CFPB’s rules, no Americans will have medical debt on their credit reports, down from 46 million in 2020.”

That could mean a better future for families like Mallory Rose, who has yet to receive a hospital bill for her infant’s illness.

“We are working with the insurance company to ask all the relevant questions about coverage and review billing statements, but the questions keep coming,” Rose said.

This avalanche of confusing and often contradictory bills is a common experience for people in the United States, with many delaying treatment and care out of fear of cost. According to a KFF survey, one in four adults struggle to pay their medical bills and report that they skip or delay medical care because of cost.

This was unacceptable to CFPB Director Rohit Chopra, who said when finalizing the rule that “no one who gets sick should have their financial future ruined.”

For more information on this topic, see:

Nonprofit hospital pursues aggressive medical debt collection
Eliminating medical debt: An open-ended approach