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Kamala Harris unveils new rule to take medical debt off Americans' credit reports

By Chris Benson
“We are making it so that medical debt cannot be used against you when you apply for a car loan, a home loan or a small-business loan or something of that nature,” U.S. Vice President Kamala Harris told reporters Tuesday. Photo by Ting Shen/UPI
1 of 3 | “We are making it so that medical debt cannot be used against you when you apply for a car loan, a home loan or a small-business loan or something of that nature,” U.S. Vice President Kamala Harris told reporters Tuesday. Photo by Ting Shen/UPI | License Photo

June 11 (UPI) -- The Biden administration Tuesday proposed taking medical debt off U.S. consumers' credit reports in a change that could affect more than 15 million Americans if it goes forward as planned.

Vice President Kamala Harris said Tuesday on a call with reporters that more than 100 million Americans struggle with medical debt.

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"No one should be denied access to economic opportunity simply because they experienced a medical emergency," she said.

Medical debt is a growing problem that makes insured and uninsured Americans sicker and poorer, according to a 2023 survey by The Commonwealth Fund.

About 46 million people in 2020 had medical debt listed on their credit report. The proposal by the Consumer Financial Protection Bureau will seek to make it zero.

The federal government's Consumer Financial Protection Bureau "is seeking to end the senseless practice of weaponizing the credit reporting system to coerce patients into paying medical bills that they do not owe," CFPB Director Rohit Chopra said Tuesday on the call after Harris spoke.

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The new rule will be open for public comment until August 12 and the earliest it would take effect is next year after the presidential election. But that's a big if, given the possibility of a Republican presidential victory this fall.

A recent budget proposal by Congressional Republicans cuts Medicaid, Medicare, the Affordable Care Act "and would prevent Medicare from directly negotiating lower prescription drug prices," the White House said, adding that "instead of supporting the CFPB's efforts to bar medical debt from credit reporting, the Republican proposal would defund the CFPB entirely."

The average amount of medical debt owed was about $2,000 for an adult and about $4,600 per U.S. household, a study last year showed, indicating how medical debt affects 1 in 5 U.S. households.

But the majority of medical debt is owed to hospitals, according to a study last year. The Biden administration has taken a number of steps to reduce medical bill costs for Americans over the last few years.

"We are making it so that medical debt cannot be used against you when you apply for a car loan, a home loan or a small-business loan or something of that nature," Harris told reporters Tuesday.

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Medical debt, or personal debt incurred from unpaid medical bills, is one of the leading causes of bankruptcies with as many as 40 percent of U.S. adults currently in debt because of medical or dental bills, according to The Commonwealth Fund.

The administration says "millions of Americans" would see an average credit score increase of 20 points if the new rule change is sanctioned. And it could lead to the approval of roughly 22,000 new U.S. mortgages annually.

Harris called on states, local governments and health care providers to take further action in order to reduce the burden of medical debt of the more than 100 million American citizens struggling with medical debt.

New York City in January unveiled their new program that will retire about $2 billion in medical debt for thousands if city residents -- who have an annual household income at or below 400% of the federal poverty line with medical debt equal to 5% or more of their annual household income -- which is estimated to cost the city around $18 million over three years.

"Medical debt makes it more difficult for millions of Americans to be approved for a car loan, a home loan, or a small-business loan, all of which, in turn, makes it more difficult to just get by, much less get ahead," Harris said Tuesday.

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Specifically, the federal government is suggesting they leverage already-available public dollars -- like American Rescue Plan Act funding -- to purchase and eliminate medical debt, prevent medical debt accumulation and "protect patients from aggressive debt collectors by expanding access to charity care" and by "limiting coercive debt collections practices by health care providers and third-party debt collectors."

ARPA funds are getting used to eliminate an estimated $7 billion in medical debt for up to nearly 3 million Americans, according to the White House.

"We have forgiven over $650 million so far, and we plan to forgive another $7 billion -- with a 'B' -- for millions of Americans across the nation," the vice president said Tuesday at the end of her talk with reporters.

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