Research shows millions of Americans have won billions of people in medical debt
A West Health-Gallup Healthcare Survey showed that 31 million Americans accumulated $74 billion in medical debt in 2024.
Consumers were hit after a federal judge in Texas abandoned Biden-era rules that banned the inclusion of medical debt in credit reports.
In a move that advocates said USA Today would eliminate key consumer protections, US District Judge Sean Jordan on July 11 granted demands from President Donald Trump’s administration and two financial industry groups to override medical debt rules.
The medical debt rules, which were finalised in January before former President Joe Biden resigned, would have banned medical debts on credit reports and banned lenders from using a person’s medical debt history to make loan decisions.
The rules were scheduled to come into effect in March, but two trade groups sued the Consumer Financial Protection Bureau to sues the rules, and Jordan issued a stay and delayed the date of the rules’ commencement. In late April, Trump-appointed CFPB leaders chose not to oppose the lawsuit, filed a joint complaint with the financial industry groups (the Consumer Data Industry Association and the Cornerstone Credit Union League), asking judges to destroy the medical debt rules.
Jordan, appointed during Trump’s first administration, agreed to the trade group that eliminating medical debt rules was “fair, appropriate and reasonable” as it surpassed CFPB authorities under the Fair Credit Reporting Act.
Medical debt “maybe worsens”
Patricia Kelmer, senior director of the healthcare campaign at the US PIRG Education Fund, said rules are needed to protect consumers from medical debt errors in credit reports. According to a 2022 report from the CFPB, health costs account for more than half of debt collections on consumer credit records.
“The problem is still here and it’s probably going to get worse,” Kelmer said. “Credit report medical liabilities are almost three times more often than credit card liabilities.”
She said that many of the 15 million Americans with medical debt on their credit reports are “punished with a lower credit score not because they owe the bill, but because they’re still fighting it or because the hospitals report it wrong.”
However, the industry group supported the decision.
“The health debt rules could potentially lend out inaccurate and incomplete pictures when making lending decisions,” Dan Smith, president and CEO of the Consumer Data Industry Association, said in a statement.
“Information about unpaid medical debt is a key factor in assessing consumers’ ability to pay,” Smith said. “This is the correct outcome to protect the integrity of the system.”
Paid medical obligations, unpaid medical obligations of less than a year and medical obligations of less than $500 have already been removed from credit reports by the three largest credit reporting companies. However, due to the scrubbing of medical debt rules, consumers can expect larger medical debts to appear on their credit reports.
The decision is because Trump’s sweeping tax cuts and spending laws could put health insurance coverage at risk for millions of Americans going forward.
According to the Non-partisan Congressional Budget Office, the law cuts around $1 trillion from Medicaid and Affordable Care Act insurance plans, eliminating 11.8 million insurance coverage over the next decade.
According to previous CBO analysis, Biden’s Covid-19 pandemic-era tax credits that made the ACA plan cheaper for consumers could potentially lose health insurance as the law doesn’t expand.
