18% drop since 2020 in people with reported medical debt

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The number of people with medical debt on their credit reports fell by 8.2 million—or 17.9%—between 2020 and 2022, according to a report Tuesday from the Consumer Financial Protection Bureau.

White House officials said in a separate draft report that the two-year drop likely stems from their policies. Among the programs they say contributed to less debt was an expansion of the Affordable Care Act, which added 4.2 million people with some form of health insurance. Also, local governments are leveraging $16 million in coronavirus relief funds to wipe out $1.5 billion worth of medical debt.

There has also been a persistent effort by the CFPB to reduce medical debt. The major credit rating agencies said last year that they will no longer include in their reports medical debts under $500 or debts that were already repaid. The agencies will also extend the time it takes to add medical debt to reports from six months to one year, possibly giving families more time to repay before being penalized with lower credit scores.

White House officials said the decline in debt could reduce fears about medical bills that can prevent people from making needed doctor appointments and filling pharmaceutical prescriptions.

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While economic measures such as the unemployment rate and inflation can swing up and down, the decline in medical debt shows that steady progress is being made. Some 13.5% of the 279 million people with credit reports had at least one medical debt, down from 16.4% in 2020 and 19.4% in 2014.

Still, unpaid medical bills account for more than half of all debt in collections, according to the White House report. As a result, medical debt exceeds credit cards, personal loans and utilities and phone bills combined.

There is also evidence that the decline predates Joe Biden’s presidency. The amount of medical debt on credit reports fell to $111 billion from $143 billion between 2018 and the first half of 2021, according to a March 2022 report by the CFPB.

But communities such as Chicago, New Orleans, Pittsburgh and Toledo, Ohio, are using $16 million in funds from the 2021 COVID-19 relief to buy medical debt and forgive it. So far, the spending plans are eliminating $1.5 billion in medical debt, a ratio of about 100-to-1 for the expenditures by the local governments.

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