Hospitals and other health care providers in New York are barred from reporting medical debt to credit agencies under a bill passed this week by the state legislature — a move intended to limit the damage that illness and injury can do to a person’s financial health.
If signed by Gov. Kathy Hochul, the law would make New York the second state, after Colorado, to prohibit medical debt from being collected by credit reporting agencies or included on a credit report.
National credit reporting agencies have voluntarily agreed not to report medical debts of less than $500, but advocates say more protections are needed.
A bad credit report often means difficulty renting a home, buying a car, or securing a loan. And unlike someone whose credit is damaged because of careless spending or a bad investment, people are often hit with large, unexpected medical bills simply because they suffer from illness or damage
“Medical debt is different from other debt. It’s loud. It doesn’t reflect a person’s creditworthiness,” said Assemblymember Amy Paulin, a Brooklyn Democrat.
In at least a dozen states, lawmakers have introduced legislation aimed at curbing the financial burden that comes with medical debt. Some of the bills would prevent medical debt from tanking credit scores and create medical debt relief programs, while other proposals would protect personal property from collections.
Colorado law stops medical debt from being included on credit reports and included in credit scores, except in very narrow circumstances.
An estimated 100 million Americans have accumulated nearly $200 billion in collective medical debt, according to the Kaiser Family Foundation.
The New York legislation will affect about 740,000 New York adults and their families with medical debt collections on their credit reports by February 2022, according to a study conducted by the Urban Center, a think tank that conducts economic and social policy research.
Some Republican lawmakers fear the legislation could have unintended consequences.
Republican Assemblymember Josh Jensen, who voted against the bill, said that while there is a need to ensure that emergency medical debt doesn’t overwhelm people, the legislation is too broad and doesn’t necessarily apply to nursing care. which is not an emergency.
“There is a concern that people may have a lot of debt with no intention of paying it back, rather than the intended rationale of the legislation to ensure that people who need critical care get it without worry that the debt will follow them forever,” said Jensen.
The bill would take effect immediately if signed by Hochul, a Democrat.
“Medical debt is a serious problem that creates a crushing burden for many New Yorkers and disproportionately undermines their financial security,” said Chuck Bell, director of advocacy programs for of the nonprofit Consumer Reports, said in a statement. “This bill protects the right of New Yorkers to get the health care services they need without fear of unfairly damaging their credit records.”
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