How Credit And Financial Service Companies Can Help Address Medical Debt
Mike DeVico is the President and CEO of Progrexion.
The pandemic has shined a bright light on a significant problem, one long known to credit repair professionals: medical debt. A national study (paywall) published last year found that medical debt has become the largest source of debt in collections, soaring to $140 billion in unpaid bills as of 2020. The scale of this problem can be difficult to digest—researchers found that around 18% of Americans hold medical debt in collections. The Consumer Financial Protection Bureau estimates that around 43 million (paywall) credit reports currently list medical-related debts, a problem that became even more acute as the pandemic ravaged both our healthcare system and economy.
I have the privilege of leading a credit repair company. The bulk of our work focuses on helping consumers complete the arduous process of removing errors on their credit reports. Through our work over the past 20 years, we at Progrexion have gained extraordinary insights into broader systemic issues impacting consumers and our economy more generally. While our credit system is fraught with issues, I’ve noticed medical debt stands out.
What is the impact of the medical debt crisis on consumers and the economy?
In my experience, far from being irresponsible, Americans struggling with poor credit scores are often the hardest working people I know. In many cases, they did everything they were supposed to do until they were derailed by an unexpected financial crisis—a lost job, a divorce, an unexpected illness, a global pandemic. Unfortunately, as few beyond the credit system seem to fully appreciate, the negative impact of these events can be unnecessarily magnified and exacerbated, creating an avoidable drag on our economy by needlessly pushing people to the economic margins.
Medical debt can compound tragedy and drive families off the edge—beyond the cost of medical care itself, an unexpected illness can ravage a family’s financial health in other ways, especially if it forces an individual out of the workforce. Companies that specialize in medical debt collection can often be hyper-aggressive and predatory, even for an industry that is known to be aggressive and predatory.
Medical debt can impact all consumers, not just those weighed down by sky-high bills. I have worked with consumers impacted by unpaid bills for trivial amounts—a copayment left unpaid due to a move or because the consumer was unfamiliar with the provider’s billing entity. Historically, I’ve noticed medical debts have also cropped up on consumer credit reports because of delayed payments owed by insurance companies, not the consumer. Medical debt can continue to haunt consumers for years, even after the debt has been paid. Until this year, medical debts sent to collections often remained on a consumer’s credit report for up to seven years (paywall), regardless of whether the debt was subsequently paid by the consumer.
In other words, medical debt—already quite different from the other types of debt listed on consumer credit reports—can unnecessarily reduce consumer borrowing power by lowering credit scores for people with otherwise good credit histories. Given the number of people with credit reports dragged down by unpaid medical bills, it isn’t hard to see how this could have a big drag on lenders, businesses and the broader economy.
How can leaders in the credit and financial services industries make a difference?
Like many companies today, we are committed to living our values fully, which is why we have made reducing medical debt a core part of our corporate social responsibility efforts. In addition to pro bono financial literacy and credit repair services, direct contributions by the company and staff have resulted in medical debt relief, benefiting many Americans. Fortunately, our efforts are not isolated. Many other businesses, as well as churches, nonprofits and ordinary Americans, have united behind a movement to buy and retire medical debt, providing important relief for millions of American families. For businesses interested in making a difference, you may want to consider getting involved through contribution programs of your own.
For leaders in the financial services and credit industries, making medical debt a priority of your social responsibility efforts can be especially impactful because of the many opportunities businesses in those sectors have to provide pro bono or in-kind services in addition to direct contributions. When employees are given the opportunity to apply the skills they use in their “day jobs” for the public good, I’ve found job satisfaction can skyrocket.
Families struggling with medical debt are often dealing with other challenges, challenges that often make it even harder to bounce back, such as a breadwinner losing the ability to work. This expands the direct service opportunities for credit and financial services firms. Just as law firms often encourage junior lawyers to cut their teeth, gain critical skills and give back to their community through pro bono legal work, the business community can actively look to identify opportunities where employees can gain skills and grow in their careers through pro bono work. Helping a family recovering from medical debt navigate an application for a loan or credit instrument, for example, can give an employee important insights into the lending process, insights that might come more slowly over time.
As businesses evaluate their social responsibility strategy, it is my hope that medical debt becomes a greater priority for more companies. Eliminating this burden can be literally life-changing for a family. But the benefits easily extend beyond each individual family to the economy as a whole—imagine what could happen if one in five Americans were no longer impacted by medical debt on their credit reports?