Medical debt sunk her credit. New changes from the credit reporting agencies won’t help

CHARLOTTE, NC — In 2014, after a year of chemotherapy and radiation, doctors told Penelope “Penny” Wingard that her breast cancer was in remission. She had prayed for this good news. But it also meant she no longer qualified for a program in her state that provides temporary Medicaid coverage to patients undergoing active breast cancer treatment.

Wingard became uninsured. She had survived the medical toll, but the financial toll continued.

Bills for follow-up appointments, blood tests, and scans piled up quickly. Soon her oncologist said he would not see her until she paid off the debt.

“My hair hadn’t even grown back from chemo,” Wingard said, “and I couldn’t see my oncologist.”

Medical debt has lowered her credit score to the point that she has struggled to qualify for credit and applying for jobs and housing has become a harrowing experience.

“It’s like being punished for being sick,” Wingard said.

When three national credit agencies announced new guidelines for handling medical debt earlier this year, consumer advocates celebrated because they thought it would relieve patients like Wingard. But it turns out the changes aren’t enough to help her or many other black and low-income patients who are often hardest hit by medical debt.

Under the new guidelines, Equifax, Experian and TransUnion will remove from credit reports any debt that is paid or less than $500, even if it has not been paid. This won’t wipe out people’s debts, but the idea is to remove the black mark of collections from their credit, making it easier for them to reach such milestones as qualifying for a car or home loan.

The changes, which will take full effect in 2023, are expected to benefit an estimated 16 million Americans. However, a federal report released this summer suggests these may not be the ones who need it most.

“Although credit bureaus have hailed this as a big change, the truth is they’re just removing the small things,” said Ryan Sandler, co-author of the report and senior economist at the US Consumer Financial Protection Bureau. “Maybe they’re not doing as well as their press releases would have us believe.”

People most burdened by medical debt tend to be black or Hispanic, have low incomes, and live in the South. A nationwide survey by the Kaiser Family Foundation found that 56% of black and 50% of Hispanic adults say they have current debt from medical or dental bills, compared to 37% of non-Hispanic white adults. And a study published in 2021 found that medical debt was highest in low-income communities and Southern states that hadn’t expanded Medicaid.

But, Sandler said, “the population whose collections are all scheduled to be removed are slightly more likely to live in majority-white and high-income neighborhoods.”

Collections under $500 often result from an unpaid co-payment or coinsurance, Sandler said, and people with insurance tend to be wealthier and whiter.

Someone like Wingard — a black woman living in North Carolina — is less likely to benefit from the lending companies’ new policies.

After Wingard’s oncologist stripped her of her job, it was nearly six months before she found another doctor who would treat her and leave bills unpaid.

North Carolina has not expanded Medicaid, so Wingard, who is 58 and has no young children, is not eligible for her state’s public insurance program.

She estimates her total medical debt is more than $50,000 today. It’s not just about cancer treatments, but also bills for unrelated health problems that developed in the years that followed.

She has worked as an after-school teacher and tutor, a COVID-19 contact tracer, and a driver for a transportation service, but none of those jobs involved health insurance benefits. Wingard cannot afford to take out private insurance. That left her hooked bill after bill after bill. Your credit report shows five pages of notifications from collection agencies representing doctor’s offices, hospitals, and laboratories.

Wingard is resourceful. She has tracked down clinics that work with tiered fees, pharmacy programs that reduce co-payments, and nonprofit organizations that help cover healthcare costs. But it wasn’t enough to get her out of debt.

In February, Wingard required a specialized mammogram to check for cancer recurrence. Before the appointment, she contacted a local non-profit organization who agreed to cover the costs. But a few weeks after the procedure, Wingard received a bill for nearly $1,900. There were some misunderstandings between the nonprofit and the hospital, Wingard said. While trying to solve the problem, the bill went to the collections. It’s over $500, so it won’t be removed even when the new credit bureaus go into full effect next year.

“You fight so hard and go through so much,” Wingard said. “Nevertheless, sometimes you don’t see any relief at all.”

According to the KFF poll, nearly 20% of Americans with medical debt don’t think they’ll ever pay it all off. Wingard has resigned himself to living with the consequences.

Both her refrigerator and stove have been broken for more than a year. She can’t qualify for credit to replace them, so she often settles for a can of soup or fast-food chicken wings instead, rather than making her favorite family recipe for baked chicken.

In emergencies — like when she had to fix a chipped tooth this fall — Wingard borrows money from the family. But asking for money isn’t easy, she said. “You feel worthless, like you can’t do anything.”

A recent study found that medical debt leaves many people unable to pay for basic care, increases their housing and food insecurity, and “can contribute to a downward spiral of illness and financial precarity.”

For Wingard, it affected her ability to get a job. She said two employers told her that bad credit showed up as a red flag on background checks and resulted in her being turned down for jobs.

Employers sometimes use credit reports as “proxies for character,” explained Mark Rukavina, program director at the nonprofit health advocacy community Catalyst. If two candidates are equally qualified but one has a low credit score or multiple unpaid debts, employers might consider that person less responsible, he said — although research shows medical debt isn’t an accurate indicator of someone’s likelihood of paying bills.

Though the lending companies’ new guidelines are unlikely to improve Wingard’s situation, consumer advocates say there are signs society is starting to think differently about medical debt.

The Biden administration has advised federal lenders to stop considering medical debt when evaluating loan applications and asked the Consumer Financial Protection Bureau to investigate whether medical debt should ever appear on credit reports.

A federal law banning certain types of surprise medical bills went into effect this year, and some states have strengthened protections against medical debt by expanding Medicaid or holding nonprofit hospitals accountable for financially assisting low-income patients.

In August, VantageScore, a company that calculates credit scores, said it will stop using medical collections in its formula.

Wingard is ready for faster and stronger change. And she has an idea for how to get there: a march on Washington to demand medical debt relief and universal insurance to reduce future bills.

“If a million people got together there and said we need better healthcare, I think that would make history,” she said. “Maybe then they’ll realize we need help.”

This article is from Project Diagnosis: Debt, a reporting partnership between KHN, a national newsroom dedicated to healthcare issues, and NPR, which examines the magnitude, impact and causes of medical debt in America. It is based on a survey conducted online and by phone in English and Spanish from February 25 to March 20 of a nationally representative sample of 2,375 US adults, including 1,292 adults with current healthcare debt and 382 adults with Healthcare debt over the past five years.

The sampling error rate is plus or minus 3 percentage points for the full sample and 3 percentage points for those with ongoing debt. For results based on subgroups, the sampling error margin can be higher.