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This post is from our friend Mark Rukavina of The Access Project, which is a resource center for local communities working to improve health and healthcare access.
Financial Burden of Healthcare Costs
It is not surprising that American families are feeling the strain of unaffordable health care costs. Premium costs for family insurance coverage have jumped 131% between 1999 and 2009, well over three times the rate at which wages rose during this time.
Millions of jobs have been lost during the recession putting unemployed workers at risk of also being without health insurance. As employers struggle with economic uncertainty and ever-increasing healthcare costs, many have pushed more of the costs of health insurance and care onto their workers. Trends show an increasing number of Americans living in households where health insurance premiums and out of pocket expense threaten their financial well-being.
In 2007, the most recent year for which data are available, an estimated 72 million Americans had medical bills problems. A significant portion made paying off medical bills a top priority and therefore struggled to pay for other basic necessities like food, rent or heat. More than 30 million American adults used up all their savings or borrowed against their homes in order to pay off medical bills. Unfortunately, for many American families this did not stop the bill collector from knocking on their door when they came up short.
With Medical Billing, Confusion Reigns
Thirty million Americans are contacted annually by collection agencies for unpaid medical bills. Many struggle to pay these bills. Mistakes made by third party payers are common and many people are unclear why their insurance did not pay a claim. Others are simply confused about the amount they owe. More than half of respondents to a recent health care survey said they were puzzled by medical jargon on their bills (have you ever been befuddled by an Explanation of Benefits (EOB) Form?) and one in four said confusion led them to allow bills to go past the due date or be sent to a collection agency.
A medical bill that is sent to collection can create headaches down the road. If the collection agency reports it to the credit bureaus – typically their practice – it will result in a lower credit score. Once sent to collection and reported, a medical bill is classified as an account in arrears. Currently, the Fair Credit Report Act allows such accounts, even after being paid off in full, to remain on a report for up to seven years. For consumers, this results in lower credit scores and increases the cost of a mortgage, auto loan or the interest rate on a credit card.
Medical Debtors and Ruined Credit
It is estimated that during calendar year 2008, Americans spent $277 billion on out-of-pocket health care expenses; this is over and above the cost of insurance premiums. No doubt, a portion of this amount was used to pay off medical bills inappropriately sent to collection. Credit scores erroneously lowered by medical bills that have been paid in full hurt consumers. In spite of doing the right thing by paying their bills, these consumers are seen as credit risks. Such inaccuracies in credit reports slow America’s economic recover.
One mortgage originator in Texas, Rodney Anderson of Supreme Lending, has seen the detrimental effects firsthand. He was frustrated as customers looking to purchase homes or refinance were deemed risky because of medical accounts on their credit reports. Ironically, many of these medical accounts originally had small balances and were paid in full. Because they had been sent to collection, his customers’ credit scores were wrongly lowered.
Using the services of a credit score simulation service, Anderson ran scores for clients after removing zero-balance medical accounts. The credit scores of some of his clients increased by 50 to 100 points after being recalculated by the simulation service. What he found exposed a dirty little secret of the credit scoring world; medical accounts on credit reports can destroy credit even after being paid in full.
Consumer Protection
Ohio Congresswoman Mary Jo Kilroy has also seen the consequences of outstanding medical bills. Hearing from constituents challenged by bills resulting from unexpected illness or accidents, Rep. Kilroy decided to take action; she saw medical debt as unique and felt it deserved to be treated differently than other debt.
Rep Kilroy has introduced HR 3421, The Medical Debt Relief Act, which amends the Fair Credit Reporting Act. The bill requires that medical debt fully paid off or settled be removed from a consumer’s credit records within 30 days. This proposal enjoys bipartisan support and has nearly 75 co-sponsors in the House. A similar bill is expected to be introduced in the Senate before the end of February.
By passing HR 3421, Congress would protect families and ensure them that they will no longer be further compromised after paying their outstanding medical bills. While this straightforward proposal does not fix the healthcare system, it would provide relief for those who’ve paid off their medical debt while Americans await broader health reform.
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1899 L Street, N.W., Suite 400, Washington, DC 20036
921 11th Street, Suite 901, Sacramento, CA 95814
Additional Contact Info
New America® is a registered trademark of the New America Foundation.
This bill is a necessity!
This bill is a necessity!
I simply cannot state how necessary this bill is to bringing prosperity back to those who have suffered an illness and are penalized severely for being of a lower financial means while making every attempt to pay. This key to this law is Intent. People who pay their bills have the intent of doing the right thing, but the means are often slower than the companies that billed them would like. They are penalized for medical conditions that are not their fault, yet they do take responsibility and DO pay. This bill will show that intent and tenacity to do the right thing where it counts, as a persons credibility to pay debt.
Thank you
Two members of my family are un- or under-employed and neither has insurance. I worry. Worry has become a leitmotif in my days, since I have multiple extensive medical problems and so does my husband and we're lucky to have good insurance (PERS provides MedMutual, if you ever need to cite them.) Once again, I'm grateful for the opportunity to thank you for all you do. You are a real hero to me and I admire your energy, strength and perseverance, Best representative we ever had! You go, Mary Jo!
Not enough but a start
Insurance co-pay processing is often at the heart of problems leaving a small balance with no indication of when it's really due as it's tentative until the insurance is done. Added to that is the full medical industrial complex of overpaid physicians overcharging because we are all hostage.
The only way this type of thing is ever resolved is to withdraw any reporting agency protection. They engage in an unconscionable act or practice, erroneously report my credit or put it in a false or inaccurate light then let them explain it to a jury. If they have their nose in my business to my detriment then I should be able to sue them to stop it. It is, after all, none of their business, but a matter between me and the person I contracted the service with.
As for the physicians to which this problem traces, entry into the profession is limited and that is protected by the AMA to keep their monopoly running so prices remain high and their wealth is preserved so it will grow exponentially. I say regulate them just like we do other necessities in life, like utilties. Is this service any less necessary for modern welfare? The market isn't regulating them, so it is needed. Either that or force open the medical market, ramp up more medical schools, admit more people and get the price in line with market forces....supply and demand.