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March 1, 2016

National Patient Advocate Foundation Applauds Medical Debt Relief Act

2016-03-01 | March 1, 2015

Washington, DC – National Patient Advocate Foundation (NPAF), a national nonprofit organization dedicated to ensuring the patient’s voice is heard in support of access to quality, affordable health care, today applauded the introduction of the Medical Debt Relief Act.

Introduced by Senator Jeff Merkley (D-OR), this crucial legislation would require that no new medical debt be included on a credit report until 180 days after the patient has been notified of the alleged debt, giving a consumer the sufficient opportunity to contest, pay or otherwise settle the debt before it adversely impacts their credit score.  It would also require that information related to a fully paid or settled medical debt be removed from a credit report within 45 days of the date it was fully paid or settled.

In the current system, not only does including medical debt cause further hardships on patients already struggling with their health, but it also makes credit scores less accurate.  Medical debt is not predictive of a consumer’s credit-worthiness: when agencies include medical debt into credit scores, it inaccurately lowers scores by approximately 20 points below consumers’ actual future creditworthiness.

“We see the impact of medical debt on patients every day and have long advocated for a more equitable system,” said Alan Balch, CEO of NPAF.  “We commend Senator Merkley for standing up for patients nationwide by introducing this vital legislation. If it becomes law, medical debt would have a lower impact on scores, commensurate with the risk it represents and leading to a more predictive score.  More importantly, patients will be able to focus on recovering their health instead of worrying about losing their cars, home or even declaring bankruptcy because of the unfair impact of medical debt.”

An estimated 20 percent of all medical bills that are reported to collection are the result of a billing or other administrative error, affecting the credit of about 7 million Americans.  Yet it is very difficult to remove these errors from a credit report. A bill can go to collections even as the patient tries to set up a payment plan with a provider or insurance company. This credit information can stay on consumers’ credit reports for up to seven years, lowering their credit scores and dramatically affecting their ability to open a new loan or raising the offered interest rate, and potentially costing thousands of dollars.