Industry Voices—The White House and credit bureaus agree: Medical debt is not really ‘debt’

In an important win for healthcare consumers, the three major credit reporting bureaus announced they are changing their rules around medical debt so that the majority of unpaid medical bills will no longer count against credit ratings. 

A few weeks later, Vice President Kamala Harris announced she will lead an effort by the Biden Administration to end predatory collections practices in healthcare. 

These are tremendous steps in the right direction to help the one in three Americans saddled with medical debt. Most importantly, Equifax, TransUnion and Experian—as well as the White House—with all of their tremendous influence, have acknowledged that medical debt is different from other types of debt. 

As I’ve argued before, “medical debt” could be more accurately called “healthcare oppression.” It’s not a result of people overspending or making poor decisions. The patient shouldn’t be punished because the broken business side of our healthcare industry has failed them. 

This shift from the credit bureaus and attention from the White House is the tip of the spear. Everyone across the healthcare industry has an opportunity to build on this momentum to change the narrative around “medical debt” and eliminate its causes. Here are some potential next steps. 

What the new rule does—and doesn’t—do 

Highlights from the new rule from the credit bureaus include: 

  • Removing bad medical debts that have been paid from credit reports 
  • Giving consumers a year to work with providers, etc. before they can report the debt 
  • Eliminating credit reporting for medical debts under $500 (in 2023)  

While five- and six-figure medical debts make headlines, these days, there is plenty of space for consumers with insurance to accrue medical debt within their deductible. Some 72% of medical debts are less than $10,000. 

Eliminating medical debts under $500 from credit reports is significant, and I applaud the credit bureaus for doing it. Do I wish the threshold were higher? Absolutely. But more fundamentally, the cost of care should be lower so that fewer patients go into debt in the first place. 

The road to a fair cost of care 

The White House is kicking off its initiative by requesting “data from more than 2,000 providers on medical bill collection practices.” This is the perfect place to start. There is currently no aggregate of data to help uncover the underlying causes of medical debt. The fact that this type of investigation is necessary proves that “medical debt” wasn’t fair to begin with. 

Collecting that data won’t be easy. Many hospitals have yet to comply with the Price Transparency Rule that’s been in effect for more than a year. 

Once the data is collected, rather than focusing on bill collection practices—the symptom of the disease—the White House and the healthcare industry will need to look at the causes of medical debt. These include underutilized financial assistance programs, billing errors, and a high cost of care overall. 

While hospitals are the gatekeepers of the data needed to attack this systemic issue, fixing it will require collaboration between all types of healthcare organizations including health plans, providers, PBMs and more.  

While to some extent we’re flying blind until the hospital data becomes available, other types of healthcare organizations need to make a commitment to do all they can to address medical debt. Health plans, for instance, don’t track how many of their patients on high deductible health plans go into medical debt. This information would be a valuable piece of the puzzle.  

The White House and credit bureaus have confirmed what we already knew: Medical debt isn’t the patients’ fault. Kamala Harris, Equifax, TransUnion and Experian are doing their part. But the healthcare industry made this problem, and we all have an obligation to fix it. 

Michael Waterbury is CEO of Goodroot, a community of companies committed to reinventing healthcare one system at a time.