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The Biden administration is trying to eliminate medical debt from your credit report. Is it true? There are many players in this and it will yet to be determined if that will be true. What will happen to the medical service providers? Will they be willing to provide services and not have an avenue to collect payment? That is a very good question.

The U.S. government first allowed consumers to miss payments on various types of loans without those missed payments showing up on their credit reports. The next phase removed most past due taxes and any judgments from the credit report. Now, the Biden administration wants to remove all medical collections form the credit report. There will be a fight on this one and it will create additional secondary consequences.

Hospitals, doctors and other medical providers are not going to just allow the Biden administration to take away tone of their best methods to collect payments. Just like the student loan debacle, there will be legal action because it impacts many more people. 

Medical collections are primarily the result of a failed medical system that pays too much with too little benefit. Many families with at least a couple of children end up paying over ten thousand dollars annually for medical coverage. For some, it is the cost to go the doctor a couple of times a year. For others, it is the coverage to prevent a massive medical bill.

Whatever the situation, the insurance premiums for a regular size family are extraordinarily too high for the benefited that are provided. With the U.S. government subsidizing insurance premiums for millions of Americans, the root cause of the problem becomes more difficult to address because it is just covered up by more government involvement. Throwing more money is not the solution, it just exacerbates the problem.

We hear that medical debts are not a good barometer of a person paying on a loan. We also heard the same for tax liens and judgments. If a person didn’t make a house payment during the deferred payment period during the pandemic, don’t you think someone who did make their payment would be considered less risky. But yet they are all treated the same. When a debt is owed, it adds more risk to a consumers financial profile. There are repercussions for having all this derogatory information remove from credit reports.

The problem that is occurring is that credit score requirements keep increasing to qualify for the lowest interest rate and the lowest insurance premiums. Most mortgages raised their requirements from 740 to 780 in the Spring of 2023. Other lenders are following the same lead.

Those that make payments on time are wrongly hurt by not qualifying for the best interest rate because the goal posts have moved and become more difficult to reach. The end result is millions are paying more who have really good credit, but not excellent credit as now required.

It may make great headlines to say that missed payments, judgments or tax liens won’t appear on a credit report, or medical debt will disappear. When you turn around, we will all be paying more unless we have an excellent credit score. Additionally, you may be denied services because of these proposed changes. Unless we fix the problem, they are just putting a temporary band aid on the issue.

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