The Biden administration on Monday directed agencies to no longer use medical debt as a fact in underwriting loans through federal programs.
Americans should be able to apply for rural housing service loans without fear that their medical debt could keep them from getting a mortgage from the U.S. Department of Agriculture, the White House said in one example.
The Small Business Administration will find ways to reduce the impact of medical debt on small businesses’ access to capital, and the government will ensure the Fannie Mae and Freddie Mac loans companies use measures of creditworthiness that are “accurate, reliable and predictive,” the administration said.
“Medical debt is not a reliable indicator of credit quality, and its impact should be reduced or eliminated to give more American families the opportunity to thrive,” a White House fact sheet said.
The administration said one in three adults in the U.S. have medical debt, and it is now the largest source of debt in collections — “more than credit cards, utilities, and auto loans combined.”
Black and Hispanic households are more likely to hold medical debt than White households, the White House said.
Vice President Kamala Harris plans to outline new steps to ease medical debt at the White House on Monday.
Among other steps, the Department of Veterans Affairs will make it easier for veterans to get their VA medical debt forgiven. The administration said the current process is too confusing and time-consuming.
The new plan will offer an online option to apply and set a simple income threshold to qualify for relief, the White House said.
Health and Human Services Secretary Xavier Becerra also will request data from more than 2,000 providers on medical bill collection practices and things like lawsuits against patients and third-party debt buying practices.
“The department will, for the first time, weigh this information in their grant-making decisions, publish top-line data and policy recommendations for the public, and share potential violations with the relevant enforcement agencies of jurisdiction,” the White House said.