Medical Debt Responsibility Act

This Affects Us All

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I believe that we should enact a federal law mandating the complete removal of a medical collection within 45 days of it being paid or settled. All derogatory marks relating to that debt should be permanently removed from the consumer’s credit report. This affects us all, and together we can make a difference.

If you agree, and would like to be part of a national movement that will change millions of lives for the better, I urge you to tell your story and send this to everyone you know.


Medical Debt is Different!

(supported by quotes from The Access Project Fact Sheet)

Traditional Debt: Credit Cards, Auto Loans, Consumer Loans, Home Loans

  • Consumers fill out credit applications prior to incurring the debt.
  • We receive a bill / invoice on a regular (monthly) basis directly from the creditor, which clearly itemizes / describes all of the charges in easy to understand terms.
  • The monthly bills / statements are almost always accurate and rarely have to be disputed.
  • We deal directly with the creditor who is billing us and to whom we send our payments.
  • Almost all of these creditors report the status of our account / debt to the credit bureaus every month.

Compared to:

Medical Debt: Doctor Visits, Emergency Room Services, Hospital Stays, Emergency Transportation

  • We do not routinely complete a credit application prior to receiving medical services (maybe done for elective / cosmetic surgery).
  • Most of these organizations use a third party billing service that may use terms that are difficult for us to understand.
  • Medical bills have a high percentage of errors (use the quote from the reference study).
  • Most of us have insurance that pays for some of the charges that are incurred. (From below: Nearly two-thirds (59%) of the people who experienced bill problems or had medical debt were insured at the time that care was provided.) It may take months before all of the claims are filed and paid by the insurance company before we learn how much of the debt we are actually responsible for. Many times the medical service provider sends our account to a collection agency without us understanding how much we owe and giving us a chance to pay it. (From below: One study found that nearly one-third of respondents let a medical bill go to a collection agency because they did not understand the bill or explanation of benefits statement.)
  • Rarely do these medical service providers report their accounts to the credit bureaus. The first time that these debts appear in our credit reports is when the account is turned over to a collection agency. (From below: According to Experian, medical businesses account for only 7/100th of one percent of their data.)

THE “MEDICAL DEBT RESPONSIBILITY ACT”

MEDICAL DEBT

Medical debt is money owed for any type of medical service or product. The money may be owed directly to the provider of the service or to an agent of the provider, such as a collection agency.

Medical debt is different Unlike credit cards, automobile loans or home mortgages, people do not fill out a credit application to incur medical debt.

Prevalence of medical debt In 2010, 44 million Americans, nearly one-quarter (24%) of American adults under the age of 65, had medical debt or bills being paid off over time.

Levels of medical debt Nearly three quarters (69%) of those with medical debt were paying off bills totaling less than $4,000.

Insurance status of those with medical debt Nearly two-thirds (59%) of the people who experienced bill problems or had medical debt were insured at the time that care was provided.

COLLECTION AGENCIES & CREDIT REPORTS

Medical bills are typically reported to the consumer reporting agencies only after they have been assigned to collections. Healthcare providers rarely furnish data directly to the consumer reporting agencies. According to Experian, medical businesses account for only 7/100th of one percent of their data.

Frequency of medical data appearing on credit reports More than one-half (52%) of collection accounts are associated with medical bills, according to a study published in the Federal Reserve Bulletin.

Prevalence of people with medical collections Thirty million American adults, one in six, were contacted by collection agencies for unpaid medical bills in 2010.

Confusion and medical bills Many people who have had medical bills sent to collection are confused about the amount owed. One study found that nearly one-third of respondents let a medical bill go to a collection agency because they did not understand the bill or explanation of benefits statement.

Errors and medical collections Health insurance claim denials occur frequently because of billing errors, such as duplicate claims or missing information on the claim. Medical claims in dispute can be sent to collection in error. An estimated 14 million American adults said that a medical bill was sent to a collection agency because of a billing mistake.

PREDICTIVE VALUE & CREDITWORTHINESS

The predictive value of medical payment data has been questioned by experts in the financial services industry. Federal Reserve Bulletin studies found that some credit evaluators remove medical collection accounts from credit evaluations because they may not indicate future performance on loans.

Tarnished Credit Many consumers have their credit histories damaged due to burdensome medical billing systems. They have otherwise clear credit histories that show years of steady payments. However, all too often their credit reputation gets damaged as an innocent bystander in the battle between the medical providers and the insurance companies .

Uniform Reporting Increased scrutiny of healthcare billing and collection practices, especially among non-profit hospitals, is changing industry practices. Many healthcare providers prohibit their collection agents from reporting to the credit bureaus and certain states are developing policies regarding the reporting of medical debt.

MEDICAL DEBT RESPONSIBILITY ACT would require the removal medical accounts from a consumer’s credit report within 45 days of being fully paid or settled.

How many people would be helped by this proposal? According to studies published in the Federal Reserve Bulletin, an estimated 3.5 million Americans have paid-off medical collection accounts on their credit reports.

How long do medical bills stay on a person’s credit report? Currently, the Fair Credit Reporting Action allows the consumer reporting agencies to include this information on a credit report for up to seven years after the date on which it is reported delinquent.

Is the 45 days timeframe for removing paid-off medical accounts realistic? Yes, the 45 day timeframe is consistent with the time allotment currently provided under the Fair Credit Reporting Act for processing consumer disputes when data need to be reviewed.

Can the credit bureaus easily identify medical accounts? Yes, in fact, there already exist consumer privacy protections regarding medical information. The Fair Credit Reporting Act requires furnishers to designate information as medical and includes various requirements dictating how these data are reported. Given this, medical debt will be identified for the credit bureaus by the data furnishing entities.

Once again, I believe that we should enact a federal law mandating the complete removal of a medical collection within 45 days of it being paid or settled. All derogatory marks relating to that debt should be permanently removed from the consumer’s credit report.

If you agree, and would like to be part of a national movement that will change millions of lives for the better, I urge you to tell your story, and send this to everyone you know. This affects us all, and together we can make a difference.

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