The Biden-Harris administration on Monday announced a four-part plan to “ease the burden of medical debt” for American families, the White House said in a release, a move the administration hopes will give “more American families the opportunity to thrive.”
Vice President Kamala Harris detailed the reforms alongside other members of the administration in a speech from Washington on Monday afternoon.
"I have met so many people in so many communities in our nation who are struggling with this burden, many of whom are managing an illness or an injury at the same time and who stay up at night, staring at the ceiling, wondering if they will ever be able to pay off their medical debt," Harris said. "No one in our nation should have to endure that."
"No one in our nation should have to go bankrupt just to get the health care they need," she added. "And that is why our administration is prioritizing this issue of medical debt."
The reforms focus on four key areas: holding health care providers and debt collectors accountable, improving the federal government’s underwriting practices for those with medical debt, supporting veterans struggling with medical debt or other health-related hardships and helping American consumers know and understand their rights when it comes to medical care.
“Medical debt is now the largest source of debt and collections – more than credit cards, utilities and auto loans combined,” White House press secretary Jen Psaki told reporters earlier Monday, adding: “Getting sick or taking care of loved ones should not mean financial hardship for American families.”
Medical debt is a problem impacting millions of Americans. A recent study from the Kaiser Family Foundation found that nearly 23 million people – or nearly one in 10 U.S. adults – currently owe $250 or more for health-related costs, defined as “significant medical debt,” by the organization.
Around 16 million individuals owe at least $1,000 in medical debts, per KFF, with another 3 million people owing upwards of $10,000. But the debt is not spread equally amongst all demographics, as Black Americans are “far more likely than people of other racial and ethnic groups to report significant medical debt.”
In order to hold companies accountable, the Department of Health and Human Services is requesting data from over 2,000 providers to evaluate information on collection practices, lawsuits, financial assistance, debt buying practices and other factors that might “impact access and affordability of care and the accrual of medical debt,” per the White House.
“The Department will, for the first time, weigh this information in their grantmaking decisions, publish topline data and policy recommendations for the public, and share potential violations with the relevant enforcement agencies of jurisdiction,” the White House added.
The administration is also taking steps to ensure that the credit scores of individuals with medical debt do not suffer, building off of a private-sector announcement in mid-March from the country’s three major credit reporting agencies — Equifax, Experian and TransUnion — that they would remove nearly 70% of medical collection debt from consumer credit reports.
Starting July 1, paid medical debt will no longer be included on credit reports. Currently, it can remain on reports up to seven years, even after being paid off.
The agencies also are extending the time period from six months to a year before unpaid debt appears on credit reports, giving people more time to work with insurance companies or health care providers to resolve the debt.
And in the first half of 2023, Equifax, Experian and TransUnion will stop including medical debt under $500 on credit reports.
"This is an important first step forward," Harris said of the companies' announcements. "And one that the president and I applaud. Credit reporting agencies must continue to work toward completely erasing the effects of medical debt on credit reports and our administration intends to keep an eye on that progress."
Monday’s announcements from the government “go beyond the private sector announcements,” per the White House, as it will provide guidance to all credit reporting agencies on removing medical debt as a factor in underwriting, or the process by which a lender reviews an applicant's credit and decides whether to give them a loan.
Beginning Monday, the Department of Agriculture will stop including recurring medical debts when calculating borrower repayment options for its homeowner programs. The Department of Veterans Affairs will similarly “will also review its underwriting guidelines to ensure we minimize or eliminate medical debt reporting as a proxy for creditworthiness, wherever possible,” per the White House.
The VA has either canceled or refunded $1 billion in copayments to veterans since the start of the pandemic, the administration said, and will now streamline the process for lower-income veterans to request medical debt relief online.
"The bottom line is that vets always step up for this country when we need them most," VA deputy secretary Donald Remy said at Monday's White House event. "But COVID is one of those times when veterans have needed us the most, when vets need us to step up for them."
Finally, the Consumer Financial Protection Bureau is also launching an initiative to help all Americans understand the complex systems that make up medical billing and payments, and the agency encourages individuals who experience issues with aggressive debt collectors, coercive credit reporting or other problems to its complaint portal.
"Our administration is also taking action against the bad actors, the folks who violate consumer's rights to force people to pay medical debt," Harris said Monday. "Some debt collection companies harass consumers with dozens of phone calls a week. [...] Some who pose as law enforcement officials or threatened consumers with jail time. That sort of harassment and intimidation is unethical. And often, it is illegal."
Spectrum News' Ryan Chatelain contributed reporting to this article.