White House Announces Steps to Ease Americans’ Medical Debt

WASHINGTON — The Biden administration is taking action to lessen the burden for Americans dealing with medical debt, Vice President Harris said Monday.

“Some debt collection companies harass consumers with dozens of phone calls a week,” Harris said during a briefing in the South Court Auditorium at the Eisenhower Executive Office Building here. “Remember what we are talking about — folks who are in the process of attempting to recover from an illness, for example. Debt collectors try to collect on debt that has already been paid, some who pose as law enforcement officials or threaten consumers with jail time. That sort of harassment and intimidation is unethical and often it is illegal. And that is why the CFPB [Consumer Financial Protection Bureau] has made it a priority to hold debt collectors accountable.”

“One in three U.S. adults are saddled with outstanding medical debt,” said Shalanda Young, director of the Office of Management and Budget, who spoke before Harris. “It’s become the biggest source of debt and collections in our country, bigger than credit cards, utilities, auto loans, and other sources combined … It’s long past time that we do something about it.”

And medical debt is not spread evenly among communities, said Health and Human Services (HHS) Secretary Xavier Becerra, who also spoke at the event. “Americans with lower incomes, poorer health, and from communities of color have higher rates of medical debt,” he said. “More than two-thirds of debtors cite medical issues as contributing to their bankruptcy.”

Young said her team has been working with agency partners “to identify steps we can take at individual agencies and government-wide to reduce the negative impacts that the existence of medical debt has on families’ abilities to access federal credit programs. Life happens and it’s time for families to stop paying the price for the rest of their lives.”

Several federal agencies announced actions to help Americans with medical debt, including:

• HHS. HHS will examine how providers’ billing practices impact access and affordability of care and the accrual of medical debt, the White House said in a fact sheet. HHS will request data from more than 2,000 providers on medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and third-party contracting or debt-buying practices. The department will use the information in their grant-making decisions, publish data and recommendations related to the findings, and refer any potential law violations to the appropriate federal agencies.
• CFPB. The CFPB will investigate credit-reporting companies and debt collectors for possible violations of patients’ and families’ rights, and hold violators accountable. In January, the CFPB issued a bulletin reminding debt collectors and credit bureaus of their legal obligations in light of the No Surprises Act, which protects patients from receiving “surprise” medical bills for emergency out-of-network care. The CFPB also “will target coercive credit reporting and determine whether unpaid medical billing data should ever be included in credit reports,” the fact sheet noted. “The latest research finds that owing medical debt is not a reliable predictor of overall financial health.”
• The Department of Veterans Affairs (VA). Since the beginning of the pandemic, the VA has cancelled or refunded about $1 billion in medical co-payments for over 1.5 million veterans, Harris said. “Many more veterans are eligible for debt relief,” but applying can be time-consuming and confusing, and the process requires a lot of documentation and can only be done on paper. So the VA “is offering a new, easy-to-use online application,” Harris added. “And they’re setting a simple income threshold for eligibility. So, if you are a veteran who has medical debt, please go online and consider applying.” The VA has also published a final rule under which it will virtually cease reporting unfavorable debt, including medical debt, to consumer reporting agencies, according to the fact sheet. “The new rule ensures that debt reported better reflects creditworthiness, while saving veterans from further financial struggles simply because they had to take on medical debt.”
• The Department of Agriculture (USDA). The USDA, which offers home loans for people buying houses in rural areas, announced that it will no longer include any recurring medical debts in its borrower repayment calculations, which measure a borrower’s ability to repay for its homeownership programs — more than $20 billion in lending activity, the fact sheet noted.

Harris also praised some actions being taken by the private sector. “Last month, the three largest credit reporting agencies announced that they will no longer include medical debt in credit scores if an individual has paid their debts, has unpaid debts less than a year old, or has accrued less than $500 in debt,” she said. “This is an important first step forward and one that the President and I applaud.” According to the White House fact sheet, however, “this change leaves out a third of Americans with medical debt over $500. For example, 11 million Americans have medical debt above $2,000 and 3 million Americans have debt over $10,000. Further action is needed to help families struggling with medical debt.”