Earlier this year, Equifax, Experian, and TransUnion announced plans to provide relief for roughly 16 million Americans with medical debt—but the new policies may not benefit those who need it most, Aneri Pattani writes for NPR's "Shots."

Policy changes may not provide sufficient relief for Americans with medical debt

Under the new policies, which will go into effect in 2023, the credit agencies will remove any paid debts or individual bills under $500 that were sent to collections, even if they are unpaid.

"This doesn't wipe out what people owe, but the idea is to remove the black mark of collections from their credit so they can more easily reach milestones like qualifying for a car or home loan," Pattani writes.

While the new policies are expected to benefit around 16 million Americans, a federal report released this summer suggests that the policies may not benefit the people who need it most.

"Although the credit reporting companies have trumpeted this as a big change, the fact is they're just removing the small stuff," said Ryan Sandler, co-author of the report and senior economist with the Consumer Financial Protection Bureau. "They're not maybe doing as good of a thing as their press releases would like you to believe."

According to a national Kaiser Family Foundation (KFF) poll, 56% of Black adults and 50% of Hispanic adults currently have debt from medical or dental bills, while just 37% of non-Hispanic white adults reported having medical or dental debt.

A separate study published in 2021 found that low-income communities and Southern states without expanded Medicaid had the highest levels of medical debt.

However, "the population that is going to have all their collections removed is a little more likely to live in majority-white neighborhoods and high-income neighborhoods," Sandler noted. Typically, collections that fall under the $500 threshold are the result of an unpaid copay or coinsurance—and insured individuals are more likely to be white and richer, Sandler added. 

How medical debt makes patients feel like they are 'being punished for being sick'

In 2014, when Penelope Wingard's doctors told her that her breast cancer was in remission, she was relieved. However, because she was no longer undergoing active breast cancer treatment, she no longer qualified for a program that offers North Carolina residents temporary Medicaid coverage during active cancer treatments. 

"Wingard became uninsured," Pattani writes. "She'd survived the medical toll, but the financial toll was ongoing."

After her cancer went into remission, mounting bills for follow-up appointments, blood tests, and scans quickly added up. Eventually, her oncologist told her he would not see her again until the debt was paid down.

"My hair hadn't even grown back from chemo," Wingard said, "and I couldn't see my oncologist."

Her medical debt drove her credit score so low that she has struggled to qualify for any loans and faced difficulties applying for jobs and apartments.

"It's like you're being punished for being sick," Wingard said.

Currently, North Carolina has not expanded Medicaid, which means that Wingard, who is 58 and does not have young children, cannot qualify for public insurance despite her low income. Wingard currently estimates that her total medical debt is over $50,000.

According to the KFF poll, almost 20% of Americans with medical debt do not believe that they will ever be able to pay off the amount they owe.

Another recent study found that many individuals with medical debt are often unable to pay for basic utilities, which increases their housing and food insecurity, and can "contribute to a downward spiral of ill-health and financial precarity."

Notably, when Wingard tried to purchase private insurance several years ago, she couldn't afford to pay the monthly premiums, which were over $200.

"That left her on the hook for bill after bill after bill. Her credit report shows five pages of notifications from collection agencies representing doctor's offices, hospitals and labs," Pattani writes.

"For Wingard, it has hurt her ability to get a job," she adds. "She says two employers told her that poor credit shows up as a red flag on background checks and has led her to be turned down for positions."

According to Mark Rukavina, a program director with nonprofit health advocacy group Community Catalyst, employers often use credit reports as a "proxy on character."

For example, when two candidates have equal qualifications, but one has low credit or multiple unpaid debts, employers sometimes believe that applicant is less responsible—even though research suggests that medical debt is not an accurate predictor of how likely a person is to pay their bills.

"Although the new policies from credit companies are unlikely to improve Wingard's situation, consumer advocates say there are signs that society is starting to think about medical debt differently," Pattani writes. (Pattani, "Shots," NPR, 10/6)