Massachusetts Gov. Maura Healey announced a proposed regulation Tuesday to prevent medical debt from appearing on consumer credit reports.
“Getting sick should not affect your credit,” Healey said. “[Medical] bills are overwhelming and they may oftentimes far outstrip any savings that you have. And too often they follow you, they follow your family like an albatross for years.”
The new rules would bar licensed health care providers and the debt collectors working on their behalf, from reporting medical debt to credit reporting agencies.
Medical debt on a credit report can lower a person’s credit score, making it more difficult or expensive to qualify for loans, credit cards, housing, or in some cases for getting employment.
Supporters of the change argue that medical bills often arise from unexpected illnesses or emergencies rather than irresponsible borrowing.
The new regulations have already been vetted by the state’s Department of Public Health and are expected to be approved after the public comment period ends in late July. Once the rules take effect, the state would be able to revoke or deny the licenses of providers that report users to credit companies.
“It’s a pretty significant penalty for someone who’s trying to provide health care,” Massachusetts Public Health Commissioner Robbie Goldstein said.
One in eight Massachusetts residents have medical debt. That number is even higher when it comes to Black residents. Families with low or moderate income are also more likely to have medical debt of $2,000 or more, according to a report by the Center for Health Information and Analysis.
Healey said medical debt is a bad predictor of one’s ability or willingness to pay other bills.
“Medical debt isn’t a sign of poor financial health,” Healey said. “It isn’t a sign that you’ve mismanaged your finances. Medical debt happens because bad stuff happens.”
The Biden administration tried to roll out a similar policy at the national level but a federal judge ruled last year that it was illegal. Critics argued that this removed an important protection from consumers. Since that ruling, more than a dozen states have created similar rules.
Matt Selig, the executive director of nonprofit health care law firm Health Law Advocates, thinks legal challenges to the new rule would be tough since the state has authority to grant and revoke healthcare licenses.
“They’re tying the regulations to providers’ licensure, which is so clearly within the state’s purview,” Selig said. “We think that that should provide them with all the authority that they need to enforce these regulations.”
Blocking medical debt from credit reports will be a big help to people looking to buy cars and homes, Selig said.
“This is gonna provide huge relief for the people that we serve,” Selig said. “There’s no reason why somebody should have a harder time renting an apartment, or trying to get a car loan, just because they were sick and they had to incur medical debt.”
Healey’s announcement follows the news last week of the purchase of $170 million in Massachusetts residents’ medical debt by three nonprofits, a move they called the “largest ever” debt relief effort in Massachusetts.
And while Healey lauded the private sector’s role in alleviating Massachusetts residents’ debt, she said public officials also have a responsibility.
“Government has a role to play,” Healey said. “The private sector has a role to play. Philanthropy has a role to play. And when we work together, we can help more families move forward instead of falling behind.”
