American Rescue Plan funds are being used to eliminate an estimated $7 billion in medical debt for up to nearly 3 million of Americans; the Consumer Financial Protection Bureau’s (CFPB) proposal would ensure that no Americans have medical debt on their credit reports, down from 46 million in 2020

June 12, 2024 – On Tuesday, Vice President Harris announced a proposal to prohibit medical bills from being included on credit reports and calls on states and localities to take further actions to reduce medical debt.

Today, Vice President Harris and CFPB Director Rohit Chopra announced a new action by the CFPB that would remove medical debt from credit reports of more than 15 million Americans, raising their credit scores by an average of 20 points and leading to the approval of approximately 22,000 additional mortgages every year. Under the CFPB proposed rule, there would be zero Americans with medical debt listed on their credit reports, down from 46 million in 2020. The Vice President also called upon states, local governments, and health care providers to take additional actions to reduce the burden of medical debt for millions of Americans, building upon the $7 billion in medical debt that is being eliminated by the end of 2026 thanks to the American Rescue Plan (ARP).

President Biden and Vice President Harris believe that getting sick or taking care of loved ones should not mean financial hardship for American families. The burden of medical debt and its impact on credit reports inflicts serious financial repercussions on American families, restricting access to credit, increasing risk of bankruptcy, creating barriers to housing and health care access, and negatively impacting health outcomes. This debt is often placed on American families despite evidence of medical bills frequently being invalid, unsubstantiated, and inaccurate. And these repercussions do not fall equally across Americans—Black and Hispanic communities, as well as people with low incomes, veterans, older adults, and young adults of all races and ethnicities, are disproportionately impacted by medical debt.

While the Biden-Harris Administration has been hard at work to tackle medical debt and to lower the costs of prescription drugs and health care, Congressional Republicans have repeatedly opposed efforts to lower health care costs and for years have tried to repeal the Affordable Care Act. A recent Budget proposal from the Republican Study Committee—representing 100% of House Republican leadership and nearly 80% of their members— cuts  Medicaid, Medicare, and the Affordable Care Act, and would prevent Medicare from directly negotiating lower prescription drug prices. And instead of supporting the CFPB’s efforts to bar medical debt from credit reporting, the Republican proposal would defund the CFPB entirely.

Today, Vice President Harris is calling on states, local governments, and health care providers to take comprehensive action to reduce the burden of medical debt, including but not limited to:

• Leverage public dollars to purchase and eliminate medical debt;
• Prevent accumulation of medical debt and protect patients from aggressive debt collectors by expanding access to charity care; and
• Protect patients and consumers by limiting coercive debt collections practices by health care providers and third-party debt collectors.

These strategies will help ensure that no one will need to go into debt to get the health care that they need.

Leverage public dollars to purchase and eliminate medical debt

Several states, cities, and counties have pioneered medical debt relief efforts in their communities leveraging American Rescue Plan funds. Building on that momentum, the Biden-Harris Administration is calling on additional states and localities to leverage their own funding to aid families and relieve additional medical debt, including debt that patients have more recently accrued. Because past-due medical debt is frequently available for purchase at a discount, states and localities are often able to purchase this debt for pennies on the dollar.

Thanks to the American Rescue Plan (ARP), states, counties, and cities are canceling an estimated $7 billion in medical debt for up to nearly 3 million Americans, including:

• Arizona is using ARP funds to relieve an estimated up to $2 billion in medical debt for up to 1 million Arizonans.
• Cook County, Illinois is investing ARP funds to wipe out an estimated up to $1 billion in medical debt for 400,000 residents. Since launching in 2022, the ARP-funded Cook County Medical Debt Relief Initiative has already benefited over 200,000 residents.
• New Jersey has budgeted millions of dollars that could be drawn from the State’s ARP funds to eliminate up to $1 billion in medical debts, benefiting an estimated 400,000 residents of the Garden State.
• Connecticut is using ARP funding to cancel up to $650 million in medical debt for an estimated 250,000 residents.
• Wayne County, Michigan is providing funding enabled in part by ARP to eliminate up to $700 million in medical debt for up to 200,000 residents.
• Orange County, Florida is leveraging ARP funding to relieve up to $450 million in medical debt for over 150,000 residents.
• Oakland County, Michigan is using ARP funds to eliminate up to $200 million in medical debt, benefiting up to 80,000 residents.
• Cleveland, Ohio is investing public funds enabled by ARP to purchase and retire more than $180 million in medical debt. To date, the initiative has already helped over 160,000 residents.
• Toledo and Lucas County, Ohio are partnering, including leveraging ARP funding to relieve up to $240 million in medical debt for up to 50,000 residents.
• Cincinnati, Ohio is using public funds to retire medical debt for an estimated almost 60,000 residents.
• New Orleans, Louisiana is using public funds to cancel approximately $130 million in medical debt for up to 50,000 residents.
• St. Paul, Minnesota will invest ARP funding to relieve up to $110 million in medical debt, benefiting more than 40,000 residents.
• Pittsburgh, Pennsylvania is leveraging ARP funding to discharge an estimated $115 million in medical debt for up to 40,000 residents.
• City and County of Kalamazoo, Michigan are partnering to eliminate up to $89 million in medical debt for over 30,000 residents.
• St. Louis, Missouri is investing ARP funding to relieve medical debt for roughly 30,000 residents.
• Akron, Ohio is committing ARP funding to eliminate medical debt for an estimated 20,000 residents.

Prevent accumulation of medical debt and protect patients from aggressive debt collectors by expanding access to charity care

Despite receiving roughly $60 billion in tax breaks, too many nonprofit hospitals are failing to provide sufficient financial assistance – or failing to make known the availability of financial assistance – to low-income patients. In fact, recent reporting and CFPB research show that some non-profit hospitals are erecting significant barriers to obtaining financial assistance. Overall, one report found that non-profit hospitals are spending only 2.3% of their revenue on financial assistance, a lower percentage than for-profit hospitals.

To increase financial assistance for low-income families, the Vice President is calling on states to pass legislation or take executive action to expand eligibility for financial assistance and increase screening of patients. Research shows that uptake of financial assistance not only reduces financial burdens but also promotes access to care and improves health – as patients with less debt are more likely to obtain high-value follow-up care. These impacts would accrue to uninsured and low-income families, reducing wealth and health inequality. Actions like these will prevent the accumulation of medical debt by lowering patients’ upfront health care costs and ensuring that they are not forced to take on medical debt in order to receive care.

Additionally, the Internal Revenue Service (IRS) recently announced plans to increase audits of tax-exempt hospitals in fiscal year 2024 to better ensure that nonprofit hospitals provide the community benefits necessary to maintain their non-profit status.

Protect patients and consumers by limiting coercive debt collections practices by hospitals and third-party debt collectors

Research by the CFPB shows that tens of millions of people are pursued by debt collectors annually. These collectors, including both hospitals and third-party debt collectors, often subject patients to persistent and aggressive collection practices, including litigation, wage garnishment, and charging excessive interest. The CFPB is already taking action to ensure that medical debt collections follow the law, including taking supervision and enforcement efforts where appropriate, reminding collection entities about their legal obligations, supporting state-level enforcement actions, and conducting education and outreach activities to inform consumers of their rights.

The Biden-Harris Administration calls on states to build on these actions to curb coercive debt collections practices. Several states have already taken actions to limit debt collection practices, including to require financial assistance screening by hospitals before debt is sold to a third party, pausing collections on medical debt until patients’ insurance coverage appeals are settled, requiring debt collectors to provide written notices of patient rights and responsibilities, and capping interest rates charged on medical debt. States should swiftly move to adopt practices such as these to limit the coercive power of debt collectors and protect patients from unfair collection practices.

The Biden-Harris Record on Lowering Health Care Costs and Reducing the Burden of Medical Debt

The Biden-Harris Administration has made great progress in reducing the impact of medical debt since the President and Vice President launched a whole-of-government effort.  By making coverage under the Affordable Care Act (ACA) more affordable and accessible and expanding Medicaid in four states, this Administration has enrolled millions of Americans into coverage and driven the uninsured rate to the lowest point in history. Following the release of a CFPB report in March 2022 that found that Americans owed $88 billion in unpaid medical bills, the three largest credit reporting agencies announced that they would no longer include paid medical debts, unpaid medical debts less than a year old, and medical debt under $500 from credit reporting. This action reduced the amount of households with medical debt on credit reports from 46 million in 2020 to 15 million Americans today, and the CFPB’s proposed rule would bring that number to zero. Removing medical bills from consumer credit reporting and the Vice President’s call on states to take action both build on the significant progress the Biden-Harris Administration has already made to lower health care costs and address the negative impacts of medical debt, including:

• The Department of Veterans Affairs (VA) implemented a streamlined process to make it easier and faster for lower-income veterans to get their VA medical debt forgiven, already providing relief to over 10,000 veterans and saved them more than $10 million in copay debt.
• The Federal Housing Finance Agency (FHFA) validated and approved the use of VantageScore 4.0, along with FICO 10T, for the underwriting of mortgages by Fannie Mae and Freddie Mac, marking the first time that a credit score that excludes medical debt has been approved for mortgage underwriting of Enterprise loans.
• The Small Business Administration (SBA) is taking steps to reduce the role of medical debt in the underwriting of loans for its flagship 7(a) guaranteed loan program, including revising its lender Standard Operating Procedures and Lender Match tool to discourage consideration of medical debt.
• The White House Office of Management and Budget (OMB) issued memorandum M-22-17 to direct agencies to reduce the impact of medical debt in the underwriting of Federal credit programs, helping to spur the actions by VA, FHFA, and SBA listed above.

The Consumer Financial Protection Bureau (CFPB), the Department of Health and Human Services (HHS), and the Department of the Treasury issued a joint request for information seeking comment on the prevalence, nature, and impact of medical payment products.

• The Departments of Health and Human Services, Labor, and Treasury have prioritized implementing surprise billing protections, preventing 1 million Americans from receiving surprise medical bills every single month.
• As a part of the Inflation Reduction Act, President Biden capped the cost of insulin at $35 and capped out-of-pocket prescription drug costs at $2,000 annually starting in 2025 for seniors and others with Medicare. Since taking these actions, President Biden has called on Congress to expand these caps to cover all Americans.
• President Biden has called on states to close the Medicaid coverage gap and create new pathways to health coverage by expanding Medicaid under the Affordable Care Act.
• The Biden-Harris Administration issued a final rule that protects consumers from junk health insurance and makes sure Americans aren’t scammed into low-quality coverage that leaves consumers on the hook for thousands of dollars in medical bills.
• The White House convened state and local leaders to discuss initiatives to further lower health care costs and reduce the burden of medical debt, including addressing medical payment products, unfair debt collection practices, surprise billing and facility fees, and charity care.
  Source: Office of the White House
  
  Related: Consumer Financial Protection Bureau (CFPB) Proposes to Ban Medical Bills from Credit Reports - Comments Must Be Received On or Before August 12, 2024