FOR PROFIT HEALTHCARE
Inaccurate medical bills are trapping Americans in a 'doom loop' costing them $88 billion last year, Biden's top consumer watchdog finds

asheffey@businessinsider.com (Ayelet Sheffey) 

 A person walks past the emergency room of a hospital in New York, on December 13, 2021. 

Wang Ying/Xinhua via Getty Image

The CFPB found $88 billion in medical debt landed on consumers' credit reports last year.

Patients were often stuck with big bills from emergency situations that were processed inaccurately.

Medical bills that end up in collections can reduce access to credit and lead to avoidance of medical care.

Paying off medical debt is difficult on its own, and President Joe Biden's top consumer watchdog just found that billions of dollars of that debt hurt Americans' credit reports last year.

Some of those bills weren't even accurate.

The Consumer Financial Protection Bureau (CFPB) released a report on Tuesday that estimated $88 billion in medical debt landed on consumer credit reports as of June 2021. According to the agency, the "complicated and burdensome" medical billing system in the US has not only pushed patients into debt they struggle to pay off — it's also a result of errors in hospital bills that are difficult to resolve and reflect poorly on credit scores.

"When it comes to medical bills, Americans are often caught in a doom loop between their medical provider and insurance company," CFPB Director Rohit Chopra said in a statement. "Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe."

Total medical debt in the US stands at $140 billion, according to the Journal of the American Medical Association, and it continues to grow. While lawmakers have taken steps to act on the issue, like making surprise medical billing illegal early this year, patients continue to bear significant medical costs for often unavoidable emergency health situations. Some advocates say medical debt shouldn't even be included on a credit report as it doesn't reflect a choice the consumer made.

That's why the CFPB says it will work with credit reporting companies to ensure Americans aren't suffering unnecessary financial costs for vital healthcare.

Here are the other main findings from the CFPB's report:
About 20% of US households reported having medical debt, and data on that debt appeared on 43 million credit reports.
Most medical debts on credit reports are under $500 each, but many people have multiple.
Overdue medical debt is more prevalent among individuals of color and is more common in the Southern US regions, where Medicaid coverage hasn't been expanded.
As of 2021, medical debt was the most common debt collection type on credit reports.

The CFPB also noted that medical debt appearing on credit reports is particularly problematic given that type of debt does not indicate whether an individual might fall behind on other payments in the future. Given most of the debt is unavoidable, and is incurred for emergency medical situations, taking on that debt is often not a choice the patient makes.

"Medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous," the report said.

To ensure credit reporting does not further hurt patients with medical debt, the CFPB said it will take action, if necessary, against companies that report inaccurate information, work with other government agencies to ensure patients do not pay more than they owe, and determine whether unpaid medical bills should be included in credit reports.

The CFPB has been overseeing medical billing over the past decade, and this is only the latest action it's taking to protect American patients. In 2014, a CFPB a 2014 report found medical debt was typically not a good indicator of whether someone would default on future debt, partly because of most of that debt resulted from emergency circumstances.

More recently, the Department of Veterans Affairs worked with CFPB to allow most of veterans' medical debt to go unreported to credit bureaus, following years of unfair processing of veterans' debt that left them paying amounts they didn't owe.