When faced with health issues, most consumers, even those with insurance, have a difficult time paying off medical bills that are not covered under your policy. Even with good financial planning the common consumer would find it difficult to paying off these exorbitant bills. Regardless, if your medical debt goes unpaid, it ends up on your report damaging your credit score for a long period of time.
Currently, before Congress is the Medical Debt Relief Act (“MDRA”), a bill that proposes assistance to consumers facing insurmountable medical debt. The purpose of the MDRA is to reward consumers for their diligent efforts in eventually getting their debt paid off. The current state of the law is that even if you pay off your debt in full, it will remain on your report for approximately seven years, continuing to tarnish your credit score. The Act would require the credit reporting agencies (“CRAs”) to remove any paid medical debt under $2500, 45 days after payment was made.
The motivation for the MDRA is that a consumer with good credit should not be punished for unforeseen circumstances, like failing health. Because credit scoring is supposed to gauge risk, whether you as a consumer pay your bills in a timely fashion, pay off your loans and pay off your credit cards every month, it seems unfair to include medical debt in this category after if it has been paid off too. The reason medical debt should be looked at differently, is because it is an expense you have no control over.
This MDRA will prevent credit reports of numerous consumers from being unfairly tarnished, forcing consumers to pay higher interest rates on loans and credit cards because of ailing health. Instead, Congress should reward these consumers for paying off their debt by deleting it from a credit file after it has been paid. Unfortunately, this is not the first time the bill has been before Congress. While previous attempts to pass this legislation have been futile, perhaps this time around there will be greater success.