On Tuesday, the Biden administration proposed a change that could potentially impact over 15 million Americans by removing medical debt from their credit reports. This change would aim to alleviate the burden of medical debt on consumers.
During a call with reporters, Vice President Kamala Harris revealed on Tuesday that medical debt is a burden faced by over 100 million Americans.
She expressed that it is unfair for individuals to be deprived of economic opportunities just because they faced a medical emergency.
According to a recent survey conducted by The Commonwealth Fund in 2023, medical debt is becoming a more significant issue that is impacting both insured and uninsured Americans. This growing problem is not only making people sicker but also causing financial strain, leading to increased poverty levels.
In 2020, medical debt was listed on the credit reports of approximately 46 million individuals. The Consumer Financial Protection Bureau has put forth a proposal with the aim of completely eradicating medical debt.
During a call on Tuesday, CFPB Director Rohit Chopra stated that the agency is aiming to put a stop to the unfair tactic of using credit reports to force patients into paying medical bills they don’t actually owe. This follows remarks made by Harris earlier on the call.
The public can provide their comments on the new rule until August 12, and it may take effect next year after the presidential election. However, there is a chance that it may not happen, especially if a Republican presidential candidate wins this year’s election.
The White House has criticized the Congressional Republicans’ budget proposal, which aims to cut Medicaid, Medicare, and the Affordable Care Act. Additionally, the proposal would prohibit Medicare from negotiating lower prescription drug prices, which is a major concern for many Americans. The White House further stated that the Republican proposal does not support the Consumer Financial Protection Bureau’s efforts to prevent medical debt from affecting credit reporting. Instead, the proposal suggests completely defunding the CFPB.
According to a study conducted last year, medical debt affects one in five households in the United States. The study found that the average amount owed by an adult for medical expenses was approximately $2,000, while the average medical debt for a U.S. household was about $4,600.
According to a study conducted last year, the bulk of medical debt is owed to hospitals. In recent years, the Biden administration has implemented several measures to lower medical bill expenses for the American people.
During a press briefing on Tuesday, Harris announced that they are taking measures to prevent medical debt from affecting one’s eligibility for a car loan, home loan, or small-business loan. “We are making it so that medical debt cannot be used against you,” Harris stated. This move aims to alleviate the financial burden of medical debt and provide individuals with better opportunities to secure loans without being penalized for their medical expenses.
According to The Commonwealth Fund, medical debt is a major contributor to bankruptcy cases in the United States. Currently, up to 40 percent of American adults are struggling with debt due to unpaid medical or dental bills.
If the new rule change is sanctioned, the administration claims that an average credit score increase of 20 points would be seen by millions of Americans. Furthermore, this could result in the approval of approximately 22,000 new U.S. mortgages every year.
In an effort to alleviate the financial burden of medical debt for over 100 million Americans, Harris urged states, local governments, and healthcare providers to take additional measures. It is crucial that they work together to find solutions that will alleviate this pressing issue.
In a recent announcement, New York City has launched a new program aimed at retiring medical debt for thousands of city residents. The program is set to alleviate the burden of medical debt for those with an annual household income at or below 400% of the federal poverty line and medical debt equal to 5% or more of their annual household income. The city has allocated approximately $18 million over three years towards the program, which will retire an estimated $2 billion in medical debt. This initiative is a positive step towards providing much-needed financial relief for those struggling with medical debt in the city.
On Tuesday, Harris stated that medical debt is an obstacle for millions of Americans to secure approvals for car loans, home loans, or small-business loans. This, in turn, makes it harder for people to manage their finances and achieve financial stability.
The federal government has recommended utilizing public funds, such as those provided by the American Rescue Plan Act, to erase medical debt, prevent its accumulation, and ensure patients are shielded from aggressive debt collectors. The government also suggests expanding access to charity care and limiting coercive debt collection practices by healthcare providers and third-party debt collectors.
Up to nearly 3 million Americans are set to benefit from the use of ARPA funds to eliminate an estimated $7 billion worth of medical debt, as reported by the White House.
During a press conference on Tuesday, Vice President announced that they have already forgiven over $650 million and are planning to forgive another $7 billion for millions of Americans across the nation.