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Taking medical debts out of credit equation

June 23, 2011|By Kathleen Pender, Chronicle Columnist

Consumers would have medical debt - up to $2,500 per collection account - removed from their credit reports within 45 days of paying or settling the debt under a bill introduced in Congress this month.
Today, medical debt that has been turned over to collection agencies can remain on a person's credit report for up to seven years, even if the debt eventually gets paid or settled for less than the full amount. That can hurt the person's ability to get a home, car or other loan.

"This is single-handedly holding our economy back," says Rodney Anderson, a Texas mortgage banker who personally hired lobbyists to get a bill sponsored after discovering that more than 40 percent of the people who applied for mortgages with his company had medical debt on their credit reports. Many of these debts were $100 or less but often caused a steep drop in an applicant's credit score.

Sponsors of the bill say medical debt is unlike other debt because people don't choose to get sick or injured. They add that many medical debts reported to collection are the result of billing errors and insurance disputes.

On Monday, the American Medical Association reported that 19.3 percent of claims submitted electronically by doctors to insurance companies were processed incorrectly, based on a random survey done this year. That was up from an error rate of 17.3 percent last year. Many of these faulty processing systems also affect patients.

The bill's sponsors estimate that 44 million Americans younger than 65 have medical debt or bills being paid off over time, and a third of those can be attributed to a billing mistake. HR2086, the Medical Debt Responsibility Act, has five Democratic and four Republican sponsors led by Rep. Heath Shuler, D-N.C.

A similar bill called the Medical Debt Relief Act passed the House 336-82 in September with strong bipartisan support, but failed to gain approval in the Senate's lame-duck session. That bill, HR3421, had no limit on the amount of paid or settled medical debt that could be expunged from a consumer's credit report.

Wide support for bill The earlier bill was supported by the American Medical Association, National Association of Home Builders, Mortgage Bankers Association, Consumers Union and other real estate and consumer groups.

June 23, 2011|By Kathleen Pender, Chronicle Columnist

Consumers would have medical debt - up to $2,500 per collection account - removed from their credit reports within 45 days of paying or settling the debt under a bill introduced in Congress this month.
Today, medical debt that has been turned over to collection agencies can remain on a person's credit report for up to seven years, even if the debt eventually gets paid or settled for less than the full amount. That can hurt the person's ability to get a home, car or other loan.

"This is single-handedly holding our economy back," says Rodney Anderson, a Texas mortgage banker who personally hired lobbyists to get a bill sponsored after discovering that more than 40 percent of the people who applied for mortgages with his company had medical debt on their credit reports. Many of these debts were $100 or less but often caused a steep drop in an applicant's credit score.

Sponsors of the bill say medical debt is unlike other debt because people don't choose to get sick or injured. They add that many medical debts reported to collection are the result of billing errors and insurance disputes.

On Monday, the American Medical Association reported that 19.3 percent of claims submitted electronically by doctors to insurance companies were processed incorrectly, based on a random survey done this year. That was up from an error rate of 17.3 percent last year. Many of these faulty processing systems also affect patients.

The bill's sponsors estimate that 44 million Americans younger than 65 have medical debt or bills being paid off over time, and a third of those can be attributed to a billing mistake. HR2086, the Medical Debt Responsibility Act, has five Democratic and four Republican sponsors led by Rep. Heath Shuler, D-N.C.

A similar bill called the Medical Debt Relief Act passed the House 336-82 in September with strong bipartisan support, but failed to gain approval in the Senate's lame-duck session. That bill, HR3421, had no limit on the amount of paid or settled medical debt that could be expunged from a consumer's credit report.

Wide support for bill The earlier bill was supported by the American Medical Association, National Association of Home Builders, Mortgage Bankers Association, Consumers Union and other real estate and consumer groups.

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Licensed by the California Bureau of Real Estate
License number 00685309
NMLS number 338105
Equal Housing Lender