After recently overhauling a "glitch" in the Affordable Care Act (ACA), the Biden administration is now addressing another issue plaguing the American health care system: medical debt.

On Monday, Vice President Kamala Harris announced the administration’s four-step plan aimed at increasing consumer protections for Americans billed for health care costs.

These measures include holding medical providers and debt collectors “accountable for harmful practices,” reducing the role medical debt plays in determining whether Americans can access credit, forgiving medical debt for over 500,000 low-income veterans, and informing consumers of their rights.

"No one in our nation should have to go bankrupt just to get the health care they need," Vice President Harris said.

Medical debt 'not like other forms of debt'

According to a February 2022 report from the Consumer Financial Protection Bureau (CFPB), U.S. consumers held $88 billion in debt as of June 2021. Additionally, the report found that medical debt accounts for 58% of all third-party collection tradelines (i.e., the credit accounts listed on a credit report).

The report highlighted that Black and Hispanic individuals are more likely to have medical debt, along with young adults and low-income individuals.

"This burden is not shouldered equally in America," Health and Human Services Secretary Xavier Becerra said, adding: "It is a painful truth ... this is not just about health care. It's about economic security."

Soon after the CFPB findings were released, three of the biggest credit unions — Equifax (EFX), Experian (EXPGF), and TransUnion (TRU) — stated that beginning July 1, they will no longer include medical debt in collections on credit reports once it is paid off. And beginning in 2023, medical debt in collection that’s less than $500 will be excluded from credit reports. Furthermore, the grace period for medical debt collection has been expanded from six months to one year.

The Biden administration highlighted that the $500 debt exclusion only applies to a fraction of Americans in need, which still leaves millions of Americans behind.

"Medical debt is not like other forms of debt," Brian Deese, director of the White House National Economic Council, said on Yahoo Finance Live (video above). "In almost all cases, most cases, you don't choose to take it on. It happens when you have a health event happen in your life. And medical debt is not a very good predictor of future credit quality, as well."