Medical debt should not harm consumers’ financial health

MASSPIRG testified today in support of the Department of Public Health’s proposal to protect consumers by prohibiting health care providers, facilities and debt collectors working on their behalf from reporting medical debt to consumer reporting agencies. Policies in place in 15 states other states.

These reforms mark an important step towards protecting individuals and families from the unnecessarily harsh and long-term consequences of attributing owed medical bills as an indicator of a person’s financial responsibility and credit-worthiness. Medical debt contributes to lower credit scores which makes home, auto, school and other loans more expensive or difficult and/or impossible to get; it can also adversely impact one’s ability to rent an apartment or even get a job.

The broad impact of this proposed rule will be almost immediate and help people of all ages across the Commonwealth. Despite nearly universal health insurance coverage in Massachusetts, more than one in eight residents carry medical debt, according to a report by the Center for Health Information and Analysis, which monitors the Massachusetts health care systems and practices. Unlike many other forms of consumer debt, most people cannot avoid incurring medical debt.

The proposed rule will not erase medical debt — patients will still have to pay their legitimately owed medical bills. But under this rule, people with outstanding medical bills won’t have to suffer the consequences of a low credit score.

Most Americans understand how an unexpected medical emergency feels. These emergencies are unavoidable, which is why it just isn’t fair to penalize people for them.

Why is medical debt often unavoidable?

Health status: Our health status is mostly out of our control. Health care bills pile up without regard to the careful budgeting of a family. When you get sick or are injured in an accident, you will likely receive large medical bills. Couple those bills with loss of income from missed work days or an extended leave, and suddenly any savings a person has that might have paid some of the medical bills are gobbled up to cover everyday essentials like rent and food.

Out-of-pocket obligations, even with insurance: Most families have some type of insurance (Medicare, Medicaid, Veteran’s or commercial insurance) which covers many health bills. However, insured people are still responsible for significant out-of-pocket obligations for their care. Patients face the full cost of annual deductibles, co-pays, and co-insurance payments on many curative treatments and prescription medications. And if they need treatment for more significant care related to disease diagnosis or emergency health encounters, the amount patients owe to health care providers grows even larger. People on commercial plans in Massachusetts on average spent $1,094 out-of-pocket on health care in 2023. Those with serious ailments owe more than average bills.

Claim denials: Claim denials are happening more frequently with the use of technology. When an insurance claim is denied, the patient owes the full cost of the medical bill; insurance refuses to pay and yet the patient has already received the care. Insurers rely heavily on artificial intelligence (AI) to review claims, meaning fewer claims are reviewed individually by doctors. When claims are batched for the purposes of AI analysis, important information can be missed which might have prevented a claim denial. In 2025, almost 1 in 5 working age adults with private insurance reported they or a family member had experienced an insurance company denial of medical care. Even though patients have the right to challenge those denials, less than half did. But insurance companies do make mistakes, even in claim denials. So when bills arrive for necessary care that has already been provided, patients are unfairly left with a large bill if the insurance company denies a claim. Appealing denials is a complicated and time-consuming business. Many don’t have the skills or time to manage an appeal, so the bill lands on them.

Billing errors: Medical billing and coding errors inappropriately burden families with extra medical bills that they have to spend months or years fighting. Meanwhile, as patients dispute errors through complex insurance appeal systems, the bills pile up. A CFPB’s study shows that collections on medical debt were significantly more likely than credit cards or student loans of being disputed. Billing errors are common and yet difficult to fight. Patients end up owing erroneous bills that they don’t have the time or ability to get corrected.

Timelines for paying off a medical bill: Unlike most large consumer purchases such as cars and mortgages, medical bills are required to be paid off within 30, 60 or 90 days. Taking into account that about 28% of Americans have less than $1000 in savings, and average out-of-pocket costs for health care nationally is $1,425, it is no wonder that many individuals find themselves struggling to come up with the extra money to pay those medical bills. Adding to the financial burden is the loss of income some may experience because of their illness or injury.

Testimony here