Federal Report Highlights The Effects Of Medical Debts On Credit

One in five American consumers — 43 million people — have blemishes on their credit reports because of overdue medical bills, while medical debts make up more than half of collection items on credit reports, according to a newly released federal report.  The Consumer Financial Protection Bureau released the report Thursday ahead of a public hearing on medical debt collection in Oklahoma City. The report follows the bureau’s finding last spring that medical debt can unfairly harm credit scores, which affect whether people can borrow money and what interest rate they pay.

Medical debt differs from other types of debt because it often results from unforeseen circumstances, noted Richard Cordray, the bureau’s director, in prepared remarks. The role of insurers can further complicate the situation, by muddying the waters about how much of the cost is owed by the patient.  “When people fall ill and end up at the hospital with unexpected bills,” Mr. Cordray said, “far too often they have entered into a financial maze.”

He gave the example of a consumer from Connecticut who complained to the bureau last year that confusion over an unexpected lab bill resulted in several rounds of telephone calls to his health insurance company before he gave up and paid the bill. When he later checked his credit report, he found that the debt had been reported as a collection account, even though he had paid it.  Chi Chi Wu, a lawyer with the National Consumer Law Center, said consumers are often confused about statements they receive from their insurers, some of which may state “this is not a bill,” yet include charges that the consumer may or may not ultimately owe. “People don’t know what to do with that,” she said...