Ia blog post published last week, the CFPB examined the link between eligibility for financial assistance under policies mandated by the Affordable Care Act (ACA) and medical collections. The ACA requires nonprofit hospitals to establish financial assistance policies for consumers who are unable to pay their medical bills.
The main conclusions discussed in the blog are as follows:
- The ACA prohibits nonprofit hospitals from reporting medical debts as collections to credit reporting companies or selling the debt to another party, without first trying to determine if the patient would be eligible for their financial aid policies. Nonetheless, a large percentage of low-income consumers in 2018 had at least one medical collection on their credit reports.
- Some state laws have established eligibility thresholds as a percentage of federal poverty levels, which are based on both income and household size. Among people living in households with children and with incomes below $40,000, 38.1% had at least one medical collection on their credit report in December 2018, a rate that is almost three times higher than that of people without children earning the same amount.
- The North East has the fewest medical collections per person and the lowest average collection balances among those with one or more collections. The South has the highest percentage of individuals with a medical collection, while the number of collections and total amount owed are highest in the Midwest. Differences in uptake of Medicaid expansion, differences in income levels, or differences in medical insurance coverage rates may account for some of the regional differences. State laws and programs related to the provision of financial assistance also appear to differ significantly across the country. Further research is needed to determine to what extent regional differences are also the result of differences in state financial aid policies.
- In July 2022, Experian, Equifax, and TransUnion began removing paid medical recoveries from credit reports, and beginning in 2023, they will no longer report medical recoveries under $500. The companies have also increased the time after which a medical bill can appear on a credit report from six months to a year. While these changes have the potential to improve the credit of low-income people who, despite possible financial aid eligibility, have medical collections on their credit reports, many low-income consumers are still unlikely to benefit because their existing medical bills exceed $500 at the threshold. Among consumers with medical collections on their credit reports, 48% of those earning less than $40,000 a year in 2018 had at least one collectible item for more than $500 at the time.
The CFPB concludes the report by suggesting that nonprofit hospitals may not be providing low-income consumers with the financial assistance for which they are eligible. While acknowledging that there is a lack of data to identify debt owed to nonprofit hospitals and that many medical debts may originate from for-profit and other providers, the CFPB observes that nonprofit hospitals account for approximately 49 % of all hospitals. The CFPB specifies that “[t]These hospitals must provide financial assistance and other community benefits in exchange for the significant tax benefits they receive, but our results suggest that many consumers are not getting the financial assistance they need. He also observes that “[d]Different parts of the country also experience very different outcomes with medical collections, some of which can be attributed to differences in state laws and other programs regarding financial aid.
The CFPB has already released three reports this year on medical debt, with its latest report released last month. In the most recent report, the CFPB analyzed how changes announced by Equifax, Experian and TransUnion will affect people who may have unpaid medical debt on their credit reports. The CFPB concluded the report by stating that it “shows that a substantial portion of medical collections currently flagged in consumer credit reports are likely to be removed” as part of the change announced by the national credit reporting companies. credit assessment. We observed that while previous CFPB comments had strongly suggested that the agency was moving towards measures to block or limit the reporting of medical debts, the findings of the latest report may lead the CFPB to question whether such action is necessary. Whatever position the CFPB ultimately takes on medical debt reporting, it is clear that medical debt will continue to be a priority for the CFPB under Director Chopra’s leadership.