Vice President Kamala Harris announces reforms to ease burden of medical debt

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Including medical debt that has been paid off causes creditworthiness to be underestimated by up to 22 points. (Photo: iStock/NNPA)

By Stacy M. Brown, The Washington Informater

One in three adults in the United States is burdened with medical debt, which is now recognized as the largest source of debt in debt collection processes — more than credit cards, utility companies, and auto loans combined.

Black and Hispanic households are more likely to have medical debt than white households, according to a White House fact sheet.

As part of the fight to help people cope with high costs, Vice President Kamala Harris plans to announce reforms to ease the burden of medical debt.

The White House said this should help give more families the opportunity to thrive.

“Together, these actions will help hold medical providers and debt collectors accountable for harmful practices and reduce the role medical debt plays in determining whether Americans have access to credit — opening new opportunities for people in medical debt to buy a home or get a small business loan to help over half a million low-income American veterans forgive their medical debt; and inform consumers of their rights,” the administration said in a press release.

The White House said medical debt isn’t just a financial problem — it can have negative health implications.

One study found that nearly half of those with medical debt intentionally avoided seeking medical care.

“Getting sick or caring for loved ones should not cause financial hardship for American families,” government officials said.

“That’s why the government is taking new measures to reduce the burden of medical debt and protect consumers from predatory collection efforts.”

The White House said the planned measures build on President Joe Biden’s April 5 executive order to strengthen access to affordable, quality health care, which directed federal agencies to take steps to reduce the burden of medical debt.

“Vice President Harris announces reforms in four areas that will reduce the burden of medical debt, protect consumers and open new opportunities for Americans looking to buy a home or start a small business,” the White House said.

Measures include holding providers and collectors accountable.

“Providers have a responsibility to offer non-predatory payment plans or financial assistance to all eligible patients,” the White House noted.

“While many do, far too many eligible patients report not receiving help. Worse, lawsuits against patients over medical bills are on the rise. And when hospitals sell outstanding bills to outside collection agencies, patients can be exposed to persistent and aggressive collection practices.”

The government noted that the federal government pays approximately $1.5 trillion into the healthcare system annually to provide quality care and services to patients.

Providers receiving these funds should make it easier for eligible patients to receive the financial assistance they are entitled to and should not directly or indirectly expose patients to illegal and harassing collection practices, the White House said.

Department of Health and Human Services Secretary Becerra plans to direct the agency to assess how provider billing practices impact access and affordability of care and medical debt accumulation.

Officials said HHS will request data from more than 2,000 vendors on medical bill collection practices, lawsuits against patients, financial assistance, offerings of financial products, and third-party contract or debt-purchasing practices.

The Department will, for the first time, consider this information in its grant decisions, release topline data and policy recommendations to the public, and share potential violations with the relevant law enforcement bodies of the jurisdiction.

Separately, the Consumer Financial Protection Bureau (CFPB) will investigate credit bureaus and debt collectors who violate the rights of patients and families, and will hold violators accountable.

The White House added that the administration also plans to improve government insurance practices, as the latest research has found that taking on sickness debt is not a reliable indicator of overall financial health.

They said an analysis of 5 million anonymized loan records found consumers who owed medical debt paid their bills at the same rate as those who didn’t.

Including medical debt that has been paid off causes creditworthiness to be underestimated by up to 22 points.

“As a result, the inclusion of medical debt on credit reports and in credit scores and lending practices can deter Americans from financial opportunity while not improving the accuracy and predictive power of loan programs,” the White House said in the release.

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