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Medical Debts Out of Credit Reports

Elite Personal Finance
Last Update: March 4, 2025 • Credit Report • Financial News •

In a landmark decision by the former Biden administration, medical debts will no longer appear on Experian, Equifax, or TransUnion credit reports, marking a step forward toward healthcare affordability and financial equity between Americans of different socioeconomic classes.

Now enforced by the Consumer Financial Protection Bureau (CFPB), which is estimated to affect nearly 15 million Americans, the U.S. government agency responsible for consumer protections within the financial sector and enforcement of consumer financial laws, this change seeks to benefit millions of Americans who struggle between paying outstanding medical debt and fixed monthly expenses like gas and utility bills.

Nearly one in five Americans report unpaid medical bills due to anything from unexpected emergencies to insurance coverage gaps. As a result, it has prevented Americans from seeking favorable APR in other lines of credit like mortgages and auto loans.

“No one should be penalized for getting sick. Medical debt does not reflect someone’s ability to repay other obligations, and it shouldn’t dictate their financial future,” said CFPB Director Rohit Chopra. “This change will help ensure that credit reports more accurately reflect a person’s creditworthiness.”

Although the CFPB clearly favored the decision, many critics have questioned the role of federal agencies in regulating private industries. For example, continued enforcement like this reinforces the government’s willingness to intervene in credit reporting and, by extension, the private sector. Many healthcare providers have expressed concerns, citing a reduced ability to collect payments without affecting debtors’ credit scores.

In other words, Americans can now feel more empowered than ever before to fall behind on their medical bills.

Can Removing Medical Debt from Credit Reports Increase Costs?

Now that hospitals and clinics have reduced ability to collect debt, the Healthcare Financial Management Association argues that this will only drive up the cost of healthcare, including insurance premiums.

According to a 2022 report by the American Hospital Association (AHA), hospitals accounted for roughly $42 billion in uncompensated care two years prior, which drove up healthcare costs for insured patients and led to higher reimbursement rates with insurance companies.

In short, rising medical costs can increase the overall cost of medical care, as there is likely to be a much higher rate of uncompensated care due to the diminished threat of medical debt being reported on credit reports throughout the United States.

Trends Over the Years in National Uncompensated Care Costs

According to AHA Annual Survey Data, 2000-2020, uncompensated care costs reported by hospitals have changed over the years.

For example, from 2000 to 2013, uncompensated care costs rose from $21.6 billion to more than $46 billion, which included the 2008 financial crisis. During this period, the number of hospitals reporting remained around 5,000 to 5,400, which generally suggests an increased demand for care and higher overall costs.

In contrast, from 2014 to 2015, there was an actual decline, with uncompensated care costs falling to $36.1 billion, mainly due to the Affordable Care Act (ACA), which expanded Medicare coverage for millions of uninsured Americans under the Obama administration. However, from 2016 to 2020, there was a slight increase, with uncompensated care costs rising to the $38 to $42 billion range. This increase was partly attributed to the COVID-19 pandemic, which forced many Americans into medical debt.

In short, the pre-Affordable Care Act era saw more than a doubling of uncompensated care costs, followed by significantly reduced costs from 2014 to 2015, before rising steadily due to increasing healthcare costs.

For more data, check out the American Hospital Association’s Uncompensated Care Fact Sheet

Significant Implications for Healthcare Providers

In addition to higher rates of uncompensated care driving up medical costs, we can expect even more challenges due to this change. For starters, there could be cuts to funding for hospitals and states with a high percentage of uninsured individuals, as there is a greater reliance on patient payments to cover administrative overhead.

Another area of concern is the potential for policy recommendations aimed at upgrading or enhancing Medicaid coverage in states lacking Affordable Care Act options. This could benefit millions of additional Americans and reduce uncompensated care costs by millions. Other areas of focus could include sliding-scale payment systems and charity care, where patients pay based on their income rather than a fixed rate.

The expansion of key low-income assistance programs, such as California’s Charity Care Law, is also a possibility. Currently, this program offers free care to patients up to 400% of the federal poverty level, which means up to $9,250 per month for a four-person family as of 2022.

All in all, the removal of medical debts from credit reports could contribute to higher rates of uncompensated care, new policy recommendations that upgrade Medicaid coverage, and the expansion of low-income programs that serve as a vital lifeline to communities in need.

ElitePersonalFinance’s Verdict

The removal of medical debt from credit reports is a double-edged sword. On one hand, it will provide much-needed financial relief to millions of Americans burdened by medical debt and the ever-looming threat of negatively affecting their credit scores. On the other hand, healthcare providers face an uphill battle, and a higher percentage of uncompensated care costs should be expected.

Additionally, there are the more significant issues of government intervention and its role in private industries. Many are opposed to government oversight, especially in the healthcare sector. We trust that there will be plenty of solutions to provide an even playing field for both healthcare providers and creditors.

For more information on medical debts being removed from credit reports, visit the CFPB’s website for the latest.

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