Credit Reports Showed $88B in Past-Due Medical Debts in 2021

Consumer credit reports disclosed around $88 billion in past-due medical debt in 2021, underscoring the burden of healthcare costs and the barriers individuals face in the wake of high medical bills.

According to a report from the Consumer Financial Protection Bureau (CFPB), 20 percent of households across the country reported having medical debt. When individuals cannot pay off their debt, the medical bills get sent to debt collectors and may wind up on consumer credit reports, resulting in several consequences for consumers.

If medical debt shows up on credit reports, it could lower consumer credit scores. Consequently, individuals may face reduced access to credit, making it hard to find employment or secure housing. It could also lead to an increased risk of bankruptcy or cause people to avoid medical care in fear of furthering their debt.

CFPB found that medical debt collections appeared on 43 million credit reports. As of the second quarter of 2021, more than half of all debt collection tradelines were for medical debt. Although most tradelines were under $500, a handful of individuals had more than one collection tradeline listed on their credit report.

Medical debts are less likely to predict future payment problems than other debt collections, the report stated, leading researchers to question why credit reporting agencies consider medical debt. According to CFPB, some credit models take this into account, but other common models weigh medical and nonmedical collections equally.

Moreover, medical debt shown on credit reports may not always be accurate. Doctors, hospitals, parent companies, or other groups representing providers may send bills to debt collectors, resulting in multiple charges for the same visit.

“When it comes to medical bills, Americans are often caught in a doom loop between their medical provider and insurance company,” Rohit Chopra, director of CFPB, said in the press release. “Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”

Additionally, medical debt commonly stems from unexpected and emergency events in which patients may not have time to understand the cost of care before receiving treatment. In other instances, patients may need care to a certain extent that forces them to accept whatever price facilities offer.

Not all medical debt ends up in the hands of consumer reporting companies, indicating that the total national medical debt in collections likely exceeds $88 million.

Medical debt impacts the US population unevenly, the report found. Black and Hispanic individuals are more likely to have past-due medical debt than White and Asian individuals. Low-income Americans also tend to have more debt than their wealthier counterparts.

Individuals in the Southeast and Southwest regions of the country face higher medical bills as well, partly because their states have not expanded Medicaid coverage, the report stated.

Due to the greater likelihood of having past-due medical bills, these populations are more likely to face the repercussions of debts appearing on their consumer credit reports.

CFPB stated that it is committed to ensuring that the consumer credit reporting system does not compel patients to pay medical bills that are not accurate.

The Bureau is currently collaborating with HHS to help protect consumers from this fate. The report stressed that debt collectors and credit reporting companies cannot collect or report debts that are not legally due, which includes bills where the amount violates the No Surprises Act.

The No Surprises Act aims to shield consumers from high medical bills by preventing out-of-network providers from billing patients for a service at more than the median in-network rate.

Recent data from HealthCare.com revealed that younger generations feel the stress of medical debt. For example, one in four Generation Z and Millennial Americans said they skipped their rent or mortgage payments due to outstanding medical debt. Around half of the adults in these younger generations also reported that their medical debt hurt their credit score.