Washington could exempt medical debt from credit reports
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When Kristopher Shook was diagnosed with Stage 4 cancer at age 42, his only concern was beating it, no matter the cost. As a result, he accumulated hundreds of thousands of dollars in debt.
He was diagnosed with two types of lymphoma cancer — follicular lymphoma, an incurable cancer, and large B cell lymphoma, which is aggressive. He was only given a 15% chance of survival.
'There was no price tag on my life and I was willing to do whatever it took to survive,' Shook said. 'I wasn't concerned about the medical bills.'
The hospital gave him two years to pay off hundreds of thousands of dollars worth of debt. When he couldn't pay it on time, the hospital sold it to a collections firm, which added 12% interest. Shook was threatened with lawsuits, wage garnishment, and court action.
He felt penalized for beating cancer.
Shook's situation is not unique. Nationwide, about 20 million people, or nearly one in 12 Americans, owed $250 or more in medical debt in 2021, according to an analysis released last year by the Peterson Center on Healthcare and KFF. Medical debt is a leading cause of personal bankruptcy in America and got worse after the COVID-19 pandemic hit.
To alleviate some of the negative effects this debt might have on people in Washington, Sen. Marcus Riccelli, D-Spokane, is sponsoring Senate Bill 5480, which would prevent medical debt from appearing on a person's credit report.
He said the bill is an attempt to help people in 'really unfortunate situations' avoid snowballing financial difficulties.
'But we're not trying to provide a path for folks to get around paying their obligations,' Riccelli said.
The bill passed the Senate on Wednesday on a 35-12 vote, with six Republicans — Sens. John Braun, Chris Gildon, Paul Harris, Curtis King, Ron Muzzall, and Jeff Wilson — voting with Democrats in favor. The bill will next go to the House for consideration.
The legislation comes amid uncertainty over a similar effort at the federal level.
In early January, the Biden administration finalized a Consumer Financial Protection Bureau rule to prevent medical debt from appearing on credit reports. It was set to take effect in March. But it's since been paused by the Trump administration and also faces legal challenges.
Riccelli's bill is a way for the state to provide extra protections. It also goes further than the federal rule in certain ways, including by preventing medical devices such as wheelchairs and prosthetics from being taken away from people if they don't pay their debt on time.
This bill would only apply to Washington residents.
Sen. Keith Wagoner, R-Sedro-Woolley, is among those who criticized the bill.
'It can enable further bad choices,' Wagoner said in a floor speech. 'If you are already suffering from crushing debt, but it doesn't have to be exposed, you now can take a future loan to put you further in debt and make life actually worse.'
The Washington Collectors Association, an industry group for debt collectors, originally opposed the bill, but after amendments adopted a neutral position.
Eliminating medical debt from credit reports could increase credit scores by an average of 20 points, according to the Consumer Financial Protection Bureau. A low credit score can cause a range of problems for people, including when trying to rent an apartment or buy a home. And blemishes on a credit report can last for years.
Meanwhile, many people are underinsured and don't know they qualify for charity care or financial assistance because hospitals often fail to screen for it. And even for people with insurance, expensive health care costs and high deductibles and copays can add up.
Shook always considered himself healthy, so he used a high deductible health care plan where he paid low monthly costs for insurance. This resulted in higher out-of-pocket costs as he went through chemotherapy, scans and follow-up care for his cancer.
In the first year after a leukemia diagnosis, care can cost almost half a million dollars, and drugs for cancer can be $10,000 per prescription, said Adam Zarrin, director of state government affairs for the Leukemia and Lymphoma Society.
'I think that people want to save their lives and health care just costs too much,' Zarrin said. 'There's just not enough money in the world to pay off your medical bills.'
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