We will continue to raise the issue of medical debt in local, state, and national policy discussions on health care and economic development. We will strive to help and counsel those in need and empower consumers by bringing their voices into the policymaking arena. The Access Project's Executive Director, Mark Rukavina, authored an article for the Federal Reserve Bank of Boston's Communities & Banking magazine. The article, "The Financial Burden of Health Care" appeared in the Summer 2009 edition. Communities & Banking magazine aims to be the central forum for the sharing of information about low- and moderate-income issues in New England. You can read the article, view the entire magazine, or visit the Federal Reserve Bank of Boston website here.
Before 2000, not even health policy experts worried much about medical debt. Most people assumed that the uninsured could get charity care in hospital emergency rooms, and that they faced few problems if they left their bills unpaid. The Access Project has worked tirelessly to expose how policy decisions and business practices lead to medical debt. Our studies motivated changes in hospital pricing and charity care policies that previously discriminated against the uninsured. Our effective use of research combined with personal stories compelled the American Hospital Association to issue new guidelines on medical debt collection, and helped build support for laws passed in several states that gave patients expanded rights.
*May 2010* The Agency for Healthcare Research and Quality (AHRQ) Innovations Exchange has profiled The Access Project's Medical Debt Resolution Program. The Innovation Profile, Pathway Helps Massachusetts Residents Develop and Implement Debt-Reduction Strategies, Leading to 60% Reduction in Medical Debt, describes the program's development, results, and lessons learned.
The Agency for Healthcare Research and Quality's Health Care Innovations Exchange is a Web-based program designed to support health care professionals in sharing and adopting innovations that improve health care quality. For more information, visit www.innovations.ahrq.gov.
Medical Debt on Credit Reports
The Access Project applauds former Ohio Rep. Mary Jo Kilroy for introducing the Medical Debt Relief Act of 2009 (HR 3421). This legislation addresses the widespread problem of medical debt on credit reports. The Act would require the removal from a consumer's credit report of medical accounts that have been fully paid within 30 days of being settled. The proposal could provide relief to millions of Americans who have had their credit scores lowered due to medical accounts that have been fully paid off yet can remain on a credit report for up to seven years.
The Access Project had the opportunity to ask questions of Rep. Kilroy related to HR 3421, The Medical Debt Relief Act of 2009. The questions, and her responses to them, are listed below:
View the bill's summary and status ...
- What inspired you to file this legislation on medical debt?
I have listened to thousands of constituents since entering office in January and the number of central Ohioans adversely affected by medical debt is staggering. I have tried to make constituent services the hallmark of my office and an increasing number of the cases we deal with involve medical debt.
Medical debt is still leaving black marks on consumer credit scores even if that debt has been paid off or settled. That means that many of my constituents may be unfairly subjected to fines and higher interest rates when purchasing a home. In this economy, we need to help consumers, especially those that are put in a bad situation by something out of their control like health issues.
Medical debt is not the result of irresponsibly buying a big screen television or a fancy, luxury vacation. Debt incurred to make someone healthy and whole should not be considered when scoring consumer credit.
- Why is removing medical debts with zero balances from credit reports important for consumers?
Our broken health insurance system and escalating health care costs are major factors in the growing economic insecurity that Americans are facing. Today, uninsured and underinsured Americans are doubly harmed. They face high out of pocket costs if they experience illness or injury. Then, if they are unable to pay their medical bills promptly, their credit can be ruined by having these bills turned over to collection agencies and reported to credit bureaus. Such accounts lower one’s credit score. This can lead to increased interest charged on consumer debt, including home mortgages, automobile loans, and credit cards. I introduced H.R. 3421 to immediately address the injustice of medical accounts with a zero balance lingering on credit reports and causing credit problems for hardworking Americans.
- How common is the problem of medical debt?
The number of American adults under the age of 65 carrying medical debt jumped from 21 percent in 2005 to 28 percent in 2007 this represents 49 million people. I found this to be a disturbing figure and was even more concerned when I learned that the majority of those with medical debt had insurance at the time of they sought the care for which they owe money.
- Is it typical for medical accounts to appear on people’s credit reports?
Many people, even some of my Congressional colleagues, are surprised to learn that medical bills or accounts are commonly found on credit reports. While it is rare for medical providers to report directly to the credit bureaus, it is all too common for the collection agencies, which providers contract with, to do so. Research published by the Federal Reserve Bank found that medical bills constitute the majority of non-credit related accounts in collection and found on credit reports.
- How common is it for medical bills to be sent to collection agencies?
According to research from The Commonwealth Fund, 28 million Americans were contacted by a collection agency for unpaid medical bills in 2007. This is the most recent data we have. Unfortunately, given the economic troubles that have confronted our nation over the past year, it is likely that the number of Americans dealing with calls from collection agencies for unpaid medical bills is increasing.
- Will this legislation be necessary if Congress passes a health reform law?
Yes. First, millions of Americans have medical debt and this existing debt will not disappear with the passage of health reform. People struggling to pay off their medical bills do so over the course of several years. H.R. 3421 will provide immediate relief. Second, the health reform proposals being introduced in both the House and Senate will be implemented over a number of years. In the interim, millions of Americans will be at risk of incurring medical debt. Therefore, this legislation will complement the health reform proposals before Congress.
- Isn’t it a good idea to leave medical accounts that have been paid in full on credit reports to show that someone has a good credit payment history?
No. Most medical accounts that appear on credit reports because unpaid bills have been sent to collection agencies. By definition, these are derogatory accounts. They are a blemish on a credit report. This is true whether these accounts have a balance of zero or thousands of dollars. This means that Americans who do the right thing and pay off their medical bills will find that it does little or nothing to improve their credit score. This is unfair, it is wrong, and H.R. 3421 will address this problem.
- Who will be helped by your legislation?
My bill is designed to help people who have medical bills on their credit reports with a balance of zero. I believe that if there is not a balance due on the account, it should be removed from the report so that it does the consumer no further harm.
Some individuals with medical bills on their credit reports are victims of a dysfunctional billing system. It can take months for insurers and providers to adjudicate claims. In the meantime, patients receive explanation of benefits forms with bold letters stating “this is not a bill, do not pay.” However, it is only after the insurers and providers come to an agreement on claims payment that a patient bill can be generated. Once invoiced, if the patient does not pay promptly, it can lead to collection action. After a bill is sent to collection and reported to the credit bureaus even if paid off in full it lowers the person’s credit score and drives up their cost of credit. H.R. 3421 will address this.
- What is your hope for outcome, should this legislation be passed into law?
That millions of hardworking Americans who have experienced health insurance billing problems or have inadequate insurance coverage are no longer penalized after they have used their hard earned dollars to pay off their medical bills.
Research: Credit card debt and medical debt
For many years, health care costs have been steadily rising. As employers have moved into insurance coverage options with greater out-of-pocket expenses or have stopped providing health care coverage altogether, American families have struggled with the burden of health care costs.
To gain a better understanding of how medical debt impacts families' debt and assets, Demos collaborated with The Access Project to analyze data from its 2008 national household survey of low- and middle-income households with credit card debt. This survey, which consisted of 2,248 phone interviews with low- and middle-income households, collected information about the scope and nature of credit card debt--from the amount and duration of debt to the types of expenses that contribute to household indebtedness.
This report "Sick and In the Red: Medical Debt and its Economic Impact" will explore the extent to which medical debt adds to the general credit card debt of households and will examine the impact of such debt on families' economic security. We hope that it helps to inform the public policy discussion on health care affordability and insurance product design.
Also in collaboration with Demos, The Access Project produced a Medical Debt fact sheet in December 2009, "How Debt From Out-of-Pocket Medical Expenses Impacts Low- and Middle-Income Families." This fact sheet documents how an increasing number of low- and middle-income families use credit cards for basic living expenses. As health care costs have increased and health insurance coverage has become inadequate, medical expenses have become another basic cost that families increasingly cover using credit cards.
An earlier report released by Demos and The Access Project in January 2007 titled Borrowing to Stay Healthy, documents in more detail how low and middle income households are turning to credit cards to pay for medical care. The report findings are based on a national telephone survey of over 1,100 low and middle income households.
Report highlights include the finding that nearly one-third (29%) of respondents reported that medical expenses contributed to their current level of credit card debt. In households with medical debt, the average credit card debt was significantly higher (46%) that in those households without medical expenses as a contributing factor in their overall credit card debt.
While uninsured respondents had the highest levels of credit care debt, even respondents with health insurance were not shielded from the medical debt problem. These findings, combined with the industry trend of increasing deductibles and other out-of-pocket costs, call into question whether it is prudent to rely on borrowing as a method to pay for needed health care.
For more information on Demos, visit their website at www.demos.org
One report is specifc to the state of Missouri. In January and February 2005, a survey of working families in the
area asked the question: Do you owe money for medical care? Over half (53%) of these families said yes. More striking, more than 50% of those who were struggling to pay off medical bills said they had health insurance when they sought treatment. Almost one-third (31%) experienced housing problems due to their unaffordable medical bills. This report, Living in the Red: Medical Debt and Housing Security in
tells the personal stories that bring life to the statistics on medical debt. Seven
residents from across the state share their personal experiences telling how medical debt affects their access to health care, as well as their families’ financial and emotional stability. As these stories attest, people with medical debt expect to and want to pay for the medical care they receive, but too often family budgets are overwhelmed by the rising costs of care.
People with unaffordable medical bills are our neighbors, friends, and colleagues. They work hard to support their families and live in small towns, suburbs and big cities. Nonetheless, each of these individuals was unable to avoid the unforeseen illness or injury that disrupted their lives, caused medical debt, and created financial instability and housing problems. Most appalling, most of these folks had health insurance that failed to protect them from the immense costs of medical care.
Another report on medical debt and its effect on housing, Home Sick: How Medical Debt Undermines Housing Security is based on a survey by The Access Project and its research partners of 1,700 low- and moderate-income taxpayers in seven cities. Nearly half of those people reported having medical debt and, of those, about a quarter said that housing problems resulted from the debt. The most frequent housing problems were the inability to qualify for a mortgage, difficulty making rent or mortgage payments, being turned down from renting a home, and being forced to move to less expensive housing.
Another significant finding was that many people who reported medical debt and subsequent housing problems had health insurance at the time the debt was incurred, suggesting that insurance, in many cases, is not fulfilling its basic purpose of protecting the insured from financial catastrophe. Home Sick details all of these findings, and lays out potential remedies for policy makers, health care providers, insurers and lenders.