States Advance Medical Debt Protections as Federal Support Turns to Opposition

Ray Ellen Beachell

Lawmakers in several states are working to expand medical debt protections for patients, even after the Trump administration reversed course and told states they had no authority to take action on credit reporting.

However, lawmakers in Alaska and Michigan are pushing bills to keep medical debt off consumer credit reports.

The attorneys general of California and Colorado have said they will support credit reporting laws passed in those states in recent years, even as Colorado faces a lawsuit from debt collectors challenging those laws.

Lawmakers in Indiana and Ohio have abandoned proposals to remove medical debt from credit reports but are pushing legislation that would expand other protections for patients who can't pay their medical bills.

“Seventy four percent Alaska voters do not believe credit reports should include medical debt,” a state Rep. said. Genevieve Minademocrat sponsoring a medical debt measure there. “I’m not going to wait for a court decision on medical debt.”

An estimated 100 million Americans are saddled with healthcare debt. And a growing number of red and blue states are passing laws to protect patients.

But federal policy toward such debt boomeranged this year when President Donald Trump's administration decided not to protect federal regulations it would eliminate medical debt from the credit scores of all Americans. And in October, Trump's Consumer Financial Protection Bureau said he declares do not have the authority to regulate consumer credit reports.

“It's kind of a dizzying 180-degree turn,” he said. Chi Chi Wuis an attorney with the National Consumer Law Center who advocates for low-income people. She called the Consumer Financial Protection Bureau, now headed by the architect of Project 2025. Russell Voughtthe “evil twin” of his predecessor under President Joe Biden.

The bureau did not respond to requests for comment.

Eight days after the new federal guidance, debt collectors filed a lawsuit challenging the Colorado Medical Debt Credit Reporting Act of 2023, which was the first to require the removal of some or all medical debt from credit reports.

Scott Purcell, CEO ASA Internationalwhich is a debt collection trade group and a plaintiff in the Colorado lawsuit, said debt relief makes it harder to assess creditworthiness, which it said will lead creditors to view everyone as a riskier bet.

His business of organization also argues that the Colorado law violates the First Amendment by suppressing “true commercial speech.”

Colorado Attorney General Phil Weiser, a Democrat, called the lawsuit outrageous in a statement to KFF Health News. His office, he said, “will vigorously oppose all efforts to eliminate critical medical debt protections.”

In California, Attorney General Rob Bonta is also holding firm to his state's laws, regardless of how federal officials now interpret state rights. The Democrat told voters during November 13th Alert: “Let me be clear: This remains the law in California.”

In other states that are still considering credit reporting laws, lawmakers are adjusting their strategy to take into account the lawsuit and the Trump administration's actions, either abandoning a plan to remove medical debt from credit reports or changing such legislation.

Wu said her organization saw coming changes at the federal level and had already called on state legislators to make the pending credit reporting law more lawsuit-proof by examining credit reporting agencies upstream and downstream. For example, Wu said, states could tell landlords, employers or other users of credit reports that they cannot use a person's medical debt history when making decisions. And states could require health care providers to include in their contracts with debt collectors restrictions on what they can tell credit reporting agencies about the accounts they collect.

“You often hear providers say, 'Well, we don't want to give our patients a bad name,'” she said. “Tell the debt collectors, 'Don't report this.'

Alaska's law has both elements: It prohibits landlords from making decisions about potential tenants based on their medical debt history, and it prohibits service providers and debt collectors from reporting patients' debts to credit reporting agencies.

Elsewhere, state legislators have abandoned efforts to include credit reporting provisions in proposed legislation. Indiana State Senator. Fadi Kaddourademocrat, filed a medical debt claim it tries, among other things, to cap interest rates, limit wage garnishments and keep people from losing their homes due to unpaid bills for medically necessary procedures. But he and his colleagues made the tactical decision to eliminate credit reporting after unsuccessfully including it in a similar bill last year.

“This is out of legislative pragmatism,” Kaddoura said. “We want to make sure that you don't kill any law that provides multiple benefits to tens of thousands of families just because one provision can't be implemented.”

Democratic member of the Ohio House of Representatives. Michelle Grim made a similar calculation. She was working on measure prohibit wage garnishment for medical debt, cap interest rates on such debt at 3%, and remove it from credit reports. She said she and other lawmakers recently removed some of the credit reporting.

“It’s better to convey something than nothing at all,” Grim said. “It still prohibits wage garnishment, which is a very aggressive and more common practice than you might think. And it caps the interest rate.”

Recent KFF Health News investigation found that in Colorado alone, thousands of people have wages garnished each year to pay off medical bills, and some people prosecuted for medical debt never actually owed the money.

Legislative efforts to protect people from the consequences of medical debt are often bipartisan, but that doesn't mean they pass easily. Even before the Consumer Financial Protection Bureau changed its stance on credit reports, several measures were taken. overcome obstacles in conservative states this year, and legislation aimed at removing medical debt from credit reports failed in Wyoming and South Dakota.

Americans are largely protected from having their credit ratings deteriorated by small medical debts. In 2023, the three major credit bureaus—TransUnion, Equifax, and Experian— voluntarily chose remove medical debts of less than $500 from their credit reports, and the Consumer Data Industry Association, a trade group for the companies, confirmed they are still doing so.

Even so, lawmakers in several states said they are weighing whether and how to get ahead of federal recommendations by passing legislation that addresses the issue of additional, larger medical debt on credit reports.

“We know that this will need to be strengthened,” said Sarah AnthonyDemocratic Senator from Michigan a law of which she is a co-author. She's not sure what that would look like, although consumer advocates including Libby Benton hope the measure will be consistent with Wu's strategy.

“These are not the kinds of debts that people choose to take on. People might decide to buy a huge pickup truck, and that's a bad financial decision,” said Benton, director of the Michigan Anti-Poverty Program. “People are hesitant to have emergency heart bypass surgery.”

However, both may end up on your credit report.

KFF health news is a national newsroom that produces in-depth journalism on health issues and is one of the core operating programs of KFF, an independent source of health policy research, polling and journalism. Find out more about KFF.

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