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Why Medical Debt is Vanishing From Credit Reports · CareTalk: Healthcare. Unfiltered.

• 0:00
  Unpaid medical bills can bring down your credit score.
• 0:03
  That never seemed fair to me, and a whole lot of people seem to agree.
• 0:07
  The Biden administration is working to drop medical debt from credit reports, and Colorado has already moved ahead on its own.
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  So, what are the medical debt reporting changes, and will they make a difference?
• 0:27
  Welcome to CareTalk, America's home for incisive debate about healthcare business and policy.
• 0:32
  I'm David Williams, President of Health Business Group.
• 0:35
  And I'm John Driscoll, the president of Walgreens Health.
• 0:38
  It's time to join our ever growing community on LinkedIn, where you can access CareTalk content and interact with the hosts, and be sure to leave us a rating on Apple or Spotify while you're at it.
• 0:50
  We need those ratings, David.
• 0:52
  So, Dave, what is medical debt?
• 0:55
  Well, John, I'll start with one thing, the impact of it, which is the number one cause of bankruptcy.
• 0:59
  You know, medical debt is essentially.
• 1:01
  Any bill that a provider is sending to a patient that they don't pay, okay, that's what medical debt is and that they haven't paid over some, over some period of time.
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  Now, we've also got a health care system where you don't really know typically before you go in.
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  To any get any medical procedure where you're already stressed, and you may be a little afraid what things are going to cost, but excess medical debt or medical debt in general has affected over 100, 000, 000 people over the last 5 years medical debt.
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  Affects people of color disproportionately affects mostly the people who don't have coverage and is a particularly pernicious problem for those who really don't, who don't have necessarily the either the coverage, the ability to pay or the ability, frankly, understand it.
• 1:49
  And and Dave, let's, let's, let's, let's also point out the fact that.
• 1:53
  Kind of medical debt, unlike a car debt, doesn't necessarily even reflect what you generally have to pay.
• 2:00
  Do you want to just explain how that works?
• 2:03
  Yeah, I mean, so you talk about the ability to pay, but it's also sort of the willingness to pay, and even whether you consider it to be legitimate or not.
• 2:10
  You know, when I go in, and uh, if I'm going to buy a car, I have a general idea of what it's going to cost.
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  And if I want to get an expensive car, I go to a luxury car dealer.
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  And if I want to get a more, uh, reasonable car, I go to a, you know, the, the, the more reasonable one.
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  But when you go in for health care, first of all, you might not even intentionally go in.
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  You might be, you know, carried by an ambulance.
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  You don't know what the price is going to be.
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  And the price to you could be something completely different than what it is to somebody else.
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  And in fact, a different price than what your insurance company pays.
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  And sometimes something that ends up on your, uh, as a medical debt to you is because your insurance company didn't pay, either because they made a mistake, you didn't get a prior authorization.
• 2:51
  You know, or whatever.
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  So that's, that's what makes it wacky.
• 2:54
  No, it's a, but it, but what's interesting is it's really complicated even for the insurance companies and the providers, but what worries me is, you know, 50 percent of Americans are owing some form of medical debt.
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  And of that number, I think 25 percent you know, owe, owe more than 5, 000 of at least.
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  What they're told is medical debt and a little under 15 percent owing over 10, 000.
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  And you see how this can kind of drift into bankruptcy.
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  But what's being done about it?
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  This is obviously a topic we've been kind of annoyed about and critical of because of how complicated it is.
• 3:34
  for patients and families and because the actual amount that the providers eventually expect to get paid isn't the amount that's on the bill, even though the amount of the bill is what can put people into bankruptcy.
• 3:47
  But there actually has been some progress.
• 3:48
  Do you want to walk through that?
• 3:50
  Yes, of course.
• 3:51
  So historically, medical debt's been just like any other kind of debt, even though we have shown why it's why it's different.
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  There's a push now to make medical debt.
• 4:00
  Less prominent on credit reports or to remove it completely.
• 4:04
  Now, some of the things that happened here are more in the tweaks, which is that instead of saying, Hey, it's, it has been unpaid for six months and therefore it's delinquent actually wait longer, more like a year, which makes sense because a lot of times it takes that long to resolve a medical bill.
• 4:20
  They also don't use the credit.
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  They don't use medical debt in certain of the.
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  Uh, of the models that they use to determine how creditworthy somebody is.
• 4:28
  So there's this vantage scores and they have stopped, uh, including medical debts that are under 500, even though there's no regulatory requirements that they do that.
• 4:37
  Uh, but they've stopped, they've stopped doing that.
• 4:39
  So that's one of the things that's happening, John, that change has meant that 27 million people saw 7 million.
• 4:46
  Yeah, 27 million people saw their Vantage scores go up in the year or so since that's been in place.
• 4:52
  And that has a direct impact, John, because if people need to borrow money, let's say for a legitimate purpose, like buying a car, uh, that they may need for transportation for work, uh, now they have a better chance of being able to do it and at a more reasonable interest rate.
• 5:07
  And I think the other, the other thing I think it's worth, it's worth laying out, Dave, is that the biggest change in reduction of medical debt came from Obamacare, because if you want to really make sure that people don't fall into debt, the big, your biggest leverage point is, is coverage.
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  And so I think that was significantly helpful.
• 5:27
  Uh, the second is the policies that.
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  The credit agencies have voluntarily adopted because what you find is that credit scores drive how much you pay on debt, as you pointed out, just that changed, moved a lot of Americans out of the subprime category where they pay the most expensive amount of debt because.
• 5:50
  That's tied to the riskiness of repayment and the reality is when they've actually done the studies, high medical debt or debt that you owe to medical providers has very little to do with how willing you are to pay your debts in general.
• 6:07
  And so it was a, it was a flawed construct to consider that the same in the same category of people who aren't paying.
• 6:14
  There are other bills.
• 6:16
  And again, you know, I'm totally psyched that Colorado has taken it out completely, but this is still a pernicious problem because what happens is that when the debt is owed for a long time, hospitals and providers typically sell that debt to bill collectors who can be pretty tough on.
• 6:36
  On on patients and families, because that's that that's that's and they've got a lot of levers and in some cases in in the case of a very famous series of articles in the Wall Street Journal, even hospitals like Yale, New Haven and very prominent hospitals were putting people into into into bankruptcy who had very little means to pay it.
• 6:56
  You know, it's a system that clearly needs more oversight, clearly needs more forbearance, uh, for, for a lot of these patients who are vulnerable and who probably don't even understand the bills they're getting.
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  So, John, for the credit reporting part of it, the Biden administration has actually proposed eliminating all medical debt from credit scores, and they have given instructions to the Consumer Financial Protection Bureau in order to develop a plan for this for next year.
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  Colorado has moved ahead, as you say, and New York has a similar bill pending.
• 7:29
  So those would be two places where you're going to see Uh, and impact.
• 7:34
  And as you mentioned, when someone has a lower credit score, it prevents them from being able to, you know, to borrow money or to do it at a reasonable rate.
• 7:43
  And It's, it really does make a difference by itself, but as you can imagine, you talked about the different levers that debt collectors have when they're, when they're going after these bills and they don't like it, uh, to see the removal of credit scores from, excuse me, from the medical debt, from the credit scores, because it takes away one of those.
• 8:05
  It's cheaper rather than suing someone just to say, I'm going to report you to the credit bureau.
• 8:10
  Well, it's, it's even weirder than that.
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  It doesn't surprise me that the bill collectors want more bills to collect.
• 8:17
  But what surprised me was the dermatologist who sued.
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  The credit agency suggesting it somehow they would, their DERM bills would be less likely to be paid.
• 8:27
  There is a, there is a, from a provider perspective, there is a, they also deal with a lot of complexity in terms of reimbursement with insurers.
• 8:36
  They all have what they consider a bad debt problem, but I think part of this is reconciling the fact that The, there's, there are probably, there are clearly categories of people who with low or no coverage, uh, where they, the, the, the system hasn't caught up with people's inability to pay, uh, you know, the, as an economic practicality, hospitals and providers typically unload or sell their bad debt.
• 9:04
  To bill collectors at pennies on the dollar.
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  And so what's amazing is that credit ding or burden, the bill unpaid will show as a 10 bill when it's really only going to be sold for You know, a dollar a dollar or less, uh, at the time, a penny to a dollar when it's actually sold to a bill collector.
• 9:28
  It's we have a crazy system, which is really putting the patients in the middle.
• 9:32
  And I'm I'm excited that the wonky health care people in the Biden administration are pushing it.
• 9:38
  But you kind of expect the providers to help.
• 9:41
  Create a solution for the patients here.
• 9:43
  Dave.
• 9:43
  So I think what happens, I mean, one of the things that you've heard in the same breath is the bill collectors talking about how they don't think this is good is your provider saying, well, maybe they're going to demand more payments up front, you know, which I think they kind of, that's going to turn away business for the most part.
• 9:59
  Let's look at it from the provider standpoint, John, when, when they, Hey, Do a procedure, see a patient and they submit a bill.
• 10:06
  They really don't know how much they're going to get paid or if they're going to get paid because the different health plans, uh, pay different amounts.
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  Medicaid is different than Medicare and there's different rules.
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  And so they look at it a couple of ways.
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  One is that, you know, you put out a number.
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  If I, if I don't ask for a bigger number, I'm not going to get it.
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  And so that that's the number that the patient sees if it ends up on their, their desk.
• 10:27
  And then sometimes they say, you know what, I know we have a lot of bad debt.
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  And so, I'm going to charge the patient, say, 1, 000 for something that could be 300, because I know only 30 percent of them are going to pay.
• 10:38
  So then, it's on the sucker, who actually pays the full amount, uh, and the provider may look at it and say, well that, you know, that's okay, I get 30%.
• 10:46
  Now it happened that I got it from the one person, you know, covering all these, all these other folks.
• 10:50
  It's, it's, it's not a positive situation.
• 10:53
  I mean, I, I think just to put some context around it, you know, it, it, the reach, I think, it just.
• 10:59
  The top 100 hospitals by revenue in the United States charged patient seven times the cost on average.
• 11:09
  So think about that, Dave.
• 11:10
  You compare cost to charges.
• 11:13
  It's a 7x.
• 11:14
  It's crazy.
• 11:15
  And the other thing that Again, it's not all hospitals are predatory, but I think it's, you know, uh, just ar around 20 19, 20, 20 10 hospitals filed 97% of all the court actions against patients.
• 11:31
  Uh, which, which, which?
• 11:32
  It's 40,000 lawsuits, but it's only 10 of the thousands of hospitals we have in, in the us.
• 11:40
  But these are nonprofits, you know, and they're required.
• 11:43
  All to provide some element of community support, not and and and financial assistance.
• 11:49
  I mean, this is this is clearly an area where a little bit of targeted oversight and and and and and sensible forbearance because all the other hospitals are not filing lawsuits against patients for charges that are.
• 12:03
  You know, 5 to 10 times what things cost.
• 12:06
  This, this, this is a, um, this, this, this, this is a system that is really, really needs to be fixed.
• 12:13
  And I think the credit score is, is, is, is, is a start, but we almost need a, uh, you know, a, uh, a medical debt campaign where we fix this system, because a lot of this stuff is outrageous.
• 12:25
  And there are a lot of innocent.
• 12:27
  Unknowing individuals to your point the sucker who pays, uh, but also a lot of a lot of the folks are suffering I mean, I the the burden on on those people who who some who who are in that category Of coverage they make more than medicaid may or may not be in a place where there's obamacare Uh, are between coverage gaps.
• 12:46
  I mean, a significant number of people do fall into gaps between the time that they lose a job and they get another job.
• 12:54
  They have a medical emergency.
• 12:55
  It can be devastating and it, and it, and it, we shouldn't, we shouldn't, we shouldn't put them into the, in, in the court because we, they're, they can't pay a bill that doesn't even reflect what the, what the costs are.
• 13:05
  Well, John, having this conversation may not be driving up your credit score, but it seems to be driving up your blood pressure.
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  And so I'm going to say.
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  That's it for yet another episode of Care Talk.
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  We've been talking today about medical debt and changes to credit reporting.
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  I'm David Williams, President of Health Business Group.
• 13:22
  And I'm John Driscoll, the President of Walgreens Health.
• 13:24
  If you like what you heard or you didn't, please subscribe on your favorite service.