Medical debt sunk his credit. New changes from credit reporting agencies

CHARLOTTE, NC — After a year of chemo and radiation, doctors told Penelope “Penny” Wingard in 2014 that her breast cancer was in remission. He prayed for this good news. But that means she is no longer eligible for a program in her state that provides temporary Medicaid coverage to patients undergoing active breast cancer treatment.

Wingard went uninsured. He survived the medical toll, but the financial toll was ongoing.

Bills for follow-up appointments, blood tests and scans add up quickly. Soon, his oncologist said he couldn’t see him until he paid off the debt.

“My hair didn’t even grow back from chemo,” Wingard said, “and I couldn’t see my oncologist.”

Medical debt lowered his credit score so much that he struggled to qualify for loans, and applying for jobs and apartments became a harrowing experience.

“It feels like you’re being punished for being sick,” Wingard said.

Earlier this year, when the three national credit agencies announced new policies to deal with medical debt, consumer advocates celebrated, thinking it would provide relief for patients like Wingard. But the changes appear not to be enough to help him or many other black and low-income patients, who are often hit hardest by medical debt.

Under the new policy, Equifax, Experian, and TransUnion will remove any paid-off debt or less than $500 from credit reports, even if unpaid. It doesn’t erase what people owe, but the idea is to remove collection black marks from their credit so they can more easily reach milestones like qualifying for a car or home loan.

The changes, which will take full effect in 2023, are expected to benefit approximately 16 million Americans. But a federal report released this summer suggests those may not be the ones who need it most.

“While credit reporting companies herald this as a big change, the reality is they’re just removing small things,” said Ryan Sandler, co-author of the report and senior economist at the Consumer Financial Protection Bureau. “They may not be doing as well as their press releases would have you believe.”

The burden of medical debt is greater for people who are black or Hispanic, low-income, and in the South. A nationwide KFF survey found 56% of black and 50% of Hispanic adults say they have current debt due to medical or dental bills, compared to 37% of non-Hispanic white adults. And a study published in 2021 found that medical debt is highest in low-income communities and in southern states that did not expand Medicaid.

But, Sandler says, “the population that’s going to get rid of all their collections is a little bit more likely to live in majority-white neighborhoods and high-income neighborhoods.”

Collections under $500 are often the result of an unpaid copay or coinsurance, and people with insurance are more likely to be wealthy and white, Sandler said.

Someone like Wingard — a black woman living in North Carolina — is unlikely to benefit from the credit companies’ new policies.

After Wingard’s oncologist cut him off, it took about six months to find another doctor who would see him when he couldn’t pay the bills.

North Carolina did not expand Medicaid, so Wingard, who is 58 and has no young children, is not eligible for her state’s public insurance program.

He estimates that his total medical debt today is more than $50,000. That’s the bill not only for cancer care, but also for unrelated health problems that develop in later years.

She worked as an after-school teacher and tutor, a Covid-19 contact tracer and a driver for a ride-hailing service, but none of these jobs came with health insurance benefits. Wingard cannot afford to purchase private insurance. That left him on the hook for bill after bill. His credit report shows five pages of notices from collection agencies representing doctors’ offices, hospitals and labs.

Wingard is resourceful. He found clinics that offer sliding-scale fees, pharmacy programs that reduce copays and nonprofits that help cover health care costs. But it wasn’t enough to dig out his debt.

In February, Wingard needed a special mammogram to check for cancer recurrence. Before the appointment, she contacted a local non-profit organization that agreed to cover the costs But weeks after the procedure, Wingard received a bill for nearly $1,900. There was some miscommunication between the nonprofit and the hospital, Wingard said. While he tries to fix the problem, the bill goes to collections. That’s more than $500, so it won’t go away even after the new credit agency policies take full effect next year.

“You’ve fought so hard and you’ve overcome so much,” Wingard said. “Still, sometimes you don’t see any kind of relief.”

According to a KFF survey, nearly 20% of Americans with medical debt don’t think they’ll ever pay it off. Wingard resigned himself to living with this effect.

Both her fridge and stove have been broken for over a year. She can’t qualify for a loan to replace them, so instead of making baked chicken from her favorite family recipe, she often settles for cans of soup or fast-food chicken wings.

In emergencies — like when he needed a broken tooth repaired this fall — Wingard borrows from the family. But asking for money is not easy, he said. “It makes you feel worthless, like you can’t do anything.”

A recently published study found that medical debt leaves many people unable to pay for basic benefits, increases their housing and food insecurity, and “can contribute to a downward spiral of ill health and financial insecurity.”

For Wingard, it hurt his ability to get a job. He said two employers told him that poor credit showed up as a red flag on background checks and led him to be turned down for positions.

Employers sometimes use credit reports as a “proxy on character,” explained Mark Rukavina, program director at the nonprofit health advocacy group Community Catalyst. If two candidates are equally qualified but one has poor credit or several unpaid debts, employers may view that person as less responsible, he said — despite research showing medical debt isn’t an accurate predictor of someone’s ability to pay bills.

While the credit companies’ new policies are unlikely to improve Wingard’s situation, consumer advocates say there are signs that society is starting to think differently about medical debt.

The Biden administration advised federal lenders to no longer consider medical debt when evaluating loan applications and asked the Consumer Financial Protection Bureau to investigate whether medical debt should ever appear on a credit report.

A federal law banning certain types of surprise medical bills went into effect this year, and some states have strengthened protections against medical debt by expanding Medicaid or holding nonprofit hospitals responsible for providing financial assistance to low-income patients.

In August, VantageScore, a company that calculates credit scores, said it would stop using medical collections in its formula.

Wingard is ready for fast and powerful change. And he has an idea for how to get there: a march on Washington to demand relief from medical debt and universal insurance to lower future bills.

“For a million people to gather there and say we need better health care, I think that’s going to make history,” he said. “Maybe then they’ll recognize we need help.”

About this project

“Diagnosis: Debt” is a reporting partnership between KHN and NPR that explores the scale, impact and causes of medical debt in America.

The series draws on the “KFF Health Care Debt Survey,” a poll designed and analyzed by KFF’s public opinion researchers in collaboration with KHN reporters and editors. The survey was conducted online and by telephone from February 25 to March 20, 2022, in English and Spanish, among a nationally representative sample of 2,375 US adults, including 1,292 adults with current health care debt and 382 adults who had health care debt. last five years The margin of sampling error is plus or minus 3 percentage points for the full sample and 3 percentage points for those with current debt. For results based on subgroups, the margin of sampling error may be higher.

Additional research was conducted by the Urban Institute, which analyzed credit bureau and other demographic data on poverty, race and health status to explore where medical debt is concentrated in the United States and what factors are associated with high debt levels.

The JPMorgan Chase Institute analyzed records from a sample of Chase credit card holders to determine whether customers’ balances could be affected by major medical expenses.

Reporters from KHN and NPR also conducted hundreds of interviews with patients across the country; spoke to physicians, health industry leaders, consumer advocates, debt lawyers and researchers; and reviewed scores of studies and surveys about medical debt.

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