In this 2011 file photo, medical bills from a cancer patient lie on the kitchen table in a Salem, Virginia, home. The Trump administration’s new rule would invalidate more than a dozen state laws that protect consumers’ credit reports from medical debt. (Photo: Don Petersen/Associated Press)
A new Trump administration order issued delayed last month would invalidate state laws that prevent medical debt from being included in consumers’ credit reports, potentially weakening financial protection for millions of Americans.
In recent years a dozen states have taken steps to ensure that medical debt does not negatively impact residents’ creditworthiness by passing legislation with bipartisan support. But new conductivity from the federal Consumer Financial Protection Bureau repeals a Biden-era rule that allowed states to impose their own bans. The Trump administration does interpreted Fair Credit Reporting Act of 1970, stating that it supersedes state laws regarding reporting debts to credit bureaus.
At least American consumers did $220 billion in unpaid medical bills in 2024 – according to a research analysis of the non-profit organization KFF. About 6% of American adults, or 14 million people, have more than $1,000 in medical debt.
“Medical debt is a huge burden that prevents so many families from being financially secure, and unlike most other forms of debt, it is not a matter of choice,” North Carolina Gov. Josh Stein, a Democrat, said last month statement announcing that the new state program has ended medical debt exceeding $6.5 billion for over 25 million North Carolinians.
People rarely plan to take on health care debt like they do when borrowing money to buy a house or a car. AND a one-off or short-term expense A single hospital stay causes about two-thirds of all medical debt, according to a 2022 Consumer Financial Protection Bureau report.
And although most Americans have health insuranceMany people get stuck with unexpected medical bills because their policy has high deductibles or doesn’t fully cover certain treatments, procedures, or medications. According to KFF, people in poorer health and people with disabilities are more likely to report medical debt, as are middle-aged adults, Black Americans and people with low and middle incomes.
In the last two years, a dozen states passed laws prohibiting medical debt from being shown on credit reports, bringing the total number of states with such laws to 14: California, Colorado, Connecticut, Illinois, Maine, Maryland, Minnesota, New Jersey, New York, North Carolina, Rhode Island, Vermont, Virginia and Washington.
Another five states – Delaware, Florida, Idaho, Nevada and Utah – limit how and when medical debt can appear on credit reports, according to the nonprofit Commonwealth Fund.
Republican and Democratic legislators in other states, including Michigan, Ohio AND South Dakotaintroduced similar laws this year.
Now, new state laws face an uncertain future. In January, while Biden was still in office, the Consumer Financial Protection Bureau finalized the regulation prohibition of credit reporting agencies from reporting medical debt in certain circumstances. Credit bureaus and credit unions defendant to discontinue this rule. The incoming Trump administration agreed with the reasons and he refused to defend this principle in courtso a federal judge blocked it.
Maine state senator Donna Bailey, a Democrat, said in September statement that Maine’s new law prohibiting medical debt from appearing on consumer reports was even more crucial in delicate of the decline of federal government.
“Even though Americans no longer have federal protections, Mainers will continue to have protections here in our state,” she said in September. “When we go to the hospital for medical care, especially in an emergency, the debt we incur should not stop us from buying a car, renting a house or taking out a loan.”
However, the Trump administration’s latest executive order would make state laws like Maine’s up for debate.
Stateline reporter Anna Claire Vollers can be reached at: avollers@stateline.org.
This story was originally produced by state linewhich is part of States Newsroom, a nonprofit news network that includes the Ohio Capital Journal and is supported by grants and a coalition of donors as a 501c(3) public charity.
