States Advance Medical Debt Protections as Federal Support Turns to Opposition

Lawmakers in several states are working to expand medical debt protections for patients, even after the Trump administration reversed course and told states they did not have the authority to take action on credit reporting.

In Alaska and Michigan, lawmakers are nonetheless advancing 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 though Colorado faces a lawsuit from debt collectors challenging the laws.

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

“Seventy-four percent of Alaska voters don’t think credit reports should include medical debt,” said state Rep. Genevieve Mina, a Democrat who is sponsoring a medical debt measure there. “I’m not going to wait in court on the medical debt issue.”

An estimated 100 million Americans struggle with health care debt. And a growing number of red and blue states have passed laws to protect patients.

But federal policy on that debt boomeranged this year when President Donald Trump’s administration chose not to defend federal regulations that would have removed medical debt from the credit scores of all Americans. And in October, Trump’s Consumer Financial Protection Bureau said states don’t have the authority to regulate consumer credit reporting.

“It’s kind of a head-spinning 180-degree reversal,” said Chi Chi Wu, an attorney at the National Consumer Law Center, which advocates on behalf of low-income people. She called the Consumer Financial Protection Bureau, now led by Project 2025 architect Russell Vought, the “evil twin” of its predecessor under President Joe Biden.

The office did not respond to requests for comment.

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

Scott Purcell, CEO of ACA International, which is a debt collection trade group and a plaintiff in the Colorado lawsuit, said eliminating debt makes it harder to assess creditworthiness, which he said would lead creditors to assume everyone is a riskier bet.

His organization’s case also argues that Colorado’s law violates the First Amendment by suppressing “truthful 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 strongly oppose any efforts to remove critical protections against medical debt.”

In California, Attorney General Rob Bonta also stands firm on his state’s law, regardless of how federal authorities now interpret state rights. The Democrat told his constituents in a Nov. 13 alert: “Let me be clear: This remains the law in California. »

In other states still considering credit reporting laws, lawmakers are adjusting their strategy to account for the lawsuit and actions taken by the Trump administration, either scrapping plans to remove medical debt from credit reports or amending that legislation.

Wu said his organization saw the federal change coming and has already urged state lawmakers to make pending credit reporting legislation more resistant to lawsuits by looking up and down credit reporting agencies. For example, Wu said, states can tell landlords, employers or other readers of credit reports that they can’t use a person’s medical debt history in their decision-making. And states can require health care providers to include, in their contracts with debt collectors, limits on what they can tell credit reporting agencies about the bills they collect.

“You’ll often hear providers say, ‘Oh, well, we don’t want to hurt our patients’ credit,'” she said. “Tell debt collectors, ‘Don’t report this.’ »

The Alaska law has two components: It prohibits landlords from making decisions about potential tenants based on their medical debt history, and it prohibits providers and collectors from informing credit reporting agencies about patients’ debts.

Elsewhere, state lawmakers chose not to attempt to adopt credit reporting provisions in proposed legislation. Democratic Indiana state Sen. Fady Qaddoura has filed a medical debt measure that attempts, among other things, to cap interest rates, limit wage garnishments and prevent people from losing their homes to unpaid bills resulting from necessary medical procedures. But he and his colleagues made the tactical decision to leave out credit reporting, after unsuccessfully including it in a similar bill last year.

“It’s out of legislative pragmatism,” Qaddoura said. “We want to be sure that you won’t defeat a bill that provides many benefits to tens of thousands of families simply because a single provision can’t pass. »

In Ohio, Democratic state Rep. Michele Grim made a similar calculation. She worked on a measure to ban wage garnishments for medical debts, cap interest rates for those debts at 3 percent and remove them from credit reports. She said she and other lawmakers recently removed the part about credit reports.

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

A recent investigation by KFF Health News found that in Colorado alone, thousands of people each year have their wages garnished to pay off medical bills, and some people sued for medical debt never owe that money.

Legislative efforts to protect people from the effects of medical debt are often bipartisan, but that doesn’t mean they are easily passed. Even before the Consumer Financial Protection Bureau reversed its stance on credit reports, several measures faced obstacles in conservative states this year, and legislation in Wyoming and South Dakota to remove medical debt from credit reports failed.

Americans are largely protected against a damaged credit score by small medical debts. In 2023, the big three credit reporting agencies — TransUnion, Equifax and Experian — voluntarily chose to remove medical debt under $500 from their credit reports, and the Consumer Data Industry Association, a trade group for businesses, confirmed that they continue to do so.

Even so, lawmakers in several states said they are deciding whether and how to get ahead of federal guidelines with legislation that addresses additional and larger medical debt on credit reports.

“We know this will need to be strengthened,” Sarah Anthony, a Democratic state senator from Michigan, said of the bill she is co-sponsoring. She’s not sure what it will look like, although consumer advocates, including Libby Benton, hope the measure follows Wu’s strategy.

“These are not debts that people choose to take on. People could choose to buy a huge pickup truck and that’s a bad financial decision,” said Benton, director of the Michigan Poverty Law Program. “People don’t choose to have emergency heart bypass surgery.”

Yet both can be found on a credit report.

KFF Health News is a national newsroom that produces in-depth journalism on health issues and is one of KFF’s primary operating programs, an independent source of health policy research, polling and journalism. Learn more about KFF.

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