A new government report shows that almost 20% of US consumers – nearly 43 million people – have unpaid medical debts that have gone into collection.

That means one in five credit reports for US consumers contains overdue medical debt in collection.

The findings from the Consumer Financial Protection Bureau suggest that many Americans are being trapped by debt because they are confused by the notices they get from hospitals and insurance companies about the cost of treatment.

As a result, millions of Americans may be surprised to find they are stuck with lower credit scores, making it harder for them to borrow to buy a home or an automobile.

The report by the federal regulator indicates that much of this trouble could be avoided. About half of consumers who only carry medical debt have no other signs of being in financial distress.

Earlier this year, the bureau found that credit scores can underestimate creditworthiness by 10 points for those who carry such debt and by up to 22 points for those who have paid it off.

The medical dept plaguing most Americans isn’t high: the average reported medical debt is $579.



That is enough, however, to affect credit scores - especially if medical debt is the only thing on your credit report, which is the case for 15 million consumers.

“These 15 million consumers tend to be more reliable bill payers than consumers with other types of collections on their reports,” according to the Consumer Financial Protection Bureau. “They are much more likely to be consumers who normally meet their debt obligations.”

The findings from the CFPB suggest that many Americans are being trapped by debt because they are confused by the notices they get from hospitals and insurance companies about the cost of treatment.



Not only can there be multiple bills from multiple providers, but the costs might change depending whether the consumer has insurance, what the insurance covers and whether the doctor or the hospital is in the insurer’s network. The amount owed can also change if the consumer has met their annual cap on their deductible or the amount they are required to pay out-of-pocket.

Additionally, there is no standard practice on when overdue medical debt is supposed to be sent to a debt collector or credit reporting agencies, according to the report. As a result many debt collectors just “park” medical debt on to credit reports to get the consumers to pay them.

“The time between when a provider sends the first bill to a patient and when it ultimately ends up on a credit report can differ dramatically. Some providers send the unpaid bill to a collections agency as soon as 30 days after billing, while other providers may wait up to 180 days,” found the Consumer Financial Protection Bureau.

To illustrate the larger problem with how medical debt works in the US, about a year ago, a group of Occupy Wall Street activists purchased $14.7m in medical debt owed by 2,693 people living in 45 states and Puerto Rico.



The price paid? About $400,000.



The debt owed was then “abolished” or forgiven by the activists as part of the Rolling Jubilee project.

“No one should have to go into debt or bankruptcy because they get sick,” Laura Hanna, an organiser with Rolling Jubilee, said at that time.

Medical debt is different than other types of debt, insist the financial watchdog. Getting sick or injured often comes with unexpected cost and can result in medical debt if consumers don’t have a cushion of savings for such occasions.

According to a Bankrate report, 44% of Americans who make less than $30,000 a year say that their medical debt is larger than their emergency savings. For people who earn up to $70,000 a year, that number drops to 25%.

Overall, 55% of people are very concerned about their future medical debt and affordability of their health plans.

Dissatisfaction with health care affordability has been on the rise despite the rollout of the Affordable Care Act a year ago, a recent poll by Gallup shows. About 41% of Americans are dissatisfied with what they pay for their healthcare - a level of dissatisfaction not seen since 2006.