The credit reporting and debt collection issue that often keeps service members and their spouses awake at night isn’t unpaid credit card debts or hefty car loans, but medical billing problems.
That surprise finding was part of a new report from the Consumer Financial Protection Bureau (CFPB) that drilled down on the more than 42,700 complaints active duty, National Guard and reserve members submitted to the federal agency in 2021. Credit or consumer reporting complaints were the top topic for complaints, with medical billing errors and inaccuracies a “key driver” in that category.
While active duty, activated guardsmen and reservists, and their families receive government-sponsored healthcare, they can accrue medical debt when referred to a private provider or when receiving emergency care off base if medical bills fail to get properly submitted to TRICARE. More than half of medical debt collection complaints from service members were “about debts the individuals reported they did not owe,” the CFPB states.
Jim Rice, assistant director, CFPB’s Office of Servicemember Affairs, points out medical-billing complaints “aren’t unique to the service member population,” but can directly impact a member’s military career.
“An adverse notation in someone’s credit monitoring can affect a security clearance,” Rice said. “It can affect their ability to either get rental housing or in an increasingly difficult mortgage market to get a mortgage.”
What should you do to avoid or solve issues with medical billing or collections? Rice offers this advice to military families:
- When being seen outside of a military medical treatment facility, ensure the civilian provider is aware of your military status and TRICARE health insurance coverage.
- Provide an up-to-date mailing address to providers and civilian medical facilities, especially when moving to a new duty station.
- If an error appears on one or more of your credit reports, contact Experian, Equifax or TransUnion directly to resolve the issue. A free copy of your credit report is available annually from each of the credit bureaus.
- If you are unable to resolve a medical billing or credit reporting issue, submit a complaint to the CFPB.
- Visit the CFPB website for tips and tools on managing debt and debt-collection issues.
Under a new rule announced this year, the U.S. Department of Veterans Affairs no longer will report unpaid bills of less than $25 to credit bureaus. In addition, the VA only will report medical debt after the agency has exhausted all other debt collection efforts and determined the veteran is not “catastrophically disabled or entitled to free VA medical care.”
The CFPB would like the VA’s credit reporting rule to serve as a model for civilian healthcare providers and credit reporting companies that serve military families.
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“Can others do that? Should we look at the ability someone has to pay that debt before you send it to collections?” Rice asked. “Medical debit is different than consumer debt. Your trip to the emergency room is not like buying a new car versus buying a used car … It’s not planned and it has an immediate impact on a family whose resources may not be able to support that situation.”
If a service member enters the military with medical bills, the Servicemember Civil Relief Act provides an avenue for reducing the interest rate on such debt to 6%, but does not eliminate repayment.
For some military members, RIP Medical Debt could provide an avenue for permanently resolving medical debt issues. While neither endorsed nor affiliated with the CFPB, the 501(c)(3) nonprofit “cures” medical debt by buying bundled medical debt portfolios that have gone through collections and then forgiving those debts. RIP Medical Debt states that every dollar donated on average erases $100 in medical debt.
RIP Medical Debt provides debt relief to prequalified individuals who earn less than four times the federal poverty level (varies by state, family size) or whose debts are 5% or more of a family’s annual income. According to RIP Medical Debt, debt-relief recipients have “no adverse tax consequences, obligations or strings attached.” The Internal Revenue Service does not count the debt relief as income to the debtor.