Bernie Sanders, Medical Debt, and the Proposal for a Public Credit Agency

Bernie Sanders' new medical debt plan is called "Eliminating Medical Debt," but that title is a bit misleading. The plan does aim to erase the burden of past-due medical debt through a government buy-down. But the plan does a whole lot more.

There's no doubt that, for many families, medical debt is at least as heavy a burden as student debt. As David Sirota writes in his Bern Notice newsletter, "Today, roughly 79 million Americans are struggling to pay their medical bills or are paying off medical debt--and last year alone, 8 million people were pushed into poverty due to medical expenses. Health insurance is no protection: One in six patients with insurance incurred a surprise medical bill in 2017."

Families that are in trouble due to medical debt are in trouble now, and the relief they need is also now. This plan offers it.

Sirota also notes that Sanders' plan directly challenges "lawmakers like Biden who spearheaded legislation that made it so much more difficult to reduce medical debts in the first place."

So the plan is more than a simple debt cancellation or pay-down. It rewrites the Biden-pushed "bankruptcy protection" act of 2005. (Who did the act protect? Creditors, of course.) And, as an added feature, Sanders' plan restructures the credit reporting market, creating a new government agency to replace the private market dominated by for-profit players Equifax, TransUnion and Experian.

Sanders' medical debt plan is truly ground-breaking, both in its scope and its effect, and it's important that it be widely disseminated and understood. Few in the nation's struggling middle class or boot-stomped poor would fail to cheer its enactment. And, I dare to add, few of Sanders competitors for the presidency would dare to endorse its full breadth.

Here are the plan's main goals and the measures it will enact to achieve them.

Eliminate Existing Past-Due Medical Debt

One source of the medical debt problem is past-due debt. Hospitals often aggressively pursue collection of past-due debt from low-income (i.e., uninsured and underinsured) patients. In addition, they frequently resort, in an attempt to recoup at least something from uncollectable debt, to selling that debt to aggressive collection agencies for pennies on the dollar. Those agencies then turn on patients attempting to get repaid in full if at all possible.

Those patients, of course, have no recourse. They are at the end of their rope financially--after all, these aren't people who spent optionally on a house or car. They bought medical treatment, often life itself. They had literally nowhere else to go, have no resources to turn to when bills are due, and no way to turn off the harassment of the wolves surrounding them when they cannot pay.

Here's the Sanders plan to address the debt and collection part of the problem (emphasis mine):

As president, Bernie will:

• Eliminate the $81 billion in past-due medical debt.
  • Under this plan, the federal government will negotiate and pay off past-due medical bills in collections that have been reported to credit agencies.
    
• End abusive and harassing debt collection practices.
  • Prohibit the collection of debt beyond the statute of limitations.
  • Significantly limit the contact attempts per week a collector can make to an individual through any mode of communication, regardless of how many bills are in collection.
  • Require collectors to ensure information about a debt is fully accurate before attempting to collect.
  • Substantially limit the assets that can be seized and the wages that can be garnished in collection to ensure consumers do not lose their homes, jobs, or primary vehicles and will be able to financially support their families.
    
• Instruct the IRS to review the billing and collection practices of the nearly 3,000 non-profit hospitals to ensure they are in line with the charitable care standards for non-profit tax status, and take action against those who are not.

For people constantly hounded by hospitals and debt collectors, this alone would be a godsend.

Reform the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Joe Biden bears substantial responsibility for the inability of patients to discharge medical debt through bankruptcy.

As Sirota writes, "One of the major drivers of the debt crisis was the 2005 bankruptcy legislation that Bernie fought--and that Joe Biden helped Republicans ram through Congress. A 2018 study found that the legislation made it far harder for patients to discharge medical debt through bankruptcy after a hospital stay, especially for uninsured patients. Biden split with then-Senator Obama to become just one of only three Democrats to vote against an amendment that would have exempted those with serious medical debt from the harshest parts of the bill. Bernie's plan would roll back the key provisions of Biden's 2005 legislation, to make it easier to reduce medical debt."

Here's the part of the Sanders plan that addresses bankruptcy protection (again, emphasis mine):

Reform the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to use the existing bankruptcy court system to provide relief for those with burdensome medical debt.

• Eliminate means testing requirements to file for bankruptcy.
• Allow for the adjudication -- including potential discharge -- of debt, including interest and penalties, stemming from direct payments to providers and insurers for medical expenses. Assuming documentation, this includes medical debt incurred on credit cards or any other consumer debt product.
• End the onerous and regressive "credit counseling" required before filing to discharge medical debt.
• Include broad "automatic stay" protections, placing an immediate prohibition on any evictions, utility (heat, electric, etc.) interruptions, foreclosure proceedings, wage garnishments, driver's license suspensions, and other actions.
• Prohibit requiring the disclosure of medical debt discharge on housing, loan, or other applications.

I hope in the next debate this gets fully discussed. It's both just and Christian (in the real sense of the word) to handle people who are drowning in debt, some of whom may die of it, with mercy. It's also just to expose Joe Biden for who he really is and was--the "senator from MBNA," the senator from Credit Card America.

Replace For-Profit Credit Reporting Agencies

The for-profit credit reporting industry, a near-monopoly dominated by just three companies, does enormous damage to consumers in all of its dealings, but none more so than in its dealings with consumers who carry large medical debt.

Sirota writes, "Bernie's plan ends the corporate control of Americans' credit scores by creating a public credit registry to replace for-profit credit reporting agencies, and by excluding medical debt from credit scores. That is a direct threat to the three corporations that currently control the financial destiny of 140 million Americans. Those three companies--Equifax, TransUnion and Experian--reported more than $10 billion in revenue and more than $1.4 billion in profits last year, while paying their CEOs more than $91 million."

Credit data collection and reporting is an industry that should be treated as a utility and run by government in the public interest instead of by corporations as a profit center. (The argument that Facebook is another is compelling.) After all, U.S. citizens are not this industry's customer--the nation's creditors are--and that's where its loyalties will always lie.

Needless to say, credit reporting inaccuracies and data hacks disproportionately punishes those most in need of good and accurate reports--including and especially the poor and middle class. Including medical debt in credit reports only compounds the problem.

Here's what Sanders will do to restructure this industry:

• Remove and exclude medical debt from existing credit reports.
  
• Create a secure public credit registry to replace for-profit credit reporting agencies.
  • This registry will use a public, transparent algorithm to determine creditworthiness that eliminates racial biases in credit scores.
  • Allow Americans to receive credit scores for free.
  • Prohibit medical debt from being included.
    
• End the use of credit checks for rental housing, employment, insurance and other non-lending practices.

Another godsend, not just for those in medical debt, but for all American consumers.

To paraphrase Joe Biden, I would consider this proposal a very big deal, one that, if widely understood to be part of Sanders' platform, could be a game-changer. It's been clear for years that one of the greatest of our nation's ills is the massive, uncollectable consumer "debt overhang" that sucks life from our lives and hope from each generation--from seniors who retire into poverty, to new college graduates who can't find work in their profession and will still carry student debt far into middle age.

The overhang of consumer debt and the capture of government by wealth--the government's determination to protect creditors even if it destroys the economy for the rest of us--are the reasons most of us have never recovered from the recession of 2007-08. These are the causes, ultimately, that produced the last Donald Trump and will certainly bring the next one to center stage.

If our policy of radically protecting creditors doesn't change soon, we may never escape the trap of fake populism. Proposals like this one offer hope, and a real way out.