Despite efforts by the White House and credit bureaus, some medical debt will persist as a burden for consumers.

• The Biden administration announced on Monday that it is taking measures to minimize the negative effects of unpaid medical debts on consumers.
• The credit reporting firms have announced that they will limit the inclusion of certain debt on credit reports, and the plan to do so was revealed several weeks later.
• Approximately 30% of medical debt will remain on credit reports.

Medical debt has a big bull’s-eye on its back.

The White House on Monday unveiled measures to prevent past medical bills from negatively impacting consumers, following the March announcement by the three major credit-reporting firms regarding their plans to restrict such debt from appearing on credit reports.

Yet not everyone will see relief.

Although significant advancements have been made, there is still room for improvement, according to Chi Chi Wu, staff attorney at the National Consumer Law Center.

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The total medical debt in the U.S. is about $88 billion, as stated by the Consumer Financial Protection Bureau. Furthermore, 58% of collection notices on credit reports are related to medical bills, and approximately 43 million credit reports contain such collections.

If you have a low credit score, you may face difficulties in obtaining loans or credit, or securing favorable interest rates even if approved.

Lenders typically use a credit score that treats all debt in collections equally, regardless of whether medical debt is considered harshly or not. Employers and landlords may use either your credit score or report to make decisions.

Studies have indicated that medical debt is not as reliable in predicting a person's ability to make payments as other types of debt collection accounts.

The Biden administration has announced a plan to eliminate medical debt for low-income veterans and to stop federal agencies from considering such debt when determining a consumer's creditworthiness.

The three major credit bureaus, Equifax, Experian, and TransUnion, announced in March that they would stop including paid-off medical debt on credit reports starting July 1. Previously, this debt could remain on a person's record for up to seven years.

The credit bureaus will stop including anything that is less than $500 in credit reports starting in the first half of 2023, and consumers will have a year before unpaid medical debt appears on credit reports once it goes to a collection agency.

According to Wu, although the credit agencies claim that their actions will remove approximately 70% of medical debt from credit reports, the remaining percentage is cause for concern.

Wu stated that the 30% is a significant issue, as it affects those with cancer, long Covid, or lack of insurance, resulting in catastrophic events.

According to the White House, approximately 11 million Americans have medical debt exceeding $2,000, while 3 million owe more than $10,000.

The CFPB is considering whether medical debt should be included in credit reports, in addition to its plans to investigate credit reporting practices that violate consumer rights.

There are bills in Congress that propose to exclude "medically necessary" debt from credit reports, except for unpaid bills for elective procedures or services above $500.