ARM entities servicing medical debt should pay close attention to the recent words and actions of the Consumer Financial Protection Bureau (CFPB). On March 1, 2022, the CFPB issued a press release announcing that it released a report in which it estimated $88 Billion Dollars in medical debt is shown on credit reports. This announcement was followed a few hours later with are release of CFPB Director Rohit Chopra's prepared remarks on medical debt collection.
The report asserts that medical billing is "complicated and burdensome" and calls medical billing a "doom loop" which catches patients between medical providers and insurance companies. Of prime focus for the CFPB is the usage of credit reports to coerce a patient to pay a medical bill. In his prepared statement, CFPB Director Rohit Chopra, made his feelings on the issue clear stating, "I am concerned that the credit reporting system is being weaponized as a tool of coercion to get people to pay medical bills they may not even owe."
The report details how medical bills are often unexpected, and patients typically do not have the ability to shop for services. Per the CFPB's findings, medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous. To correct this, the CFPB plans to hold credit reporting companies accountable and work with federal partners, including the Department of Health and Human Services to ensure patients are not coerced into paying more than the amount they owe through credit reports.
For some additional foreshadowing of the CFPB's intentions, Director Chopra referred to medical debts as "contaminating" the credit reporting system and explicitly said, "we will be assessing whether it is appropriate for unpaid medical billing data to be included on credit reports altogether. We already know how a medical bill reported on credit reports is less predictive of future repayment than reporting on traditional credit obligations. We will make this determination while also taking steps to reduce harmful and inaccurate credit reporting."
The full report can be found here.
Director Chopra's full statement can be found here.
The CFPB's remarks should concern everyone in the ARM industry. The CFPB thinks there is a problem with healthcare billing, and they want to fix it. In principle, this is a good thing, but the statements issued by Director Chopra are troublesome in that they seem to take an animous approach to the collections industry and indicate that the CFPB thinks debt collectors- the last house on the block- have the ability to fix a billing system that is flawed at its roots.
The CFPB is right, any American that has visited a doctor or hospital at any point in their adult life knows medical billing is, to use the words of the CFPB, "complicated and burdensome." While the CFPB may be trying to fix the issue using the tools it has available (i.e. regulating the ARM industry), those tools cannot fix the root of the problem. The real problem with healthcare collections starts the moment a patient walks into a doctor's office or hospital.
ARM entities can do a lot. They can handle federal, state, and client requirements which seem to change almost daily now, but they cannot solve it all and they can not continue to be scapegoats for all of the country's economic issues. Putting the entire weight of the problems in the American healthcare system on the shoulders of debt collectors will not solve the issue. ARM entities can't fix the influence insurance companies have on the American healthcare system or the problems associated with medical coding and billing. However, they may be in a position to help the CFPB understand how healthcare bills end up in the collections process, and what would be needed further up in the revenue recycle to prevent accounts from hitting collections in the first place.
Further, while out of the CFPB's purview, perhaps some attention should go to the American healthcare system as a whole, and maybe why Americans pay insurance companies so much to do so little, or why America leaves the entire burden of healthcare on its citizens.