Good afternoon and thank you for having me. The practices used to bill and collect for medical services are enormously consequential for American consumers because they not only impact their financial lives, but they also can have profound effects on patients’ health outcomes.
Today, I want to discuss billing and insurance complexities that face both medical providers and patients, the consumer effects when allegedly unpaid medical bills are placed into collections and onto credit reports, and a new CFPB report on the dangers posed to patients by medical credit cards and installment loans.
The CFPB is closely looking at medical billing and collections, in part, because of its widespread effects on American families. In a report published last year, the CFPB found that 43 million consumers had medical bills on their credit reports, and that all together American families owed around $88 billion in medical bills. The contagion of medical debt affects people’s ability to access affordable credit, find quality housing, or even obtain a job.
One of the findings from the CFPB’s research is that many consumers report that the medical tradelines on their credit reports are not accurate – often because the bills should have been covered by insurance or financial assistance, the dollar amount or charged procedures are not correct, or the patient has already paid. These findings raise concerns that consumers, in some cases, are being coerced into paying bills that they may not even owe.
Of course, we are seeing tangible improvements. The three nationwide credit reporting companies eliminated medical tradelines below $500 from consumer reports – though we do anticipate some challenges which I will get into later - and our research shows many debt collectors are choosing not to report medical bills to consumer reporting companies.1
We have also prioritized discussions with the business community, including hospitals, labs, outpatient facilities, payors, and practitioners, to identify ways we can reduce the stress of medical debt and coercive credit reporting. We are looking for ways to work together to improve patients' and consumers' financial health and outcomes.
Billing and Insurance Complexities
We all recognize the difficulties healthcare administrators face. Top among them is the constant back-and-forth you face when dealing with an insurance company trying to avoid paying for patient care. Smaller or rural hospitals, especially, can be at the mercy of insurance companies, which results in being paid less than the investment required for appropriate care.
Unfortunately, patients all too often can be put in the middle of insurance and billing disputes, and they can be left holding the bag – forced into paying the bills that arrive at their doors or having to conduct full-time detective work to understand procedure codes, whether a provider was in-network or out-of-network, whether a procedure was inpatient or outpatient, or, in the case of patients with multiple insurers or insurance plus Medicare, such as older Americans, what company or agency is supposed to pay the bills.
Allegedly Unpaid Medical Bills Appearing on Credit and Consumer Reports
When billing discrepancies or insurance disputes remain unresolved, patients may find their bills transferred to third-party debt collectors and reported on their credit histories and reports.
Once that debt appears, patients and families can face adverse events such as decreased access to credit, costly and lengthy collection litigation, and an increased likelihood of bankruptcy.2
In fact, one 2019 study found 66.5 percent of all personal bankruptcies were tied to medical bills.3
While it’s a step in the right direction, we should not expect the recent removal of medical bills under $500 from credit reports to greatly reduce the overall effect of medical bills on the rate of personal bankruptcy. Our own research indicates that even with the removal of medical bills, about half of all consumers who currently have medical collection tradelines on their credit reports will continue to have medical collections reported to consumer reporting companies.4
Coercive Credit Reporting
Our research has shown that medical collections are less predictive of people’s ability to repay future loans than other types of collections or payment information, and that reporting medical collections can serve as a way to coerce people into paying medical bills they may not or should not owe.
Along those lines, our market monitoring and analysis have raised significant concerns about the accuracy of medical bills being collected as debts: complaints to the CFPB suggest that debt collectors contact consumers over bills that have already been paid or resolved. In fact, complaints about collection on medical bills that were not owed increased by 31 percent from 2018 to 2021, and, more broadly, medical bills represent 15 percent of all complaints submitted to the CFPB about debt collections.
In part, this is because the complex system of medical billing practices makes it impossible for patients and their families, already struggling with the stress and anxiety of the need for medical care, to ascertain the accuracy of medical bills. Payment assistance programs, required by law as a condition of the nonprofit status of many hospitals, can be hard for patients to access and are poorly advertised by medical providers.
Coercive credit reporting forces patients and their families to pay bills whose accuracy they doubt. And, for those families who refuse to pay a bill whose accuracy they question, they can find their credit ruined and their prospects for employment and housing dimmed.
The CFPB’s Medical Credit Cards and Financing Plans Report
Today we published a report on the use of payment products like installment loans and medical credit cards to cover medical expenses. I want to bring some key issues to your attention that I hope you will consider when deciding whether these products are right for your hospitals, healthcare systems, and the patients for whom you care.
The companies that sell these products market them and their benefits to you - not to patients. There is a reason for that: you stand to benefit far more than patients. Medical payment products can offer the promise of cost savings, payments within a few days, administrative ease, and a way to minimize financial risk.
But our research illustrates that patients can be worse off.
Among other findings, our research shows that specialty medical credit cards and installment loans have less favorable terms than other general credit products and can even get patients and their families stuck owing significant amounts of deferred interest.
Deferred interest is the golden ticket marketed with many of these products. Understandably, deferred interest plans can be appealing to patients; however, if consumers cannot repay within the promotional period, they become stuck with a higher-than-average interest rate, the principal balance, and the back interest added onto the principal.
Unlike in other purchase categories, where consumers can anticipate their abilities to pay back deferred interest loans, medical charges are rarely known in advance. Patients cannot say, for instance, please stop care once my tab hits a certain mark. Patients may be taking these products because they cannot afford the care received and not because it is an affordable method of payment.
While the benefits of these products may be alluring for many of the hospitals you represent, the long-term effects of financialization on medical payments are harmful to the entire healthcare ecosystem. Turning healthcare providers into the sales team for credit card companies erodes patient trust and can interfere with a patient’s important healthcare decisions.
I urge all of you to be vigilant in terms of billing and debt collection practices and the types of credit-based repayment plans you offer to patients. When you see concerning patterns, I encourage you to share them with us.
The CFPB plays an important role in monitoring consumer markets like medical debt and in addressing unlawful activity in areas like debt collection, credit reporting and predatory lending products. But the problems that show up in our consumer complaints and investigations often start with decisions made long before medical bills land in the hands of a debt collector or with a credit reporting company.
It is critical that we examine the complex and confounding medical billing practices that make it possible for inaccurate or misleading information to become the basis for coercive debt collection and credit reporting tradelines.
The CFPB will be working with our colleagues across federal and state governments to understand this problem better and address it, and we look forward to working with you to protect patients in our country.