A Federal Right to Obfuscate

H.R. 3421, the “Medical Debt Relief Act of 2009,” has nothing to do with relieving people of medical debts. It adds to the list of information credit reporting agencies may not communicate to their clients.


Current law bars credit bureaus from sharing truthful information about bankruptcies occuring more than ten years in the past, and lawsuits, judgments, tax liens, accounts placed in collection, or other adverse information more than seven years old, except in certain high‐​dollar credit transactions. This bill would add a new item to the list of officially banned information: medical debts that have been paid more than thirty days before a credit report is issued.


There are many cases, of course, where people who incur medical debts deserve our sympathy. But do they deserve our money?


If this bill becomes law, it will relieve people of one burden of medical debt. Lightening the obligation to save for a medically rainy day or carry health insurance, the bill will produce more people who fall on hard times due to illness or injury. These spendthrifts are worse credit risks than others, and their ability to obfuscate this will drive up the cost of credit.


The result? More expensive credit for everyone to cover the risk of medical debtors. A transfer of wealth from people responsible enough to save and buy health insurance to those who are not.


Not to worry, defenders of the law may say, Congress has findings in the bill saying that “medical debt collections are more likely to be in dispute, inconsistently reported, and of questionable value in predicting future payment performance because it is atypical and nonpredictive.”


The credit industry has a highly sophisticated cadre of analysts working to determine what facts and circumstances are, and are not, predictive of financial acuity. Congress does not. ‘Nuff said.