Medical debt continues to be a major problem in the country, especially with so many people hospitalized during the coronavirus pandemic. Rob Michaelson and Betsy Badell explain why many Americans will have their medical debt removed from their credit report.
What’s changing this year
Robin: Since the start of the pandemic, medical debt has become more and more of an issue because people have been hospitalized with COVID, and there are a lot of bills that come with it. But Betsy, we actually have good news when it comes to medical debt, don’t we?
Betty: Absolutely. It seems the major credit bureaus have been a little more lenient with consumers. They announced in a joint statement that they would cut almost 70% of medical care.
Why this happens
Robin: This sounds incredible for anyone with medical debt. But why this sudden change?
Betty: Well, that’s because of a recent report by the Consumer Financial Protection Bureau, which found that medical debt collections were less predictive of future payment issues than other debt collections, such as car loans and mortgages. The report also indicates that black, Hispanic and low-income people are more likely to have medical debt. The elderly and veterans are also heavily affected.
What to expect
Robin: So what are the details and when is this change happening?
Betty: Well, expect to see a change from July 1st. This is when state medical debt will no longer be included in consumer credit reports. The credit bureaus also announced that in the first half of 2023, medical debt under $500 will not be added to consumer credit reports. This is great news, however, I’ve spoken to advocates who have been pushing for this change in medical debt and credit reporting, and they say there’s still work to be done because in In reality, the big burden when it comes to medical debt is precisely when it comes to bills over $500.