Senators Introduce Medical Debt Relief Act to Address Medical Debt on Credit Reports

Late last week Senators Jeff Merkley (D-OR), Dick Durbin (D-IL), Richard Blumenthal (D-CT), Bob Menendez (D-NJ), and Chuck Schumer (D-NY) introduced the Medical Debt Relief Act. The legislation would prevent medical debt from damage consumers’ credit scores after it has been paid off or settled.

They argue that, as opposed to credit card debt or loans that consumers take on willingly, medical debt is often the result of unexpected accident or illness that is outside the consumer’s control. Additionally, due to complex medical billing systems and the potential for misunderstandings with health insurance companies, medical bills are often sent to collections before it is clear whether it is the consumer or the insurer who owes money to the health care provider.

The Senators cite that the CFPB has found that 43 million American consumers have overdue medical debt on their credit reports, and that 15 million have only medical debt on their credit reports. Many consumers mistakenly believe that unpaid medical bills have no influence over one’s credit score. However, once a debt is assigned to collections, even if the cause was an inefficient healthcare billing system, the account will be considered a derogatory account by credit scoring algorithms.