President Joe Biden’s administration announced on Thursday the beginning of a rulemaking process aimed at preventing unpaid medical bills from impacting credit scores. The Consumer Financial Protection Bureau has been tasked with formulating the new rules.
The proposals under consideration are intended to provide relief to Americans who struggle to pay medical bills, which can negatively impact their credit score. Poor credit scores can cripple consumers looking to make significant purchases.
The rules that are being discussed include removing medical bills from consumers’ credit reports, preventing creditors from relying on medical bills when making underwriting decisions, and ending allegedly coercive collection practices.
Vice President Kamala Harris announced the initiative on a press call with Rohit Chopra, the head of the Consumer Financial Protection Bureau (CFPB).
“No one in this country should have to go into debt to get the quality health care they need,” Harris said in the announcement, per CBS News Texas. “These measures will improve the credit scores of millions of Americans so that they will better be able to invest in their future.”
The move by the White House comes as the CFPB, which was founded in response to the 2008 financial crisis, faces a legal challenge in the Supreme Court over whether its taxpayer funding is unconstitutional due to a lack of Congressional approval.
Credit reporting is the primary tactic hospitals use to encourage patients to pay their medical bills, according to a KFF Health News analysis. However, a 2014 CFPB study concluded that medical debt over-penalizes consumer credit scores.
Chopra praised the White House plan as a research-backed initiative to relieve Americans.
“Research shows that medical bills have little predictive value in credit decisions, yet tens of millions of American households are dealing with medical debt on their credit reports,” Chopra said. “When someone gets sick, they should be able to focus on getting better, rather than fighting debt collectors trying to extort them into paying bills they may not even owe.”
The issue of medical debt and credit scores has gained traction in recent years. The three largest credit agencies announced last year they would stop using some medical debt on credit reports. This year, Colorado enacted a law that bans the consideration of medical debt on credit reports and scores.
Chi Chi Wu, a senior attorney at the National Consumer Law Center, said her group sees the devastating impact of medical debt on consumers.
“Negative credit reporting is one of the biggest pain points for patients with medical debt,” she said, per CBS News. “When we hear from consumers about medical debt, they often talk about the devastating consequences that bad credit from medical debts has had on their financial lives.”
However, while the proposals under consideration would seemingly benefit consumers, some industry professionals have expressed concern over the potential effects of the rule changes on healthcare providers as well as how the Biden administration is handling the process.
Scott Purcell, the CEO of ACA International, a trade group that represents collection agency professionals, said the changes “would [fundamentally] alter the U.S. credit-based economy as it is today in terms of consequences for not paying your bills.”
In a phone interview with The Dallas Express, he noted that the rules under consideration could result in economic loss for healthcare providers, as some patients may not feel obliged to pay their medical debts. He said this could result in some smaller healthcare facilities going out of business. Others may require patients to pay in full before providing any medical treatment.
“There’s too much at stake for Americans’ access to quality healthcare by taking actions that only negatively affect the cash flow to the healthcare community without finding ways to replace those funds,” Purcell told The Dallas Express.
He also took issue with the process undertaken to make the new rules. He commented in a press release that the CFPB’s announcement reflected a failure to “fully consider the real-world impact of its actions and see input from impacted stakeholders.” He said he believes the medical billing industry should have a place at the table when making these decisions.
Purcell further questioned whether the CFPB has the legal authority to act on its proposals and whether it is fair to do so.
“…[A] politically driven agency should not be arbitrarily picking winners and losers in the marketplace and discriminating against certain professions, such as health care providers,” he said.