Getting sick or injured can often result in a heavy financial burden for many families, leaving them with mounting medical bills. Aggressive debt collection and coercive credit reporting can make matters worse by pressuring families to pay medical bills. On top of the initial medical crisis, this financial distress can make it even harder for a family to recover.
The Department of Veterans Affairs (VA) took towards protecting veterans and their families by announcing a change to when it will report information on outstanding medical bills to consumer reporting companies. Under the VA’s new rule, the agency will only report a medical bill after all other collection efforts have been exhausted, largely eliminating coercive credit reporting as a debt collection technique. Coupled with the other announced changes by the VA, which provide additional protections to the most financially vulnerable veterans, these changes will result in a 99% reduction of unfavorable debt that it reports to consumer reporting companies.
Changes to VA’s debt collection practices
Under its new rule, the VA will only report medical debt that meets all of the following standards:
- The VA has exhausted all other debt collection efforts,
- The VA has determined the individual responsible is not catastrophically disabled or entitled to free medical care from the VA, and
- The outstanding debt is over $25.
As a result of the VA’s action, veterans who incur medical bills with the VA no longer need to fear that those medical bills will hurt their credit in most circumstances. After this change by the VA, unpaid bills of less than $25 will not be reported to consumer reporting companies; meaning, they won’t drag down veterans’ credit scores. Veterans entitled to free medical care from the VA will not find medical bills for that care on their credit reports. Fundamentally, the VA’s action decouples the collection of medical bills from coercive credit reporting. This action by the VA sends a resounding message to the healthcare industry that coercive credit reporting is wrong.
Our research shows that, generally, the existence of medical debt on a credit report has not been a good predictor of whether or not people will pay future credit. Medical debt is generally not debt that families can avoid taking on or can shop around for. In many circumstances, patients and families confronting a medical bill are caught in a doom loop between the insurer and the medical provider. Patients and their families looking at a bill for medical services can have trouble identifying whether the billed services were actually received and whether the correct amount was billed. Using the credit reporting companies to force payment of bills that may not even be owed hurts families and generally does not provide useful information to users of credit reports.
Many health care providers struggle to make sure patients are billed the correct amount, after accounting for insurance payments, other third-party reimbursement agreements, negotiated discounts under insurance plans, and available financial assistance. The VA itself has faced those challenges in the past and has taken corrective actions to address them, and its actions recognizes that patients and their families should not be forced to pay the cost of this complexity. We look forward to other medical providers taking similar steps.
The VA is continuing to put veterans and their families first, and this sets a clear and important precedent for the health care industry.
Protections against surprise medical bills
As of January 1, 2022, families also have additional protection from surprise medical bills that may result from an out-of-network provider or facility. Consumers are often rarely informed in advance of the costs of medical treatment and have little ability to shop around.
Under the No Surprises Act, limits have been set for how much of the unexpected bill you have to pay. If a debt collector is collecting debts that you don’t owe or reporting debts that you don’t owe to the credit reporting companies, that may violate the Fair Debt Collection Practices Act or the Fair Credit Reporting Act.
In other words, if you don’t owe the debt, a debt collector cannot tell you that you have to pay it or try to collect it from you.
Getting help with medical bills
If you’re struggling with mounting medical bills, there are resources available to assist you.
- by visiting the Centers for Medicare and Medicaid Services or by contacting the No Surprises Help Desk at (800) 985-3059.
- Visit Ask CFPB to find out what you should know about debt collection and credit reporting if your medical bill was sent to collections.
- You can submit a complaint to the CFPB online or by calling (855) 411-CFPB (2372) if you are having an issue with debt collection. We’ll work to get you a response from the company.
- For questions about medical and pharmacy , veterans can contact VA’s Health Resource Center at (866) 400-1238.