The checks and balances of a properly functioning market are subverted in the U.S. health sector by public and private third-party payments. Neither sellers nor buyers know what goods and services actually cost, and this blindness allows spending to rise faster than inflation year after year. Massive taxpayer subsidies and hidden private-sector transactions fuel the fires.
So enter the Biden administration with another brilliant idea: Let’s hide medical debt on citizen’s credit reports so borrowers don’t have so much trouble getting loans.
“The Biden administration announced a major initiative to protect Americans from medical debt on Thursday, outlining plans to develop federal rules barring unpaid medical bills from affecting patients’ credit scores,” KFF Health News reports.
“The regulations, if enacted, would potentially help tens of millions of people who have medical debt on their credit reports, eliminating information that can depress consumers’ scores and make it harder for many to get a job, rent an apartment, or secure a car loan.”
Let’s think this through. Hiding the debt from the loan agency may make it easier for someone to buy a house, but it will make it harder for them to make their mortgage payments.
The three largest credit agencies—Equifax, Experian, and TransUnion—already have dropped medical debt of under $500 or medical bills that have been paid from consumer credit reports.
So it’s only the major debt that will be hidden from banks and other loan agencies. Colorado already has enacted legislation that prohibits medical debt from including medical debt in credit scores.
So what’s next? If the borrower faces foreclosure because she can’t make mortgage payments, will the Biden administration then move to forgive the debt altogether? Move over student-loan forgiveness. Medical debt is next.
This is crazy and totally disregards market forces that will prevail, one way or another. If doctors and hospitals have to write off the debt, some will go under but others will try to make up the difference by charging their paying patients and plans even more.
Health spending for the average employee in America averages $14,600 a year—a largely hidden expenses for workers and families and one of the biggest expenses for employers. This potential Biden administration rule would fuel the fires even more.
Oh, and by the way, the proposed rule is expected to be ready for release next year, just in time for the presidential elections.
In the meantime:
- The House Ways and Means Committee will be marking up legislation this coming Thursday that would move policy in the right direction. A bill introduced by Reps. Greg Steube (R-FL) and Kat Cammack (R-FL) would make Health Savings Accounts available to lower-income Americans on ACA exchanges.
Their “Affordable Care and Comprehensive Economic Support through Savings (ACCESS) Act” would establish a tax-free health savings account option for about five million lower-income individuals who are eligible for cost-sharing reductions under the ACA, at no additional cost to taxpayers. This would open the door for more cost-conscious spending and greater choices for patients.
The Paragon Institute released a white paper last year describing the idea, coauthoried by Brian Blase, Dean Clancy, Andrew Lautz, and Roy Ramthun, explaining details about how lower-income Americans could use a portion of their Obamacare subsidy to make HSA contributions.
- Here is my latest piece for RealClearHealth about the Lower Cost, More Transparency Act that is awaiting House floor consideration. The bill would give consumers tools to seek better value in their health spending through transparency and check the monopolistic growth of hospital and health systems that pushes prices up. Tackling Hospital Consolidation, A Key Driver of Health Costs
- And for insightful perspective about U.S. health spending, I recommend economist Bob Graboyes latest post at Substack: “When Healthcare Spending Isn’t about Healthcare.” Bob argues that: “America’s heavy healthcare spending does not by itself constitute a crisis and is driven mostly by factors outside of healthcare.”