Is medical debt crippling your credit score?
My readers know that I am a fierce critic of the practice of putting medical debt on credit reports for many reasons. It is my firm belief that this practice frequently impinges on privacy rights guaranteed by the Health Insurance Portability and Accountability Act (HIPAA). The act does permit the disclosure of the “minimum necessary” information required to pay legitimate bills, but providers are frequently very careless in limiting any scrutiny to the minimum necessary.
New Pressure to Exempt Medical Debt on Credit Reports
It is only a matter of time before a substantial challenge to medical debt on credit reports is mounted by a smart, motivated lawyer with the right client and the right set of facts.
People of every income level suffer from the problem of medical debt on credit reports. Medical debt on credit reports questions is more likely to be in dispute than most kinds of debt. Medical debt on credit reports is atypical, of questionable value in predicting future payment performance, inconsistently reported and are non-predictive of future behavior. Medical debt on credit reports are unlike other debts.
Confusing Medical Billing Process Complex
The entire medical billing process is complex and lacking in transparency. Consumers walk out of their medical provider’s office without knowing what they owe or what the insurer owes. If the insurance company decides certain tests were unnecessary, the consumer is stuck with the bill even though he relied on the doctor’s judgment in ordering these tests and his own potential liability was the last thing on his mind. Large and small bills are often disputed by consumers. In the last year for which statistics are available, 28 million working-age Americans were contacted by a collection agency for medical debt on credit reports. Studies show that medical bills are the single largest cause of bankruptcy filings.
Insurance Companies Frequently Change their Mind
I recently received what is called a “Notice of a Revised Claim Determination” from my United Health Care provider. It says “The original cost-sharing amount for the services provided was $70.00. Upon review of these services all services remain payable, however there has been a change to your cost-sharing amount. Your adjusted cost sharing amount is now $35.00.” This was from a service they say I received over a year ago. Did I pay the original $70.00? Do they owe me $35.00? Should I just pay it and get it over with because you just can’t win with these people? Will medical debt on credit reports cripple my credit score if I don’t? Actually credit reporting agencies ignore amounts under $100.00 but you get the picture.
Tide May be Turning
There is cause for hope. Early in June the U.S. House of Representatives passed, by a vote of 336-82, H.R.3421 known as the Medical Debt Relief Act. This bill would make it illegal to include medical debts that were paid or settled on a consumer’s credit report if they were paid or settled at least 45 days prior to the issuance of that credit report. In other words.automatic expungement for settled bills! Since 40% of all credit reports have medical collections on them, this could potentially increase the credit scores of millions of Americans.
The Senate version of this bill is currently sitting in the Senate Banking Housing and Urban Affairs subcommittee. Let’s hope the powers that be can sense the urgency of this measure to the consumer and get this law passed forthwith.
UPDATE: The Medical Debt Relief Act has gone nowhere as the summer of 2014 heads towards Fall. Maybe 2015 will finally be the year medical debt on credit reports will be treated as a separate category.