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A break for consumers Legislation would keep credit rating from being hurt by paid medical bills

Legislation that passed the House with bipartisan support last year but stalled in the Senate should find the light of day, as it would help repair the credit histories of many Americans.

This year's version of the Medical Debt Responsibility Act would erase medical debts from credit reports within 45 days of being settled or paid.

The House version would cover debts up to $2,500, erasing them from credit reports soon after they are paid. That ceiling is high enough to cover most cases, according to Jeffrey Freedman, a Buffalo bankruptcy attorney.

Fixing this problem costs the government nothing. But doing so could provide a small boost to the economy because increasing a credit score lowers the cost of obtaining a home mortgage or other loan.

This issue is at the nexus of health care costs, the health care billing system and the credit report.

Many problems occur when health care payments are delayed because of confusion over whether a bill is the responsibility of the consumer or the insurance company. By the time that is sorted out, a bill may be overdue and already sent to a collections agency. Then it ends up on credit reports, according to Mark Rukavina, executive director of the Access Project, a nonprofit group that helps people with large medical debts.

More than one half of collection accounts reported to credit bureaus are associated with medical bills. And 11.5 percent of medical debts listed on credit reports are fully paid.

The legislation has broad support from a wide range of organizations, from consumer groups and the Mortgage Bankers Association to the American Medical Association. Opponents of the bill express concerns over removing data that provides important information about a person's payment history.

There are always people out to scam the system, but consumer advocates contend there could be a mechanism to differentiate between the scammers and those who want to do the right thing, the people who have a history of consistently paying their bills. The legislation affects only those bills that have been fully paid or settled.

Those caught in the complex world of billing for medical care have alarming stories to tell of small medical bills they thought had been settled, only to discover years later that the debt had still been reported to the credit bureaus.

People who pride themselves on paying their bills on time and believe that they have a spotless credit history have been shocked to find a long-ago medical debt dragging down their credit score, which they discover only upon trying to obtain a mortgage or refinance an existing one.

Granted, everyone should obtain a free annual credit report from each of the credit bureaus to check for problems. But how many people do that?

The Medical Debt Responsibility Act would do much to prevent minor medical debts from having devastating effects on consumers.