Most people never make plans to end up in a hospital emergency room because of an accident or other unexpected event. They also typically don’t have time to shop around for the lowest price on the medical care they need as a result of the urgent or life-threatening situation, especially if they are away from home.
Big bills for unplanned ER visits – and resulting surgeries – can financially sink someone who doesn’t have hefty emergency cash reserves or is underinsured.
Research shows that more than half (some 66%) of medical debts are the result of a one-time or short-term medical expenses that stem from an urgent medical need, according to the Kaiser Family Foundation. Noting that medical bills are the most common collection item on credit reports in the United States, the Consumer Financial Protection Bureau reports that about one in five households say they have unpaid medical bills.
The burden of medical debt looms large for millions in the U.S. Anyone who has ever received one of those “this is not a bill” statements from their insurance company or tried to muddle through the codes on a hospital website to figure out how much their back surgery might cost likely knows that medical billing, credit reporting and collections are often confusing and sometimes plagued with errors.
Bills for medical services that wind up in collections and then on credit reports, according to the CFPB, are often not indicative of future repayment of credit. Unfortunately, medical bills placed on credit reports often result in less access to credit for consumers, an increased risk of bankruptcy, the avoidance of needed health care, and sometimes difficulty securing employment, even when the bill itself is not accurate.
For those reasons and others, the CFPB published a report in March 2022 on medical debt that found the credit records for U.S. residents hold some $88 billion in reported medical bills (as of June 2021). On March 18, three major credit reporting agencies – Equifax, Experian and TransUnion – together announced changes to how medical bills would be reported on those credit reports.
Here are the highlights:
- One sweeping change begins July 1, 2022. That’s when old medical bills that have been paid will no longer be included on consumer credit reports issued by those three companies. Right now, medical debt stays on a report for up to seven years after it has been paid off.
- Unpaid bills will be reported only if they have remained unpaid for at least 12 months. That’s an additional six-month extension from the typical six-month grace period already extended to consumers with medical debt in collections.
- Next year, during the first six months of 2023, Equifax, Experian and TransUnion also have indicated they will no longer include medical collection debt of less than $500 on credit reports. The agencies said they expect these measures will wipe out nearly 70% of the medical collection lines from consumer credit reports.
Help is available for those who are having issues resolving a medical debt or facing a problem with other consumer financial services. You can submit a complaint with the CFPB online or by calling and speaking with a representative.