POST FALLS, Idaho — The "big three" consumer credit reporting companies will change the way medical debt is reported to offer extended timelines and some reprieve for those buried beneath the weight of health care debt, as reported by our news partners, the Coeur d'Alene Press.
Beginning Friday, a joint measure between Equifax, Experian and TransUnion is expected to remove nearly 70% of paid medical collection debt from consumer credit reports. The agencies will extend the time to report a medical collection from six months to a year and not report any medical collection under $500.
This step is being taken after months of industry research with the goal of helping people focus on their personal wellbeing and recovery following two years of the COVID-19 pandemic.
Post Falls mom Summer Johnson said her family owes more than $40,000 in medical bills.
"I’ve been paying on old bills and it’s all been rolled up into one I will be paying forever — $200 a month," Johnson said. "It didn’t get in the way of buying a house, but it does affect all other applications and loans. We end up paying higher interest rates. Medical debt is the only debt we have in collections."
Johnson is among more than 100 million Americans who are experiencing some kind of debt tied to medical expenses.
Kaiser Health News in conjunction with National Public Radio recently conducted the Kaiser Family Foundation Health Care Debt Survey that shows a broad swath of health care debt, including medical and dental bills people are unable to pay and different forms of mounting bills — payment plans, credit cards, bank loans and borrowing from friends and loved ones. The survey explores the effects of medical debt and the financial and personal sacrifices people have to make because of this debt.
According to the survey, 59% of adults with current medical debt said they feel they'll be able to pay off their debt within two years, including a third who think they'll pay it off within a year. Nearly one in five, or 18%, said they don’t think they will ever pay it off.
About a quarter of Black adults, adults with household incomes less than $40,000 and those who are uninsured say they don’t think they'll ever be debt-free.
The survey found expectations of paying off medical debt to widely vary depending on the amount of debt owed. Nearly two-thirds of respondents owing less than $1,000 said they expect to pay off their health care debt within one year. By contrast, 53% of those who owe $10,000 or more say they’ll never be able to pay it.
Shelly Woodward, executive director of revenue cycle operations at Kootenai Health, said Kootenai Health writes off millions of dollars of unpaid medical care every year. In 2021, this included $500,000 for those without the means to pay, $8.1 million in discounts to uninsured patients and $28.5 million for those who simply refused to pay the patient responsibility of their health care bills.
Kootenai Health has been removing fully paid accounts from patients' credit reports for more than a year to prevent paid-in-full accounts from negatively impacting credit scores, Woodward said.
"Effective July 1, this practice will become standard, nationwide," she said. "Based on this new federal regulation, collection agencies must also wait 12 months to report unpaid medical bad debts to the credit bureau. This extension, along with an exemption for debts below $500, could make it more likely that some patients will take more time to resolve their financial obligation to their physician or hospital."
She said many people don’t know programs like Medicare and Medicaid do not pay the full cost for the care their participants receive.
"In 2021, that totaled another $176 million," she said. "Unpaid care has a significant impact on Kootenai Health and other health care providers."
She said in most instances, lenders already take into consideration that medical debt is an unforeseen bill and not something the individual initiated.
Derek Louw, a Coeur d'Alene resident and credit consultant at Consumer Credit Auditors, said this shift is an interesting development and could be good for consumers. He said the Consumer Financial Protection Bureau, which monitors consumer complaints, has seen a large increase in complaints involving medical collections.
"This can affect up to 20% of the families in the U.S.," Louw said. "The Consumer Financial Protection Bureau responded in April with a scalding report highlighting the issues, many of which involve using collection companies to extort customers into paying medical bills that may not be accurate or even theirs. Historically, I have seen that many consumers are not even aware of these bills until they arise during a credit transaction like a mortgage or large purchase. At this time the clock may be ticking and consumers just blindly pay them to keep things moving."
He said the changes will give consumers more time to identify and deal with these bills. However, it comes with a downside.
"This is voluntary and there is no recourse if they fail to do this," Louw said. "Unfortunately, these agencies have a very poor track record of following the rules. We will see how it works out. Fingers crossed."
The Coeur d'Alene Press is a KREM 2 news partner. For more from our partners, click here.