Americans struggle with $88 billion in unpaid medical debt: survey

Americans have over $88 billion in unpaid medical debt, and most have experienced financial setbacks because of it, a recent survey said.

Over half (57%) of American patients have been unable to pay a medical bill on time or in full, and nearly 40% have been struggling to pay off their medical debt within the past five years, according to a Tebra survey. Ninety percent said that overdue medical debt on their credit reports has likely hindered their access to credit, loans, and housing. 

This ballooning unpaid debt is comes as President Joe Biden recently announced plans for Federal rules that would keep unpaid medical bills off patients' credit reports. Seventy-eight percent of respondents to Tebra's survey supported the initiative to remove medical debt records from credit reports.

The Consumer Financial Protection Bureau (CFPB) will be in charge of developing the new rules. If finalized, the proposal would prohibit consumer credit reporting companies from considering medical debt in credit reports. The proposal would end creditors' ability to include medical bills to stop coercive collection practices.

"The strong support for the CFPB's proposed medical debt credit reporting change shows a nation desiring a more compassionate approach to unpredictable debts, where patients are not penalized for unforeseen or overwhelming healthcare expenses," Tebra said in a statement. "As the CFPB considers this vital shift in policy, it is imperative to recognize the potential relief it could offer countless individuals."

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New York Governor Kathy Hochul signed a bill this month that prohibits credit reporting agencies like Equifax, Experian and TransUnion from factoring in medical debt in consumers' credit reports. Colorado also excludes medical debt from credit scores, except in certain circumstances.

Last March, the three major credit bureaus – Experian, Equifax and TransUnion – began scrubbing medical debt under $500 from credit reports. VantageScore, an entity owned by the conglomerates, has stopped using medical debt in its scores entirely. Newer FICO score models also give less weight to medical debt reporting.

"Large credit scoring companies are moving to models that completely or partially exclude medical bills, though many creditors still rely on older models that haven't made that shift," CFPB Director Rohit Chopra said in a statement. 

However, after a year, medical debt in collection over $500 will continue to show up on credit reports, and large, unpaid medical bills in collections can still damage your credit score.

Roughly 15.4% of Americans who have a credit bureau report had medical debt in collections as of February 2022, according to a recent report from HelpAdvisor.com. In some regions of the U.S., the rate of people with medical debt in collections is upwards of 40%.

If you are struggling financially, you could consider paying down your debt with a personal loan. Doing so can help you consolidate your payments at a lower interest rate, saving you money over time. You can visit Credible to find your personalized rate without affecting your credit score.

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Four out of 10 respondents say they've experienced an increase in healthcare costs, according to a recent AccessOne survey. As prices rose, 48% of Americans said they had taken some action to reduce medical expenses, including postponing care.

Beyond delaying care, 40% of respondents have opted not to fill or wait to fill a prescription, 10% have dipped into personal savings to pay for healthcare-related expenses, and 32% have used a credit card to pay their bills.

"While Congress passed the No Surprises Act, which led the top three credit bureaus to agree to drop most medical debt from consumers’ credit reports, the use of personal credit cards for healthcare expenditures doesn’t count as ‘medical debt,’" AccessOne said. "Any charges incurred by the credit card holder — such as penalties for late payments — can be subject to interest. Late payments or missed payments to the credit card affect one’s credit rating."

If you have accumulated debt, you could consider using a personal loan to help you pay it down at a lower interest rate. You can visit Credible to compare multiple personal loan lenders at once and get prequalified in minutes.

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