New Federal Ruling Bans Medical Debt from Credit Reports

Under the new regulation, credit reports can no longer include past-due medical bills, prohibiting lenders from using medical information in their lending decisions — putting an end to a practice that has unfairly targeted millions of Americans, according to the CFPB. AARP backed the rule on the basis that medical debt is a unique type of debt that people do not choose to take on — and because research shows unpaid medical bills are not a good predictor of someone’s creditworthiness. Further, many consumers have found medical billing inaccuracies on their credit reports.

The new rule will likely draw opposition from credit-reporting agencies, which criticized the idea when the CFPB proposed it in 2023.

​​​Unlike other types of borrowing, medical debt is often the result of an unexpected illness or accident. “The new rule will help ensure that older Americans can focus on recovering from illness and injury rather than worrying about debt collectors and how medical debt can negatively impact their credit scores and financial security," he says.

Older adults on Medicare are not immune from unpaid medical bills since coverage gaps can lead to surprise out-of-pocket costs. A 2022 KFF survey found 22 percent of Americans 65 and older had medical debt.

​In addition to excluding medical debt from credit reports, AARP has called for “a robust appeal process” for consumers whose medical debt information is shared with creditors.

There is a serious shortcoming to this law.

This is a step in the right direction, but the medical costs themselves need to be addressed. Just because the debt is not on your credit report doesn't mean it disappears. You still owe the debt. a serious collector can still sue you, get a judgment, garnish your wages, put a lien on your property, etc. While the rule is very popular, I believe it's a double-edged sword with unintended consequences. You may be able to get that mortgage, car loan, or credit card at a lesser rate, but what happens if the above legal action unfolds? You could be in worse shape than you started.

Often the hospital or medical bill is inaccurate and is inaccurately reported to a credit agency. Hospitals notoriously inflate their bills to patients and insurance companies. Knowing that hospitals inflate their billing insurers retaliate markedly reducing reimbursement to the hospital at times by 90%. Insurance companies will send patients an explanation of benefits detailing the amount billed, and their payments.

Patients should check their hospital statements carefully, protest the amount, and if unable to pay ask for a hardship discount, which can be considerable for seniors on Social Security with no other income. Hospital billing practices are confusing and not transparent. Once an account is sold to a credit agency it is more difficult to apply for relief.

A patient can protest a hospital bill through several steps. Here’s a general guide:

1. Review the Bill

Check for errors or discrepancies.

Ensure that all services rendered are correctly billed.

Look for duplicate charges.

2. Gather Documentation

Collect any relevant documents, such as:

Insurance policy details

Explanation of benefits (EOB) from the insurance company

Receipts and payment records

3. Contact the Hospital Billing Department, in many cases this is no longer the physical hospital. Many mergers and acquisitions have shifted financial matters to a ‘holding company” such as Health of America, Tenet, or other venture capital companies located in another state.

Call or visit the billing department to discuss the bill.

Be polite but assertive; ask for clarification on any charges you don’t understand.

Request an itemized bill if you haven’t received one.

4. File a Formal Dispute

If the issue isn’t resolved, write a formal dispute letter.

Include:

Your identification information

A clear explanation of the dispute

Supporting documents

Send this letter via certified mail for tracking.

5. Contact Your Insurance Company

If applicable, inform your insurance company about the dispute.

Request assistance in resolving billing issues.

6. Seek Help from a Patient Advocate

Many hospitals have patient advocates who can assist with billing issues.

You can also seek help from independent patient advocacy organizations.

7. File a Complaint

If the matter remains unresolved, you can file a complaint with:

The state health department

The Better Business Bureau (BBB)

The hospital accreditation body (like The Joint Commission)

8. Consider Legal Action

As a last resort, consult with a legal professional who specializes in healthcare disputes.

Tips

Surprise Medical Billing All medical debt is subject to the new Surprise Medical Billing law including doctor charges, laboratory charges, and ambulance fees including uncovered charges for emergency ambulance transportation which can run into five figures.

​In addition to the exclusion of medical debt from credit reports, AARP has called for “a robust appeal process” for consumers whose medical debt information is shared with creditors.

As a last resort patients should consult with a lawyer with experience in healthcare billing