The nation's economic downturn has already inflicted untold emotional pain. Unemployment is high, real estate has sagged, and millions of Americans are crippled by debt problems. It has been, in short, a perfect storm.
In this economic climate, many people are facing medical bills that they simply cannot pay. And this, in turn, carries consequences for their creditworthiness. Hence the effort, at the federal level, to pass the Medical Debt Relief Act.
The proposal has been circulating in Congress for two years now. The Senate version, introduced by Jeff Merkley (D-OR) in May 2010, was referred to the Senate's Committee on Banking, Housing and Urban Affairs and has been stalled in that committee since early 2010. The House Bill, H.R. 3421, was introduced by Mary Jo Kilroy (D-OH) in July 2009 and was passed by a House majority in September 2010.
The Medical Debt Relief Act is not a sweeping addition to bankruptcy protection, as its name might suggest. It is essentially a consumer credit protection amendment to the Fair Credit Reporting Act. If passed by both houses and signed by the president, it would strengthen the ability of consumers to challenge inaccurate reporting of medical debt. Under the proposed law, people who have medical debt in collection that is either fully paid, settled or in negotiations will not be subject to negative or derogatory reports furnished to credit reporting agencies.
Medical debt accounts for about half of all non-credit-related collections. These debts can damage a consumer's ability to obtain credit, housing and even employment. In 2007, almost 72 million Americans had some form of medical debt. National medical expenditures exceed $2 trillion dollars, and many experts believe that controlling medical costs and debt is the key to stabilizing the economy.
If the Medical Debt Relief Act is finally passed, it would surely have beneficial effects. Medical debt collections would be removed from credit reports, which could raise credit scores. This, in turn, would improve access to credit. That is why many consumer groups support the bill. But the Act still faces considerable opposition in the House and the Senate.