A recent report found that more than half of the debt, more than 58%, on credit reports is actually medical debt. Although the debt may not appear that way on first glance, it is medical debt being reported by debt collection companies. Obviously, medical debt being reported in collections on your credit report will destroy your chance to qualify for credit, buy a home, buy a car, or rent a house, and even find a job. The study reinforces what we already know, medical debt is the single biggest driver of bankruptcy filings. To make matters worse, black and brown Americans suffer the most from this. The study has the National Consumer Protection Bureau contemplating rule changes that prevent debt collectors from reporting medical debt on credit reports.
When you really think about it, medical debt is not like other forms of debt because it is mainly involuntary. Nobody wants to go to the ER from getting into a car accident or getting sick or injuring themselves. To make things even more unfair, the refusal of Southern states to provide similar Medicaid benefits as found in most other states in the union puts otherwise similar people at a severe disadvantage credit wise just from living in the South.
Probably the biggest problem with reporting medical debt on credit reports is the amount of inaccuracies that come with medical debt. Often times, medical debt is the result of the insurance company not paying bills they are legally obligated to pay, medical providers not properly calculating amounts due after receiving payments from insurance providers, and a number of other issues that have nothing to do with the consumer or whether or not payments towards the medical debt was paid. Losing the chance to buy a house and build family wealth just because a health insurance company didn't pay a claim they were legally obligated to pay or because a medical provider didn't write off the unpaid balance as they may be required to do by law is a very tough result for any consumer to have to live with. Solutions are needed and holding health insurance and medical providers accountable for their mistakes is a great place to start.