Medical debt credit woes need a cure

Man holding credit report

It's called the Medical Debt Responsibility Act. And it just could be the prescription consumers with medical debt need.

The bill introduced in Congress earlier this month would require credit agencies to remove medical debt -- up to $2,500 per account -- from credit reports within 45 days.

Sadly, medical debts today can remain on credit reports for up to seven years after they have been paid or settled.

This makes it difficult, if not impossible, for consumers to maintain or reestablish good credit, which makes getting a mortgage, car loan or even a job a tougher task.

The real issue, according to U.S. Rep. Nydia Velazquez (D-N.Y.), a cosponsor of the bill, is the fact that "medical debt is not a reliable indicator of credit risk, yet nearly a quarter of Americans have seen their credit scores plummet because of small, routine medical bills."

Unlike credit card debt, a person does not choose to incur medical debt in most cases. And medical debt is sometimes mishandled due to third-party collection agencies and insurance companies that process payments to providers.

Some 44 million Americans under 65 have outstanding medical debt, a third of which can be attributed to a billing mistake, according to U.S. Rep. Heath Shuler (D-N.C.), the chief House sponsor.

H.R. 2086, which has bipartisan support, seems like a small thing to do to make an already unpleasant situation less so.

A similar bill, which easily won House approval last year, was supported by a diverse set of interest groups, including the American Medical Association, National Association of Home Builders, Mortgage Bankers Association and Consumers Union, the San Francisco Chronicle reported.

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