By Grace-Marie Turner, Galen Institute
The checks and balances of a properly functioning market are subverted in the U.S. health sector by public and private third-party payments. Neither sellers nor buyers know what goods and services actually cost, and this blindness allows spending to rise faster than inflation year after year. Massive taxpayer subsidies and hidden private-sector transactions fuel the fires.
So enter the Biden administration with another brilliant idea: Let’s hide medical debt on citizen’s credit reports so borrowers don’t have so much trouble getting loans.
“The Biden administration announced a major initiative to protect Americans from medical debt on Thursday, outlining plans to develop federal rules barring unpaid medical bills from affecting patients’ credit scores,” KFF Health News reports.
“The regulations, if enacted, would potentially help tens of millions of people who have medical debt on their credit reports, eliminating information that can depress consumers’ scores and make it harder for many to get a job, rent an apartment, or secure a car loan.”
Let’s think this through. Hiding the debt from the loan agency may make it easier for someone to buy a house, but it will make it harder for them to make their mortgage payments.
The three largest credit agencies—Equifax, Experian, and TransUnion—already have dropped medical debt of under $500 or medical bills that have been paid from consumer credit reports.
So it’s only the major debt that will be hidden from banks and other loan agencies. Colorado already has enacted legislation that prohibits including medical debt in credit scores.
So what’s next? If the borrower faces foreclosure because she can’t make mortgage payments, will the Biden administration then move to forgive the debt altogether? Move over student-loan forgiveness. Medical debt is next.
This is crazy and totally disregards market forces that will prevail, one way or another. If doctors and hospitals have to write off the debt, some will go under but others will try to make up the difference by charging their paying patients and plans even more.
Health spending for the average employee in America averages $14,600 a year—a largely hidden expenses for workers and families and one of the biggest expenses for employers. This potential Biden administration rule would fuel the fires even more.
Oh, and by the way, the proposed rule is expected to be ready for release next year, just in time for the presidential elections.
Grace-Marie Turner runs the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform.