In May 2013, new legislation, “Accuracy in Reporting Medical Debt Act”, was introduced that would allow consumers additional time to ensure that only accurate medical debt is reported to credit bureaus. The crux of this is to ensure that consumers have enough time to resolve medical billing questions before medical debt can be reported to the credit bureaus. The Accuracy in Reporting Medical Debt Act would delay the efficacy of a debt collector to report medical debt to a credit bureau if the consumer notifies the debt collector that:
• The consumer is continuing to work with an insurance company
• The consumer did not know that the debt existed
• The consumer has applied for financial assistance
About 20% of consumers who filed personal bankruptcy cite medical debt as the primary cause of their financial distress. With the current difficult economy, many Americans have been unable to pay their medical bills, often resulting in a Chapter 7 or Chapter 13 bankruptcy. In addition, with unemployment remaining high, many have lost their employer-provided health insurance.
Medical debts are, more often than other bills, quickly referred to collection agencies since amounts are often high and it is cost-prohibitive for medical centers to pursue delinquent clients themselves. Consumers with large amounts of medical debt often get into financial trouble when using a credit card to pay for costly medical exams and procedures.
Experts suggest checking with the doctor/hospital/clinic about payment plans. If you agree to a payment plan, be sure it’s one that you can afford. If your financial situation changes, keep your medical provider informed. Some health care providers have charity programs for which, often, the only requirement is that the patient is uninsured. These programs are not usually advertised but you may discover that financial help is available.
Medical debt collections can damage your credit score for years, even after the debt has been settled. As a result, consumers can be denied credit or pay higher interest rates when buying a home, obtaining a credit card or applying for a small business loan.
Medical bills differ from other bills in a number of ways. The bills are often submitted first to insurance so it can take considerable time to determine the amount actually owed by the consumer. Consumers must navigate a complex billing system and wait for decisions from insurance companies to find out what they owe. Thus, consumers often do not learn that they are delinquent on a medical bill until they hear from a collection agency, by which time their credit score has already suffered. Also, medical debt is atypical because consumers have little choice over whether to incur medical expenses or how much debt they accrue.
The Medical Debt Responsibility Act would alleviate this problem by barring consumer credit agencies from using settled medical debt collections in assessing a consumer’s credit worthiness. The bill would also necessitate the creditor or credit rating agency to delete the medical debt from the consumer’s record within 45 days from the day it is paid off.
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