By Michael Bielawski
The Senate Committee on Health and Welfare is working on a bi-partisan-supported bill that would allow medical debt to be excluded from credit reports. This would be done by using state funds to purchase the debt.
Sen. Virginia “Ginny” Lyons, D-Chittenden, is the lead sponsor. With 22 sponsors altogether signed on, this bill could gain traction. The bill is S. 27, and it “proposes to direct the State Treasurer to contract with an entity to acquire and abolish certain medical debts for Vermonters with incomes at or below 400 percent of the federal poverty level or who owe medical debt equal to five percent or more of their household income.”
Similar efforts to buy out student loans at the national level have gotten stalled in federal courts.
It continues that it would prohibit credit agencies from reporting or keeping data on Vermonters’ medical debts. It would specifically prohibit health care providers from reporting such debts to any credit reporting agencies.
To achieve this, the State Treasurer would be required to purchase medical debt of qualifying debtors from the healthcare providers at a “fair market value.” It would require that healthcare providers “ensure that any adverse information resulting from the medical debt is removed from the debtor’s consumer credit report.”
According to Experian.com, credit reports are an important tool for lenders to determine who is safe to lend to and on what terms. They write, “Credit scores help lenders set the interest rates they charge on various loans, and whether to take on a borrower as a customer at all.”
Taxpayer-subsidized debt relief?
The bill proposes to use taxpayer funds as a mechanism for debt relief. It states, “The sum of $1,000,000.00 is appropriated to the State Treasurer from the General Fund in fiscal year 2026 for the purpose of contracting with a nonprofit entity to acquire and repay certain medical debts incurred by Vermont residents as set forth in this section.”
Court challenges ahead?
If this bill becomes law, it is not clear if this could face similar legal challenges as student debt relief has seen via former President Biden’s Student Loan Bailout plan. The SCOTUS has ruled unfavorably for that plan, meaning the students who initially borrowed the loans will pay them back.
The Heritage Foundation reports, “The seven-state lawsuit challenged the Saving on a Valuable Education (SAVE) plan, which the states argued was just another version of the bailout scheme that the Supreme Court struck down last summer. The Eighth Circuit apparently agreed, even scolding the administration for flouting previous rulings and directing it to put further attempts at ‘forgiveness’ on ice.”
The Pew Charitable Trusts reports that it is not so uncommon that healthcare providers will take a patient to court over outstanding debts. They report, “of the 500 major hospitals analyzed nationwide, at least 300 regularly file medical debt collection lawsuits against their patients.”
Credit reports harder to get?
Another section of this bill details specific standards for a company to access credit reports altogether. One standard is “where the request for a credit report is by the Vermont Department of Taxes and is used for the purpose of collecting or investigating delinquent taxes”.
Another standard is “where the request for a credit report is by an organization that is exempt from taxation under Section 501(c)(3) of the Internal Revenue Code for the purpose of determining eligibility for the abolition of medical debt.”
Contact them to weigh in
See all bills assigned to this committee here. Constituents may contact committee members (click link on name for bio, party affiliation, etc.) with comments, questions, and information at the following email addresses:
Senate HealthcareSen. Virginia “Ginny” Lyons, Williston, Chair, vlyons@leg.state.vt.usSen. Martine Larocque Gulick, Vice Chair, Burlington, mgulick@leg.state.vt.usSen. Ann Cummings, Montpelier, acummings@leg.state.vt.us
Sen. Larry Hart, Topsham, lhart@leg.state.vt.usSen. Samuel Douglass, Clerk, sdouglass@leg.state.vt.us
All committee transcripts are available at http://www.goldendomevt.com. The Committee meeting video is available at the committee’s YouTube channel. The committee meets in the morning in Room 17.