"The Biden Administration has issued a new rule that bans all medical bills from consumer credit reports, marking the culmination of years of policy efforts. While the rule stands to benefit some consumers, policymakers should be attentive to responses by lenders and health care providers that could undercut policy goals.
The new rule, announced by the Consumer Financial Protection Bureau, is motivated by the concern that medical bills may not always reflect creditworthiness. Instead, they argue these debts may stem from billing errors or the unpredictable nature of health care expenses, unfairly penalizing consumers.
While accurate to some degree, it is also undoubtedly true that a large share of these debts are legitimate unpaid bills—a conclusion that is consistent with reports showing around half of cost sharing goes unpaid by commercially insured patients. Moreover, the typical medical collection on credit reports is around $300, which can be incurred outside of unexpected, catastrophic events many policymakers appear to have in mind.
Given these realities, policymakers should be aware of potential reactions by health care providers and lenders to the new policy.
By design, removing medical bills from credit reports lowers the consequences of unpaid bills to consumers, which could reduce the already low rate at which patients pay health care bills. To this point, a recent randomized control trial found medical debt forgiveness led to a modest decrease in payment of medical bills.
In response, health care providers are likely to seek more upfront payment. The fraction of consumer cost sharing collected ahead of care by hospitals has recently increased to 23 percent. I anticipate this will increase moving forward. While this could improve price transparency in health care markets, it also may reduce access for those who currently do not pay medical bills.
Policymakers have also noted the sharp rise in medical credit cards—credit products offered by health care providers at the point of service. These cards allow providers to collect payment immediately while the card issuer takes the responsibility for securing payment from the patient. Between 2013 to 2023, the number of cardholders for just one notable medical credit card grew from 4.4 million to 11.7 million. The new rule is likely to amplify this trend, partly offsetting the intended benefit to consumer finances.
Policymakers should consider potential reactions by lenders as well. Even if medical collections are less predictive of future repayment risk than other derogatory marks, lenders may still consider them valuable signals. If so, removing them from credit reports obscures a perceived source of risk but does not eliminate it.
In response, lenders could proxy for unobserved risk by placing higher weights on non-medical collections or other delinquencies, raising the cost of borrowing for consumers with those flags on their credit reports. It is unclear whether this would be preferable to the status quo. Alternatively, they could increase borrowing costs across all consumers or adjust lending behavior in settings where unobserved risk is deemed significant.
It’s easy to understand why policymakers are keen to alleviate the effects of medical debts on consumer credit profiles, but they should be mindful of likely responses by market actors that may undercut the potential benefits of this new policy."
Friday, January 17, 2025
How Removing Medical Debts from Credit Reports Could Affect Health Care and Lending Practices
Woke DEI + Green Nihilism = Dresden in California
By Victor Davis Hanson of the Hoover Institution. Excerpts:
"cut over $17.6 million from the LA fire service budget—itself just 65% of the city’s homelessness expenditures."
"there is a 117-million-gallon water reservoir atop Pacific Palisades"
"it was empty and “under repair” for months because of a mere damaged cover. Consider that: a dry autumn, the onset of the usual Santa Ana winds, a recent plague of hilltop wildfires, and Quiñones (Janisse Quiñones, “the new Chief Executive Officer and Chief Engineer of the Los Angeles Department of Water and Power (LADWP)) shuts down the linchpin of a prior generation’s plan to save the Palisades."
"fire chief Kristen Crowley? She now blames the mayor for dry hydrants."
"How about her deputy Kristine Lawson, who claimed people in need want to see fire officers arrive who look like they do? And if they don’t?
She is also on record with this: “Am I able to carry your husband out of a fire? He got himself in the wrong place if I have to carry him out.”"
"But what could Newsom do or say? His entire tenure is synonymous with too many catastrophic forest fires and too little water.
He did nothing after the catastrophic Aspen and Paradise fires to revive the timber industry to glean and clean the forests. He never allowed much new grazing on fuel-rich hills or sent crews in to cut back the chaparral.
He never reconsidered his policies of diverting precious snowmelt from the Sacramento River tributaries to flow into the sea to help the delta smelt rather than to ensure that farmers could irrigate their crops or that Los Angeles County reservoirs were fully banked.
Despite an approved 2014 $7.5 billion bond to build three huge dams and reservoirs, Newsom ensured that we built none: not the easily constructed Sites reservoir, not Temperance Flat, and not Los Banos Grandes, all tertiary foothill reservoirs that could have given California by now nearly five million additional acre-feet of storage.
Or is it worse than that?
Governor Dam-Buster still brags about how he greenlit blowing up four dams on the Klamath River—the largest dam removal in American history. The dams provided 80,000 homes with clean hydroelectric power, farmers with irrigation water, and the public with recreation and flood control.
Instead of following the voters’ bond to build reservoirs and dams, Newsom preferred to dynamite them. The ensuing muddy deluge wiped out the surrounding riparian ecosystem."
"California’s failure to effectively prevent and put out fires—along with hyper-regulation and failure to combat an epidemic of insurance fraud—has destroyed the state’s insurance industry. Given the prior inability of homeowners to buy credible fire insurance at any cost, there are thousands of now-homeless who had no insurance at all.
How about the region’s large homeless population that camps out on the streets and in the tinderbox chaparral above the suburbs? Did the city investigate arson or detain, arrest, charge, and jail those rounded up with incendiary devices or seen lighting fires? Of course not. They vetoed any notion long ago of an anti-camping ordinance."
"There is not enough water for hydrants, not enough to deliver to Los Angeles, and when it arrives, there is too much incompetence to know how to use it.
There were no real warnings to residents that they had mere minutes to flee for their lives. Or was it worse still? As the fires wore on, continuous false alarms of new fires sparked unnecessary and dangerous mass evacuations citywide, destroying what, if any, trust was left in the fire department."
Reducing Spending Now: The Key to Growth, Not Austerity
By Romina Boccia and Dominik Lett of Cato.
"Imagine a future where the average American earns $15,000 more each year because Congress reduced federal spending and national debt. Too often, spending cuts are painted as a necessary evil—painful austerity measures that slow the economy. This narrative couldn’t be further from the truth. Economic research shows that stabilizing government debt by cutting spending can unleash economic growth.
Today, the federal government’s public debt is a staggering $28.8 trillion—equivalent to the nation’s annual economic output—and is projected to skyrocket to 166 percent of GDP by 2054 under optimistic assumptions. This ballooning debt is driven primarily by the growth of interest costs and just a few entitlement programs, including Medicare, Social Security, and Medicaid. High debt levels are already slowing economic growth, driving up inflation, and pushing interest rates higher. This makes it harder for families and businesses to borrow and invest.
Take the crowding-out effect. When the federal government borrows heavily, it competes with the private sector for limited financial resources, driving up interest rates. Between January 2022 and January 2025, for example, the prime bank loan rate doubled from 3.25 percent to 7.5 percent. As loans become more expensive, startups delay expansions, businesses scale back hiring, and innovation suffers. As one business owner noted in 2024, “We are a new business and our loans closed when the rates were at an all-time high … so that has increased our monthly expenses dramatically.”
The result is a less productive economy, lower wages, and reduced competitiveness. Cutting spending reduces this crowding-out effect by freeing up resources for private-sector investment, creating jobs, and boosting incomes.
Economic research reinforces the idea that spending cuts can enhance growth. A 2020 study by researchers at the Hoover Institution found that stabilizing and reducing the debt by restraining the growth in federal spending could boost short-run annual GDP growth by 10 percent and long-run growth by 7 percent. More specifically, Cogan, Hail, and Taylor find that an economic plan that curbs entitlement spending without raising taxes can deliver a powerful one-two punch for growth. A credible commitment to reducing future debt and taxes results in higher long-term disposable income for individuals, motivating more consumer spending today. This surge in consumption more than offsets the initial reduction in entitlement benefits, demonstrating that fiscal discipline can create a win-win for the economy.
Additionally, the Congressional Budget Office (CBO) projects that stabilizing the debt could raise projected income per person by $513 in 2030 compared to baseline projections. The gain in annual income grows significantly over time, and by 2054, the average American’s income could be $5,500 higher (see the graph below). If debt grows faster than expected under CBO’s baseline—meaning the fiscal outlook worsens—the economic benefits of stabilizing the debt become more pronounced. Under one high debt scenario, the Committee for a Responsible Federal Budget estimates that the income gain from debt stabilization would increase to $14,500 per person by 2054.
Spending reductions also shield Americans from higher taxes. In the current fiscal environment, spending significantly outpaces revenues—a gap that will eventually necessitate tax increases. By cutting spending today, lawmakers can prevent harmful future tax hikes and lock in low tax rates, effectively a tax cut compared to the current trajectory. As Cato’s Adam Michel puts it:
Fiscal discipline through spending cuts could act like supply-side tax reform and turbocharge other pro-growth tax cuts and deregulation.
Crucial to this idea is credibly signaling that Congress will commit to spending cuts. The most recent bond market selloff highlights growing investor concerns over America’s fiscal and monetary trajectory. Rising bond yields, in large part, reflect doubts about the government’s ability to manage its long-term debt in the face of widening deficits and repeated budgetary mismanagement. By demonstrating fiscal discipline, Congress can restore market confidence and reduce the premiums bondholders demand for elevated risk, thereby bringing down interest rates and spurring investment.
Voter frustration with inflation underscores the importance of Republicans taking spending cuts seriously. Americans know that excessive government spending over the pandemic was a key driver of inflation, and they voted Democrats out of office. This same voter backlash to spending-driven inflation could occur again come mid-term elections in 2026 should reckless deficit spending continue unabated.
With Republicans crafting a reconciliation bill (or multiple) addressing tax cuts, border security, and the debt ceiling, they have a unique opportunity to rein in inflation, shrink the federal bureaucracy, and reduce government spending, especially on health care and other entitlements. Pairing tax reform with significant spending cuts is not only fiscally responsible but critical to a pro-growth agenda.
Some critics of spending reform may argue that cuts disproportionately harm the less fortunate. Ending billions in corporate welfare (such as farm and energy subsidies) and reducing student loan subsidies, for example, would cut government aid to the rich, hardly a war on the poor. Better targeting programs aimed at the poor also has upsides. Rolling back Medicaid benefits for able-bodied adults, for example, could boost labor force participation, increasing individual earnings while reducing government spending.
These critics also ignore the costs of inaction. Fiscally induced inflation is a hidden, regressive tax that disproportionately hurts low-income households who spend a larger proportion of their income on price-sensitive necessities like food, housing, and energy. The resulting economic effects of excessive government borrowing will end up harming the poor more than the rich.
Others have suggested that even minor cuts to defense pose a risk to national security. There is no shortage of wasteful and unnecessary military spending that can be eliminated without worsening America’s security.
Spending cuts aren’t a burden—they’re a path to prosperity. By prioritizing fiscal discipline, Congress can boost growth, restore market confidence, and secure a brighter economic future for all Americans."