When you need to seek unexpected medical care, your attention should be focused on recovering physically and emotionally. However, financial concerns surrounding health care are playing a larger and larger role in the lives of patients.
In response, several Senators have written to the Consumer Financial Protection Bureau regarding the huge impact medical debt has on consumers. Specifically, the coalition asked the Bureau to address the ways that medical debt reporting can negatively affect patients' credit scores and, therefore, their ability to get credit. The Consumer Financial Protection Bureau is a federal agency that educates consumers about financial products and services including mortgages and credit cards.
How Can Medical Debt Hurt Your Credit?
Medical debt poses a unique problem to credit reports because so many parties have a hand in medical costs. If you have health insurance, typically your health care provider bills your insurance carrier. Your insurer passes on any costs that it will not cover to you and you become responsible for taking care of the balance.
Unfortunately, care providers do not always know how long this takes or where in the process the bill is. Without insight into the communication between patients and insurers, sometimes medical providers forward their bills on to collections before patients even know they owe money.
"The issue of consumer debt is usually discussed in relation to a consumer's ability to pay, but for medical debt, the problem is one of information," said the Senators' letter. This flawed information can blemish the credit history of responsible consumers, making those reports less reliable. In some cases, a patient's credit score can drop up to 100 points: damage that can take up to seven years to disappear.
Excessive debt from medical bills, a mortgage or loss of income may lead many people to consider filing bankruptcy in order to put themselves back on better financial footing.
Source: Health Tech Zone, "Senators Want Medical Debt Reporting to be Part of Consumer Financial Protection Bureau," Steve Anderson, August 6, 2012.