The truth about medical debt and credit reports: three things to know

Unfortunately, medical debt is synonymous with health care in the United States. About 41% of Americans have medical or dental bill debts – meaning they are currently owing a bill that is contacted by a collection agency or actively repaying past balances. Additionally, an April 2024 Consumer Federal Protection Bureau (CFPB) report found that 15 million Americans had medical expenses in their credit reports, accounting for up to $49 million in outstanding debt.

As 2025 brings new governments at the federal level, it also brings new changes in every aspect of healthcare, including what you guessed – Medical Debt Report. In January 2025, the CFPB finally set a rule that lifted Americans out of the weight of medical debt in existing credit reports due to a Biden-era ruling. Credits no longer have access to these historical data, including “encoded” or contextual data, in credit decisions, unless there are exceptions.

Fast forward to July 2025, a federal judge in Texas rejected the decision nationwide, claiming that the former administration’s policies violated the Federal Credit Reporting Act (FCRA). As someone who has promoted healthcare finance health, healthcare finance education and patient advocacy for most of 30 years, I am keen to break down what this ruling means for millions of Americans who have medical debt one day or one day.

Harvest #1: There is no change in the medical debt report. First, both consumers and providers should know this – there is no change in the federal level of medical debt reporting. There is no ban, because the CFPB convinces us 1/7/25; this is an announcement of a final rule that never took effect. Default federal standards based on credit reporting agencies and FCRA are still managed. If the code is correct, it is allowed to report more than $500 in the credit report and it has been 365 days after the first payment notice. This provides grace to consumers and gives time to work with the collection agency.

15 states offer consumer protection, including California, New York and more recently Delaware. Additionally, credit bureaus such as Equifax, Experian and Transunion have their own set of consumer regulations, including: deleting reports on paid medical collections instead of reporting medical debts under $500 and a year-long waiting period before reporting unpaid medical expenses. But at the federal level, the rules set by a previous government earlier this year have actually died.

Harvest #2: Hospitals can still notify consumers of accounts and collections. I think the media’s impact on the impact of medical debt reporting on credit checks is a bit dull. Headlines often hype the fact that medical debt reports are unfair to consumers and revolve around words such as “misleading,” “harmful,” and “outdated.” I want to make another point.

I think medical debt reporting provides a powerful tool for hospitals and collection agencies – leverage. Healthcare is the only industry in the United States where you can walk into a place of service and get something valuable without paying before or after payment. These services are essentially critical and may be urgent or urgent. Given that payments from federal programs such as Medicare and Medicaid are irrelevant and the growing impact of patient balances on the hospital’s bottom line, hospitals are going to have a deficit, guess what? Patient care may be affected due to the lack of patient payments and monetary resources.

Medical debt reports are not only related to lenders calculating risks. It's about hospitals having the opportunity to encourage patients to pay, reduce bad debts and ultimately maintain financial independence.

In short, the hospital needs:

1. Take advantage of the way to bring cash in – Service collection points help capture patient balances early in the revenue cycle. Reporting medical debt gives hospitals and collection companies strong leverage at the back end of the revenue cycle. It notifies patients of outstanding accounts and provides incentives for timely payments.
2. Review of financial and payment policies – Since 8-12% of the total revenue of the patient's balance, hospitals should review, update and facilitate their payment policies to ensure patients understand how to pay their accounts and choose to resolve outstanding balances.
3. Using financial consulting – Hospitals with high patient balances should use financial consulting efforts to help patients determine that they may be eligible for financial assistance, Medicaid, or other hospital-based aid/discount program. Additionally, financial advisors can develop payment plans with patients early in the process.
4. Outsourcing and self-paid collection. This may sound contradictory, but the hospital still benefits from any payments recovered (even payments collected from third-party agencies). Leverage first or third-party agencies to provide hospitals with methods to focus on the care they provide to patients and other billing matters, with the premium and lack of technology that will promote widespread promotion to patients. They manage agencies and allow their agent partners to drive collections. The cost is lower, the earlier the account is outsourced, and the work followed early in the process reflects the hospital’s policy.

Point 3: Consumers can still make debates. An error occurred. The report shows that 80% of medical expenses make mistakes, losing $125 million or more per year in the health industry and causing significant reimbursement delays. Although this number is shocking, the error ranges from demographic errors that lead to delays in billing and reimbursement to patient address or other information. Despite the hospital’s best efforts in quality inspections and audits, the error continues and the fact that the hospital is working hard to improve. In any case, whether you live in a state where medical debt reporting is prohibited, you as a consumer have the right to object to the debt and require that inaccurate balances be reviewed and reviewed.

The “weight” or value of medical debt in a credit report is not as impacted as you might think. Other types of debt loan cards and installment loans are reviewed more closely than medical debt when lenders look at the entire pie.

In summary

Medical debt reporting is the intersection of healthcare, finance and policy – ​​as proven this year, the landscape is evolving. Despite stagnation in federal protections, state laws and credit bureau policies still provide relief to consumers. Hospitals continue to rely on credit reports as a source of financial leverage, but patients remain informed, proactive and entitled to question errors and understand their rights.

Image source: FreedIgitalphotos user Naypon

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