Lawmakers in several states are working to expand medical debt protections for patients, even after the Trump administration reversed course and told states they don’t have authority to take action on credit reporting.
In Alaska and Michigan, legislators are nonetheless advancing bills to keep medical debt off consumer credit reports.
The attorneys general of California and Colorado said they would stand behind credit reporting laws enacted in those states in recent years, even as Colorado faces a lawsuit from debt collectors contesting such laws.
Indiana and Ohio lawmakers have dropped proposals to remove medical debt from credit reports but are pushing legislation that would extend other protections to patients who cannot pay their medical bills.
“Seventy-four percent of Alaska voters don’t think credit reports should include medical debt,” said state Rep. Genevieve Mina, a Democrat sponsoring a medical debt measure there. “I’m not going to wait on the courts on the medical debt issue.”
An estimated 100 million Americans are saddled with health care debt. And a growing number of red and blue states have enacted laws to protect patients.
But federal policy on such debt boomeranged this year when President Donald Trump’s administration chose not to defend federal regulations that would have removed medical debt from all Americans’ credit scores. And in October, Trump’s Consumer Financial Protection Bureau said that states do not have the authority to regulate consumer credit reports.
“It’s sort of a head-spinning, 180-degree reversal,” said Chi Chi Wu, an attorney with the National Consumer Law Center, which advocates for people with low incomes. She called the Consumer Financial Protection Bureau, now led by Project 2025 architect Russell Vought, the “evil twin” of its predecessor under President Joe Biden.
The bureau did not respond to requests for comment.
Eight days after the new federal guidance, debt collectors filed a lawsuit contesting Colorado’s 2023 medical debt credit reporting law, the first to require removal of some or all medical debt from credit reports.
Scott Purcell, CEO of ACA International, which is a debt collection trade group and a plaintiff in the Colorado suit, said removing the debt makes it harder to gauge creditworthiness, which he said would lead creditors to assume everyone is a riskier bet.
His organization’s case also argues the Colorado law violates the First Amendment by suppressing “truthful commercial speech.”
Colorado Attorney General Phil Weiser, a Democrat, called the lawsuit outrageous in a statement to KFF Health News. His office, he said, “will strongly oppose all efforts to strip away critical medical debt protections.”
In California, Attorney General Rob Bonta, too, is standing firm on his state’s law regardless of how federal officials now interpret state rights. The Democrat told constituents in a Nov. 13 alert: “Let me be clear: This remains the law in California.”
In other states still contemplating credit reporting laws, legislators are adjusting their strategy to account for the lawsuit and the Trump administration’s moves, by either ditching the plan to remove medical debt from credit reports or modifying such legislation.
Wu said her organization saw the federal change coming and had already urged state lawmakers to make pending legislation on credit reporting more lawsuit-proof by looking upstream and downstream of the credit reporting agencies. For example, Wu said, states can tell landlords, employers, or other credit report perusers that they cannot use a person’s medical debt history in their decision-making. And states can require health providers to include, in their contracts with debt collectors, limits on what they can tell credit reporting agencies about the bills they’re collecting.
“You’ll often hear providers say, ‘Oh, well, we don’t want to hurt our patients’ credit,’” she said. “Tell the debt collectors, ‘Don’t report this.’”
Alaska’s legislation has both elements: It bars landlords from making decisions about potential renters based on their medical debt history, and it bars providers and collectors from telling credit reporting agencies about patient debt.
Elsewhere, state lawmakers have opted out of trying to pass credit reporting provisions in proposed legislation. Indiana state Sen. Fady Qaddoura, a Democrat, filed a medical debt measure that tries to, among other things, cap interest rates, limit wage garnishment, and keep people from losing their homes over unpaid bills from medically necessary procedures. But he and his colleagues made a tactical decision to leave out credit reporting, after unsuccessfully including it in a similar bill last year.
“It’s out of legislative pragmatism,” Qaddoura said. “We want to be sure that you don’t get a piece of legislation killed with many benefits to tens of thousands of families just because one provision can’t go in.”
In Ohio, Democratic state Rep. Michele Grim made a similar calculation. She has been working on a measure to ban wage garnishment over medical debt, cap interest rates for such debt at 3%, and scratch it from credit reports. She said she and other lawmakers recently removed the credit reporting portion.
“It’s better to pass something than nothing at all,” Grim said. “It still bans wage garnishment, which is a very aggressive, more-common-than-you-think practice. And it caps the interest rate.”
A recent investigation by KFF Health News found that, in Colorado alone, thousands of people each year have their wages garnished to pay back medical bills, and some people taken to court for medical debts never actually owed the money.
Legislative efforts to protect people from the effects of medical debt are often bipartisan, but that doesn’t mean they pass easily. Even before the Consumer Financial Protection Bureau reversed its stance on credit reports, several measures hit obstacles in conservative states this year, and legislation failed in Wyoming and South Dakota that aimed to take medical debt off credit reports.
Americans are largely protected from having their credit scores dinged by small medical debts. In 2023, the three big credit bureaus — TransUnion, Equifax, and Experian — voluntarily opted to remove medical debts under $500 from their credit reports, and the Consumer Data Industry Association, a trade group for the companies, confirmed they are still doing so.
Even so, lawmakers in several states said they are deciding whether and how to get ahead of the federal guidance with legislation that tackles additional, larger medical debt on credit reports.
“We know that this will need to get beefed up,” said Sarah Anthony, a Democratic state senator in Michigan, of legislation she’s co-sponsoring. She isn’t sure what that will look like, though consumer advocates including Libby Benton hope to see the measure follow Wu’s strategy.
“These aren’t debts that people choose to take on. People might choose to buy a huge pickup truck and that’s a bad financial decision,” said Benton, director of the Michigan Poverty Law Program. “People don’t choose to have emergency heart bypass surgery.”
Yet both can end up on a credit report.
