What a new federal rule on medical debt will do and won’t do for consumers

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Neal Meredith tells KSL’s Matt Gephardt that despite receiving assurances from both his medical insurance provider and the hospital he was authorized for an urgent procedure, it turned out that he wasn’t. (Meghan Thackrey, KSL TV)

SALT LAKE CITY – Over the years, I've spoken to many Utahns facing medical bills large enough to force tough choices. Now, a new study shared with the KSL Investigators by LendingTree finds more than half of people with medical debt skipped or delayed medical care because of the costs. “Medical bills are forcing millions of Americans into debt,” said LendingTree’s chief credit analyst, Matt Schulz. He said medical debt is not a debt that typically gets paid off in a month or two. In fact, 17% of the folks surveyed by LendingTree who have medical debt say they’ll be saddled with it for at least five years. Half of those with medical debt have had an account sent to collections. Worse, much of that debt is inaccurate. “Medical bills are filled with errors,” Schulz said. This week, I reported Neal Meredith’s story. He faced nearly $80,000 in medical debt over a mix-up on whether his hospital was in-network.Fixing errors and appealing denials can take a long time, so now the Consumer Financial Protection Bureau has finalized a rule to remove medical debt when lenders ask for a credit report. “Lenders won't be able to consider it when they're looking at whether to lend to you or not,” Schulz said. “And that's a really significant thing.” The CFPB said medical debt isn't a predictor of creditworthiness, writing “consumers often have limited ability to control the timing and types of medical services that are required.” Now, for consumers, the new rule could mean a jump in their credit score by up to 20 points. “Twenty points may not sound like all that much, but it can be a really significant thing,” Schulz said. “Especially, if that 20 points pushes you from fair credit to good credit or good credit to very good credit. Go from one, tier to the next can really save you an awful lot of money in terms of interest, rates and fees and even just general access to credit.” Medical debt will not simply vanish into thin air when this rule takes effect, which is expected in March. Folks will still owe what they owed before. But this rule might save them from getting denied a car loan, mortgage or some other type of credit while paying their medical bills.