Biden Admin Announces Plans to Alleviate Medical Debt Burden

The Biden-Harris administration has announced a series of reforms that aim to alleviate medical debt burden and increase consumer protections for Americans.

One in three adults across the country has medical debt, which can lead to several financial and health challenges. Individuals may avoid seeking healthcare services for fear of furthering their debt.

Past-due medical bills may also appear on consumer credit reports, which can lower consumer credit scores and make it difficult for individuals to access credit, employment opportunities, and secure housing.

The Biden administration’s plan to address the burden of medical debt includes a directive from HHS Secretary Becerra on medical billing practices. Becerra will direct HHS to evaluate how provider billing practices affect care access and affordability, the announcement stated.

HHS will request data from more than 2,000 providers that detail medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and third-party contracting or debt buying practices.

The Department will consider this information and publicly publish data and policy recommendations regarding medical bill collection practices. In addition, HHS will inform enforcement agencies of potential violations.

The Consumer Financial Protection Bureau (CFPB) also plans to investigate credit reporting companies and debt collectors that violate patient rights and hold the violators accountable. In addition, CFPB will monitor credit reporting and determine if credit reports should include past-due medical bills.

CFPB will also increase its consumer education tools to help individuals and families better understand medical billing processes, including materials and resources specifically designed to help consumers access financial assistance.

Data has shown that medical debt is not a good indicator of credit quality, the announcement noted.

Three nationwide credit reporting agencies—Equifax, Experian, and TransUnion—recently announced that they will remove nearly 70 percent of medical debt collection tradelines from credit reports and will no longer list past-due debt under $500.

However, a third of Americans have medical debt over $500, with 11 million reporting debt over $2,000 and 3 million with debt that exceeds $10,000.

To address this, the Biden administration has provided guidance to all agencies to eliminate medical debt as an underwriting factor in credit programs.

The US Department of Agriculture (USDA) has announced that it will stop including medical debts in borrower repayment calculations. This will allow individuals with medical debt to apply for USDA rural housing service loans without worrying that past-due healthcare bills will prevent them from getting a mortgage, the announcement said.

The Department of Veteran Affairs (VA) has finalized a rule that will end medical debt reporting for veterans with VA Care bills. The Department plans to review its underwriting guidelines to ensure medical debt reporting is not the deciding factor determining credit quality. VA will also streamline the process of requesting medical debt relief for veterans.

Additionally, the Small Business Administration will review its lending programs to identify ways to reduce the negative impact of medical debt on small business access to capital.

The Federal Housing Finance Agency (FHFA) will also review the credit models that mortgage loan companies Fannie Mae and Freddie Mac use.

Easing the burden of medical debt may also help address racial disparities, as Black and Hispanic households are more likely to have medical debt than White households.

“Due to racial inequities in the healthcare industry, Black households are more likely to incur medical debt and less likely to have health insurance. For too long, medical debt has disproportionately burdened Black communities – and we applaud the Biden administration for taking steps to address this crisis,” Rachel Villanueva, MD, president of the National Medical Association, said in a statement emailed to RevCycleIntelligence.

“Medical debt is more than a disconcerting financial predicament – it holds people back from seeking medical care when they need it. By lessening the burden of medical debt, we can help families thrive, stay healthy and achieve health equity.” 

Past data has shown that lower-income and younger Americans are also more likely to face medical debt struggles compared to their wealthier, older counterparts.