Addressing Patient Medical Debt from All Directions

Nine percent of adults in the U.S. – or roughly 23 million people – owe more than $250 due to health costs, according to recent analysis of government data by the Kaiser Family Foundation (KFF). About half of those reporting significant medical debt owe more than $2,000, and about 1 percent of all adults owe more than $10,000.

An earlier report by KFF also showed that among those who report problems paying medical bills, two-thirds (66 percent) say the bills were the result of a one-time or short-term medical expense such as a hospital stay or an accident, while 33 percent cite bills for treatment of chronic conditions that have built up over time.

Now, patients who accumulate medical debt are getting some relief from credit reporting changes and a new four-point plan laid out by the Biden administration. Meanwhile, providers, whose bills patients are struggling to pay, are pursuing more creative and patient-friendly ways to collect those balances.

Changes to Credit Reporting

Back in March, three nationwide credit reporting agencies – Equifax, Experian, and TransUnion – announced that nearly 70 percent of medical debt will be removed from consumer credit reports over the next year. Several changes will be implemented to accomplish that.

Effective July 1, 2022, paid medical collection debt will no longer be included on consumer credit reports.
The time period before unpaid medical collection debt will appear on a consumer’s report will be increased from 6 months to one year, giving consumers more time to work with insurance companies and/or healthcare providers to address their debt before it is reported on their credit file.
In the first half of 2023, Equifax, Experian and TransUnion will no longer include medical collection debt under at least $500 on credit reports.

“Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” said Mark W. Begor, CEO Equifax; Brian Cassin, CEO Experian; and Chris Cartwright, CEO TransUnion. “As an industry we remain committed to helping drive fair and affordable access to credit for all consumers.”

Federal Consumer Protections and Debt Reform

About a month later in mid-April, the Biden-Harris Administration announced several new actions to hold medical providers and debt collectors accountable for harmful practices, reduce the role medical debt plays in determining whether Americans can access credit, help over half a million of low-income American veterans get their medical debt forgiven, and inform consumers of their rights.

First, current medical debt collection and reporting practices will be reviewed by the Department of Health and Human Services (HHS) and the Consumer Financial Protection Bureau (CFPB). HHS will request data from more than 2,000 providers on medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and third party contracting or debt buying practices. At the same time, CFPB will investigate credit reporting companies and debt collectors that violate patients’ and families’ rights, and hold violators accountable.

Next, the Biden administration is committed to improving government underwriting practices. Americans currently can apply for an FHA-backed mortgage without fear that medical debt will keep them from being able to buy a home. The administration also is providing guidance to all federal agencies to eliminate medical debt as a factor for underwriting in other credit programs, whenever possible and consistent with law. This will apply to the USDA’s rural housing service loan program, the Department of Veteran Affairs (VA), the Small Business Administration, the Federal Housing Finance Agency’s (FHFA) Fannie Mae and Freddie Mac credit models, and others.

Also, the VA will make it easier and faster for lower-income veterans to get their VA medical debt forgiven. Already, the VA has canceled or refunded approximately $1 billion in copayments to over 1.5 million veterans throughout the COVID-19 pandemic. As well, the American Rescue Plan (ARP) eliminated all out-of-pocket medical costs for veterans enrolled in VA health care and provided financial relief to veterans experiencing economic hardship during the pandemic. Now, the VA will streamline the process to request medical debt forgiveness, including offering an online option to apply and setting a simple income threshold to qualify for relief.

Finally, the CFPB will ramp-up its consumer education tools to help patients navigate the medical billing landscape, including more materials specifically designed to help patients access financial assistance.

What Providers Can Do

While many of these new provisions will help patients understand their rights, avoid predatory practices, and carry on financially despite unexpected medical debt, most of them don’t actually eliminate debt. Patients still owe balances, and physicians and hospitals must still collect payments.

“Just because it doesn’t appear on your credit report, it doesn’t mean you don’t owe the debt,” says Jenifer Bosco, a staff attorney at the National Consumer Law Center, a nonprofit organization that advocates for economic security for low income people. “Often people who are sued for medical debt or have their wages garnished – it’s not that they don’t want to pay their medical debts, they’re just unable to pay.”

Financial Hardship Policies

For those patients who truly can’t afford to pay, medical practices should have an established and well-communicated financial hardship policy as part of a patient-friendly approach to collections. According to MGMA, most healthcare organizations use 250 percent of the FPL as the cut off for qualifying for some type of charity care or hardship credit. CIPROMS works directly with clients to understand each practice’s policies and communicate those to their patients.

Good Communication

In other situations, patients might be able to pay if they knew their options. Bosco hopes these new government and private sector provisions will “help get at that problem of: How good of a job are we doing of screening patients who are lower income to figure out what other resources are out there to help them afford their medical expenses?”

Good communication is the first step. Delivering statements in patient friendly ways, including text messages and emails, in addition to mailed statements, meets patients where they are and makes it easy for them to understand what’s owed and who to contact for help. Automated reminder calls also can keep patients apprised of their balances and when payments are due, and a dedicated Call Center, like the one CIPROMS operates, can provide personalized solutions when patients call in.

“CIPROMS’ experienced Call Center team is empathetic to patients’ financial situations,” says Andrea Halpern Bryan, CIPROMS President & CEO. “We can present options that work for patients and still meet our goals to collect for our clients.”

Payment Options

But making contact with patients is only half the battle. Having an array of payment options also gives patients more flexibility to pay off their medical debt.

“You’ve got to meet the patient where they are and what is in their wallet,” says Karen Zupko, president, Karen Zupko & Associates, regarding younger patients who don’t write checks or may not own a desktop computer. “Chances are [some patients] are paying with their phone.”

CIPROMS works with clients to offer an online payment portal, financing, payment plans, and more.

“When payment plans are set up, we strive to work with patients as well as consider our clients’ financial policies so that an agreeable payment amount can be set,” explains Teresa Sams, CIPROMS Vice President of Operations. “If paying through InstaMed (our online payment portal), patients can set up recurring payments from their debit or credit card.”

Holding Third-Party Payers Accountable

Occasionally, what might appear as patient medical debt actually results from missing insurance information or improper insurance reimbursement. CIPROMS works with our clients and their patients to resolve third-party payer issues and keep patient balances to the minimum they actually owe.

“We value honesty and commitment of patients to resolve their unpaid balances,” Halpern Bryan says. “We hope patients hold their employer’s health plan, private insurance, or government insurance accountable to pay promptly for services rendered and rectify underpayments and inappropriate denials.”

Learn More

For more information about patient medical debt and steps being taken by the White House and credit reporting agencies to protect and educate consumers, check out the following resources: