I came across a recent article written by Evan J. Albright in which he states that medical debt, especially after 2015 will be a good indicator of financial responsibility and should affect where a consumer is loaned money. His argument is based on the passage of the Patient Protection and Affordable Care Act which caps outside medical expenses to what I assume believes is very affordable.
He believes that if medical bills appear on the credit report it is because:
- You did not have medical insurance
- You did not buy enough medical insurance
- You failed to maintain insurance
He states that all of the above reasons equate to financial failure of the consumer and that it is fair that they should have a lower score and not achieve the same level of borrowing.
While makes some good points he has complete lack of understanding of the medical billing systems as it stands today and will continue even after reforms. I think he completely wrong in that:
- For many Americans the health insurance exchange [healthcare.gov] pricing is still pretty pricey. For many the act of paying $250 to $380 per month for insurance is prohibitive in their budget. I guess Mr. Albright’s solution is for them to just make more money.
- When analyzed separately the cap for individual and family expenses at first sounds reasonable. Assuming a normal household income in the US for 2012 is $51,371, the average family would spend 25% of their household income on meeting the medical out-of-pocket-expenses. That is not including purchasing the insurance which would cost a family an additional $12,000 per year. For most families that make the average household income, they do not have the savings to sustain the insurance and having to max the out-of-pocket-expenses.
- Finally, from my perspective for working for a consumer credit attorney that deals with medical bills all the time we find that more than 70% of all medical bills are in error due to mis-coding, actually covered by the insurer but billed incorrectly, and finally the debtor never received the bill from the doctor before it appeared on the credit report. These issues are not going to change because the law changed. Medical billing is a broken system that needs to be fixed itself.
I do not think medical billing is a good indicator of a person’s ability to repay on a car or home loan. Medical bills are generated because of events beyond the control of an individual. They are usually unplanned and unwanted. If a consumer obtains a credit card and spent more than they can pay back that is a purpose driven transaction. They failed to control their finances. If the consumer borrows for a home and falls behind, no matter the circumstances, that is an indication of financial health. They should suffer a lower credit score.
Medical bills are not good indication of financial health. Period.