The purpose of the Consumer Financial Protection Bureau (CFPB) is to protect consumers from unfair, deceptive, or abusive financial practices. President Obama signed legislation creating the CFPB in 2010. Since its inception the agency has worked to rein in abusive practices at banks, student loans taken out to attend substandard for-profit universities and abuses at mortgage brokers. Lately the federal agency has taken aim at hospital debt collectors.
An estimated 100 million Americans have medical debt. If there ever were an example of abusive financial practices, it is the way patients are gouged by health care providers with surprise bills and non-existent price transparency. Methods that consumers use to manage expenses in other areas of the economy often do not work in our dysfunctional health care system. The following are steps the CFPB has taken to help consumers:
In the past two years, the CFPB has penalized medical debt collectors, issued stern warnings to health care providers and lenders that target patients, and published reams of reports on how the health care system is undermining the financial security of Americans.
In its most ambitious move to date, the agency is developing rules to bar medical debt from consumer credit reports, a sweeping change that could make it easier for Americans burdened by medical debt to rent a home, buy a car, even get a job. Those rules are expected to be unveiled later this year.
Medical debt can adversely affect peoples’ lives. Yesterday John Goodman posted about the state-owned Colorado hospital, UCHealth.
UC has been getting collection agencies to sue patients who owe them trivial amounts of money, and hiding the fact that UC is the actor behind the suit…. The tales here are awful. Little old ladies being forced to sell their engagement rings, and uninsured immigrants being taken to the ER against their will and given a total runaround on costs until they end up in court.
An investigation revealed that UCHealth, for which about eight suits are filed on its behalf each day, gets less than $5 million a year from the 3,000 plus suits filed each year. That averages out to people getting sued to recover about $1,600. Rohit Chopra, the director of the CFPB said:
“American families should not have their financial lives ruined by medical bills.”
Debt collectors who work for the industry oppose measures that would remove medical debt from credit reports. Naturally, debt collectors want every coercive tool they can get. From an economic standpoint, it does not make sense to create an exception for one type of debt. A debt is a legal obligation on the part of the borrower and an asset (accounts receivable) on the books of the creditor. To say otherwise is more than just a double standard. It is an admission that one byproduct of our dysfunctional health care system is that many medical debts are unjust.
“The fact that the CFPB is involved in what seems like a health care issue is because our system is so dysfunctional that when people get sick and they can’t afford all their medical bills, even with insurance, it ends up affecting every aspect of their financial lives,” said Chi Chi Wu, a senior attorney at the National Consumer Law Center.
Medical debts are common entries on credit reports. Experts also note that the presence of medical debt is a poor predictor of whether consumers will pay off other consumer loans. I have said in the past that I believe many people do not pay some of their medical bills precisely because they believe them to be unfair or inaccurate. Past due medical bills are often full of errors.
Medical debts on credit reports are also frequently riddled with errors, according to CFPB analyses of consumer complaints, which the agency found most often cite issues with bills that are the wrong amount, have already been paid, or should be billed to someone else.
There really is such high levels of inaccuracy,” Chopra said in an interview with KFF Health News. “We do not want to see the credit reporting system being weaponized to get people to pay bills they may not even owe.”
The agency went after nursing homes several years ago after it was found that many were suing friends and family members for nursing home bills that were the responsibility of the inpatient. The CFPB is now concerned about the explosion of hospitals pushing Care Credit, a medical credit card useful for when you need eye surgery you cannot afford all at once. However, shoving a consumer credit card application into someone’s face before they even know the charges or received care is too aggressive.
The CEO of the trade association that represents medical debt collectors claims the real problem is that health care is unaffordable. He believes Congress should work on affordability rather than penalize medical debt collectors. His point is hard to disagree with. However, his hospital clients are a primary source of bills from our overpriced health care system.
Read more at: With Medical Debt Burdening Millions, a Financial Regulator Steps In to Help – KFF Health News
The fastest way to decrease medical debt is get everyone a low-deductible health insurance policy.
I know that this goes against the grain of libertarian thought, but the facts are the facts.
For example, the expansion of Medicaid in many states caused medical debt overall to plunge about 40% in those states.
People on Medicare Advantage (I am one of them) generally have low levels of medical debt.
(Of course, the federal government pouring $13,000 a year into MA plans is what makes this possible.)
Entire first-world countries (Germany, Sweden) have comparatively tiny medical debts — as their insurance policies have statutory limits on deductibles.
The libertarian solution has been to have people combine a high-deductible policy with individual medical savings accounts.
This works pretty well for some families. However it is a bad joke for people who have lower wages, and/or an unwillingness to save money.