11-02-2025
Legislative committee endorses ban on medical debt reporting to credit scoring agencies
State Rep. Brian Mulder, R-Sioux Falls, speaks on the South Dakota House floor on Jan. 22, 2025. (Makenzie Huber/South Dakota Searchlight)
Debt collectors would be prohibited from reporting medical debts to credit scoring agencies under legislation endorsed by a legislative committee Tuesday at the South Dakota Capitol in Pierre.
About 18% of South Dakota adults have medical debt, which is the highest percentage in the nation and twice the national average, according to the national health advocacy group KFF.
Health care systems send overdue medical bills to debt collectors, which currently can share that information with credit scoring agencies. Lenders reference credit scores to rate a person's likelihood of paying a loan back on time.
Medical debt is commonly disputed and is often 'thrust upon' families after emergency situations, said Rep. Brian Mulder, R-Sioux Falls, who introduced House Bill 1058.
'When you have a low credit score and this compounding debt, it just makes it harder in every other aspect,' Mulder said, 'whether you're looking for housing, even renting, or you're looking for a car to get to work.'
Health care systems would still be able to send medical bills to collection agencies, Mulder said. Time Rave, executive director of South Dakota Association of Healthcare Organizations — which represents hospitals, health systems and post-acute care providers across South Dakota — told lawmakers the organization 'doesn't have a position' on the bill.
Several health advocacy groups supported the legislation, including advocates for South Dakota's elderly, disabled and tribal populations. A representative for the Rosebud Sioux Tribe told lawmakers that tribal members are often hounded by collection agencies when they are referred to a non-Indian Health Service provider and the provider does not receive timely reimbursement from the federal government.
Opponents included business and banking advocacy organizations. Karl Adam, president of the South Dakota Bankers Association, said the bill would disadvantage people with other debts, such as home mortgages, auto loans, student loans and credit card debt. He also said lenders couldn't paint a 'full and accurate picture' of a person's financial assessment without medical debt.
Lawmakers on the House Health and Human Services Committee voted 9-4 to pass the bill onto the House floor. Sioux Falls Republican Rep. Taylor Rehfeldt endorsed the bill, although she was concerned about accountability.
'The responsibility to pay for bills lies on the person, and if it does not lie on the patient, ultimately, it becomes all of our responsibilities to pay,' Rehfeldt said.
An accompanying medical debt bill introduced by Mulder that would prohibit hospitals from sending medical debt to a collector unless certain conditions were met was shot down by the committee in a 10-3 vote.
Representatives for Avera, Sanford and Monument health care systems and the South Dakota Association of Healthcare Organizations opposed the bill, saying the legislation was too vague and potentially costly. They also said health care systems already have policies and processes in place to connect patients to financial assistance before sending medical debt to collection agencies.
