As has been widely reported, the three main credit bureaus are erasing medical debt under $500.
According to the CFPB, 50% of consumers who now have medical collections tradelines on their credit reports would do so even after the reporting companies’ adjustments go into effect in full.
Medical debt is already a major problem due to patients’ inability to pay and providers’ difficulty to collect. The Consumer Credit Protection Agency reports that 57% of all collections on people’s credit reports still relate to medical tradelines.
Systemic issues with medical billing and collections, according to the Consumer Financial Protection Bureau, “may be largely to blame for this decline, increasing the likelihood that debt collectors won’t follow their legal responsibilities.” It’s conceivable that either the insurance information or the invoices are erroneous.
The CFPB reports that in 2021, 15% of complaints about debt collection were attempts to collect a medical payment. “Moreover, consumers mentioned’medical’ in several thousand complaints related credit or consumer reports,” the Bureau noted in a Spring 2022 Bulletin.
The Common Debt Burden Increases
According to the CFPB’s breakdown of the actual amounts owing on that medical debt, the mean at the start of 2018 was $615, and it increased by 30% to $802 by the start of 2022. In other words, the cost of the debt is rising.
According to Dominick Colabella, CEO of Rectangle Health, in an interview with Karen Webster, the “issue” of unpaid debts for the providers exceeds $140 billion.
According to Shannon Burke, senior vice president and general manager of health systems at Synchrony, “There is a huge opportunity for financing there if we just think about the fact that $400 billion will be paid out of pocket or is owing out of pocket. We are aware that after a bill exceeds $800, many customers choose to spread out their payments.
