The White House tackles medical debt: What it means for hospitals

Hospitals and health systems are facing more questions on their bill collection procedures, as President Joe Biden’s administration is undertaking efforts to reduce medical debts.

This week, the White House said many healthcare organizations will have to submit information about how they collect payments.

The U.S. Department of Health and Human Services will be requesting data from 2,000 providers on “medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and 3rd party contracting or debt buying practices,” the White House said in a fact sheet.

For the first time, the health department will evaluate that information in making decisions on grants. The department will also share “potential violations” with enforcement agencies, the White House said. The health department will also publish data and make policy recommendations.

Hospitals offer care to patients regardless of their ability to pay, the American Hospital Association says. Stacey Hughes, the AHA’s vice president, notes that the organization promotes best practices in billing. While hospitals will always offer uncompensated care for those in need, Hughes said in a statement that healthcare organizations need to be supported to maintain their services.

“In total, hospitals of all types have provided almost $745 billion in uncompensated care to patients since 2000 for which no payment was received for patients in need,” Hughes said. “The reality, however, is that the health care system must be adequately financed to ensure that hospitals and health systems are able to stay open and be there for their communities in times of need.”

“We look forward to learning more about this new initiative from the Administration,” she said.  “Hospitals and health systems are committed to treating all people equitably, with dignity, respect and compassion.”

The issue of medical debt has gained more attention in recent months. One in three U.S. adults has medical debts, according to the Biden administration.

Related story: Half of all Americans struggled to pay medical bills or delayed treatment

Medical debt alone accounts for more collections than credit cards, utilities, and auto loans combined, the White House said.

At a White House event Monday to announce plans to address medical debt, Health and Human Services Secretary Xavier Becerra said, “Too many families across the country are saddled with crushing medical debt.”

“At the direction of President Biden and Vice President Harris, we’re going to work with our partners to examine even more ways to address medical debt and help lift this weight off millions of families,” Becerra said.

The Consumer Finance Protection Bureau will go after debt collection agencies that violate patients’ rights, the White House said.

The Biden administration noted that $1.5 trillion in federal aid supports the healthcare system. With that investment, the White House said it expects healthcare providers to make sure patients know about financial assistance and aren’t unfairly hounded by collectors.

While noting that many healthcare providers inform patients of financial assistance or manageable payment plans, “far too many eligible patients report not receiving help,” the White House said.

Last month, the nation’s three largest credit reporting agencies - Equifax, Experian and TransUnion - announced they would remove nearly 70% of medical debt from consumer credit reports. Starting July 1, medical debts that were sent to collectors but fully paid won’t appear on credit reports. Previously, even debts that had been paid would remain on consumer reports for years.

As of June 2021, the Consumer Financial Protection Bureau reported $88 billion in medical debt on consumer credit reports. As of 2021, 58% of all third-party debt collection accounts involved medical debt, the bureau reported.

Black and Hispanic households are more likely to hold medical debt than white households, the Biden administration says.

Berneta Haynes, staff attorney at the National Consumer Law Center, described medical debt as “a racial justice issue.”

“The 30% of medical debt that will remain on credit reports may be held by the consumers who are most vulnerable – patients who have suffered a catastrophic accident or illness that led to huge medical bills, or those who lack insurance or have meager coverage,” Haynes said in a news release. “Black and Latinè consumers are more likely to be uninsured and underinsured, and to carry significant medical debt, and Black people in particular are more likely to be contacted by debt collectors over medical debt.” 

The law center hailed the Biden administration’s efforts to ease the burden of medical debts.

Among other steps announced by the White House, the Department of Veterans Affairs is simplifying the process for veterans to apply for debt relief. Veterans with financial difficulties will have an accessible online option with a simple income threshold to apply for debt forgiveness.