News: Three credit agencies change how medical collection debt is reported

Big changes are coming to how patient medical collection debt is reported on people's credit reports. As of July 1, 2022, paid medical collection debt will no longer be included on consumer credit reports, according to a joint statement from Equifax, Experian, and TransUnion.

HealthLeaders reported that it'll also take longer for unpaid medical collection debt to appear on a consumer's credit report. Instead of six months, medical collection debt won't appear until it's been unpaid for a year, giving consumers longer to work with insurers and healthcare providers to address their debt before it's reported on their credit file.

This alone could help improve poor patient financial experiences for organizations.

In addition, in the first half of 2023, Equifax, Experian, and TransUnion will no longer include medical collection debt under at least $500 on credit reports.

These joint measures will remove nearly 70% of medical collection debt tradelines from consumer credit reports.

They agencies said that the changes stem from the COVID-19 pandemic and "a detailed review of the prevalence of medical collection debt on credit reports."

In their statement about the changes, the agencies point to research from the Kaiser Family Foundation which shows that two-thirds of medical debts are the result of a one-time or short-term medical expense arising from an acute medical need.

Indeed, a new research brief from the Peterson-KFF Health System Tracker analyzed the Survey of Income and Program Participation to understand how many people have medical debt and how much they owe.

They included medical debt at the individual level for adults who reported owing more than $250 in unpaid medical bills (which they define as "significant" medical debt) as of December 2019, HealthLeaders reported.

The analysis found:

• 23 million people (nearly 1 in 10 adults) owe significant medical debt
• 6% of adults in the United States owe more than $1,000 in medical debt
• 1% of adults owe medical debt of more than $10,000

Currently, the Consumer Financial Protection Bureau estimates that $88 billion in medical debt is reflected on Americans' credit reports. However, that number might be extremely underreported for many reasons.

For instance, "when people pay for a medical expense on a credit card or fall behind on other payments in order to keep up with medical bills" medical debt can be masked as other forms of debt, the Peterson-KFF Health System Tracker brief notes.

Editor’s note: This article was originally published by HealthLeaders.