Americans Struggling to Pay for Health Care | December 2023
December 2023 | Volume 15, Issue 5
Watch the full video and find the accompanying article from CBSNews.
According to the article, unlike other bills, the debts a growing number of Americans are piling up to obtain health care services are often unplanned, or the result of billing issues and other errors that reflect the challenge of navigating our dauntingly complex health care system.
Although such problems often are not the fault of patients, medical debt can scar their credit score, drive up health insurance premiums, and even impede their ability to secure a job or housing simply because of an unexpected trip to the emergency room, for example.
Some 40 percent of U.S. adults owe money related to getting medical or dental care, according to a 2022 survey from the Kaiser Family Foundation, including credit card debt or other loans they took on to pay off a healthcare provider.
"So many of us are not that far from landing in medical debt and could be there ourselves in fairly short order whether we realize it or not," Adam Fox, deputy director of the Colorado Consumer Health Initiative (CCHI), a non-profit advocacy group, told the media.
The Consumer Financial Protection Bureau (CFPB) is in the process of introducing new rules that would ban medical debt from appearing on Americans' credit reports. Some cities and states have also started tackling the issue by passing legislation that limits how widely an individual's medical debt is shared. For millions of Americans, these changes would be transformative, advocates say.
In July 2022, the major credit bureaus — Equifax, Experian, and TransUnion — removed medical collections that were already paid from credit reports and stopped reporting unpaid medical collections less than one-year-old. The firms said that as of April of this year, they would remove medical debt amounting to less than $500 from consumer credit reports.
“Medical Debt Isn't a Decision”
Advocates for such changes say the push for reform stems from how complicated the medical billing process is in the U.S.
"Medical debt isn't a decision — it is unexpected. You get sick, you have an emergency and visit the emergency room, you don't ask for the price before you receive the service, before it happens to you.
The system is so complicated that it's hard to understand beforehand how much it will cost," said Breno Braga, a researcher with the Urban Institute who recently examined the impact of removing medical debt from people's credit records.
At the same time, for consumers, the financial consequences of drowning in medical bills can be severe.
"Having medical debt in your credit score can affect access to jobs and housing because landlords and employers can check credit records before making offers or agreements," Braga said.
Over the past year, an estimated 5 million Americans had all medical debt in collections erased from their files, Urban found in its analysis. To be sure, the debt is still outstanding and owed to providers, but it doesn't factor into an individual's credit score.
"The reporting changes don't affect the underlying debt consumers owe to health providers. It just means providers and collectors can't report it to agencies. But medical debt still exists, and they can still sue patients to collect debt, but they lost one of their tools," Braga said.
As of August, roughly 5 percent of U.S. adults had medical debt in collections in their credit files, down from 12 percent a year ago.
Consumers who in August 2022 had medical debt in their credit files saw significant increases in their scores from Vantage, another widely used credit score. On average, they moved from 585, a subprime level score, to 615, a prime level score, Urban found.
In Colorado, it is already illegal to report medical debt to credit agencies. Fox and CCHI are pushing for a nationwide law mirroring the state's ban.
"The challenge that medical billing creates, in general, is that it is incredibly confusing — it's not usually clear what you're paying for particular services, it's usually not itemized automatically for you, and it sets off a potential cascade of issues. The most egregious being landing in medical debt," Fox said. "And what we know about folks who struggle with medical debt is if they have been sent to collections, they are often stuck between having to make payments toward a medical bill or paying for other necessities, whether that's rent or food or their car insurance or gas or whatever. They face making impossible choices that affect their overall well-being and financial security."
What Consumers Can Do
To avoid financial complications from unpaid health care bills, experts say consumers should periodically check their credit reports.
"Make sure there's nothing in it that shouldn't be there, whether it's medical debt that hasn't been removed from your report or some sort of fraud or clerical error that may be holding you back," Matt Schulz, chief credit analyst at LendingTree, an online lending marketplace, told the media.
Consumers can check their credit reports for free by going to AnnualCreditReport.com. As a general practice, meanwhile, consumers should ask their healthcare provider questions before the bill arrives in the mail.
"Too often folks hesitate to ask questions, or they don't ask for an itemized bill, or they aren't sure what a bill is for. If they don't ask questions, things can spiral out of control quickly," Fox said.
Check for billing errors and demand that any problems be corrected.
"We regularly find errors or things that were not processed properly either by the provider or someone's insurance company," Fox said. "And all of that starts with making sure you understand the bill, asking questions if anything seems suspect, and challenging it."
Discussion Questions
- Explain what a credit score is and discuss the implications of having a poor credit score.
Answers to this section can be found from the Consumer Financial Protection Bureau.
What is a credit score?
A credit score is a prediction of your credit behavior, such as how likely you are to pay a loan back on time, based on information from your credit reports.
Companies use credit scores to make decisions on whether to offer you a mortgage, credit card, auto loan, and other credit products, as well as for tenant screening and insurance. They are also used to determine the interest rate and credit limit you receive.
Companies use a mathematical formula—called a scoring model—to create your credit score from the information in your credit report.
What factors impact my credit score?
Factors that are typically taken into account by credit scoring models include:
Your bill-paying history;
Your current unpaid debt;
The number and type of loan accounts you have;
How long you have had your loan accounts open;
How much of your available credit you’re using;
New applications for credit; and
Whether you have had a debt sent to collection, a foreclosure, or a bankruptcy, and how long ago.
You do not have just “one” credit score. Each credit score depends on the data used to calculate it, and it may differ depending on the scoring model (which itself may depend on the type of loan product the score will be used for), the source of the data used, and even the day when it was calculated.
Usually, a higher score makes it easier to qualify for a loan and may result in a better interest rate or loan terms. Most credit scores range from 300-850. - As the article indicates, the Consumer Financial Protection Bureau (CFPB) is in the process of introducing new rules that would ban medical debt from appearing on Americans' credit reports. Discuss the purpose and mission of the CFPB and explain why it is involved regarding the issue of medical debt.
According to The (Consumer Financial Protection) Bureau:
We aim to make consumer financial markets work for consumers, responsible providers, and the economy as a whole. We protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law. We arm people with the information, steps, and tools that they need to make smart financial decisions.
In a market that works, the prices, risks, and terms of the deal are clear upfront so that consumers can understand their options and comparison shop. Companies all play by the same consumer protection rules and compete fairly on providing quality and service. To achieve this vision, the CFPB works to:
Empower
We create tools, answer common questions, and provide tips that help consumers navigate their financial choices and shop for the deal that works best for them.
Enforce
We take action against predatory companies and practices that violate the law and have already returned billions of dollars to harmed consumers.
Educate
We encourage financial education and capability from childhood through retirement, publish research, and educate financial companies about their responsibilities.
Our Core Functions
The CFPB was created to provide a single point of accountability for enforcing federal consumer financial laws and protecting consumers in the financial marketplace. Before, that responsibility was divided among several agencies. Today, it’s our primary focus.
Our work includes:
1) Rooting out unfair, deceptive, or abusive acts or practices by writing rules, supervising companies, and enforcing the law;
2) Enforcing laws that outlaw discrimination in consumer finance;
3) Taking consumer complaints;
4) Enhancing financial education;
5) Researching the consumer experience of using financial products; and
6) Monitoring financial markets for new risks to consumers.
In your author’s opinion, introducing new rules that would ban medical debt from appearing on Americans' credit reports would be most consistent with the previously-mentioned “Core Functions” 1 (“Rooting out unfair, deceptive, or abusive acts…”) and 3 (“Taking consumer complaints”). This assumes, of course, that medical billing has the potential to be “unfair, deceptive, or abusive,” and that consumers frequently complain to the CFPB regarding the transparency, accuracy, and effect of medical billing. Your author is confident that such assumptions are safe. - Do you support or oppose the CFPB’s initiative? Explain your response.
This question invokes a subjective response, so student answers may vary. Your author supports the CFPB’s initiative, particularly since the affordability (or lack thereof) of medical care in the United States is such a major issue. Medical treatment is often unanticipated, and for most Americans, the actual cost of medical care bears no semblance to affordability.