White House evaluating provider billing practices, medical bill collection

Photo: Kameleon007/Getty Images

In a move signaling its intent to relieve medical debt burden, the Biden White House has said it would task the Department of Health and Human Services to evaluate provider billing practices, and how they factor into healthcare affordability and the accumulation of debt.

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

The department will, for the first time, weigh this information in its grantmaking decisions, publish topline data and policy recommendations for the public and share potential violations with the relevant enforcement agencies.

Separately, the Consumer Financial Protection Bureau will investigate credit reporting companies and debt collectors that violate patients' and families' rights, and hold violators accountable. The CFPB has already issued a bulletin to prevent unlawful medical debt collection and reporting. 

The CFPB will target coercive credit reporting and determine whether unpaid medical billing data should be included in credit reports.

The goal in all of this is to eliminate medical debt as a factor for underwriting in credit programs, whenever possible. 

"Medical debt is not a reliable indicator of credit quality, and its impact should be reduced or eliminated to give more American families the opportunity to thrive," the administration wrote on its website Monday.

WHAT'S THE IMPACT

One in three adults in the U.S. has medical debt, according to Census data. It is now the largest source of debt in collections – more than credit cards, utilities and auto loans combined. Black and Hispanic households are more likely to hold medical debt than white households.

Medical debt is not just a financial issue – it can have negative health effects as well. One study found that almost half of people with medical debt intentionally avoided seeking care.

Americans with medical debt can apply for USDA rural housing service loans without fear that their medical debt could keep them from getting a mortgage. This week, USDA announced it will discontinue the inclusion of any recurring medical debts into borrower repayment calculations, which measure a borrower's ability to repay for its homeownership programs – more than $20 billion in lending activity.

The Department of Veteran Affairs has also taken steps to ensure credit reporting and underwriting regarding medical debt, including finalizing a rule to virtually cease reporting of medical debt for veterans with bills from VA Care. The VA will also review its underwriting guidelines to ensure it minimizes or eliminates medical debt reporting as a proxy for creditworthiness, wherever possible.

The Small Business Administration, meanwhile, has committed to ensuring credit access and accurate credit reporting and underwriting. SBA will work with its colleagues and partners to lessen the financial burden of medical debt for families, and to review SBA lending programs to identify ways to reduce the negative impact of medical debt on small business access to capital.

And the Federal Housing Finance Agency is reviewing the credit models that Fannie Mae and Freddie Mac use and looking at ways to ensure that measures of creditworthiness are accurate, reliable and predictive, the administration said.

The CFPB said it will ramp up its consumer education tools aimed at helping families navigate the complex, often confusing medical billing landscape, including more materials specifically designed to help patients access financial assistance.

THE LARGER TREND

New research from the American Enterprise Institute found that owing medical debt is not a reliable predictor of overall financial health. And an analysis of 5 million anonymized credit records found that consumers who owed medical debt paid their bills at the same rate as those who did not. In fact, including paid-off medical debt causes credit scores to underestimate creditworthiness by as much as 22 points.

As a result, the inclusion of medical debt on credit reports and in credit scores and loan underwriting can hold Americans back from financial opportunities, while failing to improve the accuracy and predictiveness of lending programs.

The private sector has taken some steps to address this problem. Last month, the three largest credit reporting agencies – Equifax, Experian and Transunion – announced they will no longer include certain forms of medical debt on credit reports, removing billions of dollars in debt from consumer reports. This change covers borrowers with already-paid debts, unpaid debts less than a year old, and debts paid or unpaid under $500.

However, this change leaves out a third of Americans with medical debt more than $500. For example, 11 million Americans have medical debt above $2,000, and 3 million Americans have debt over $10,000.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com