The number of people with medical debt on their credit reports fell by 8.2 million — or 17.9% — between 2020 and 2022, according to a report Tuesday from the U.S. Consumer Financial Protection Bureau.
White House officials said in a separate draft report that the two-year decline likely stems from the policy. Among the programs said to have contributed to less debt is the expansion of the Obama-era health care law that added 4.2 million people with some health insurance. In addition, local governments used $16 million in coronavirus relief funds to eliminate $1.5 billion in medical debt.
There is also an ongoing effort by the CFPB to reduce medical debt. The major credit rating agencies said last year that they would not include in their reports medical debt under $500 or debt that has been paid off. The agency will also extend the time it takes to add medical debt to a report from six months to a year, possibly giving families more time to pay it back before being penalized with a lower credit score.
White House officials say the debt reduction could ease fears about medical bills that can keep people from making necessary doctor appointments and filling prescriptions.
While economic measures such as the unemployment rate and inflation may rise and fall, the decline in medical debt shows that progress is being made. About 13.5% of the 279 million people with credit reports have at least one medical debt, down from 16.4% in 2020 and 19.4% in 2014.
Still, unpaid medical bills comprise more than half of all debts in collections, according to a White House report. As a result, medical debt exceeds credit card, personal loan and utility and phone bills combined.
There is also evidence that the decline preceded the Biden presidency. The amount of medical debt on credit reports fell to $111 billion from $143 billion between 2018 and the first half of 2021, according to a March 2022 report by the CFPB.
But communities such as Chicago, New Orleans, Pittsburgh and Toledo, Ohio, are using $16 million in 2021 coronavirus relief funds to buy medical debt and forgive it. So far, the spending plan has eliminated $1.5 billion in medical debt, a ratio of about 100-to-1 for local governments.
Learn how to navigate and build trust in your business with The Trust Factor, a weekly newsletter that examines what leaders need to succeed. Log in here.