Medical Debt and Collections

Medical debt is financially and emotionally taxing, more so than most other types of debt, but there are ways to manage it before it gets out of hand.

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Medical debt is financially and emotionally taxing, more so than most other types of debt, but there are ways to manage it before it gets out of hand.

Medical debt almost always follows an unexpected injury or illness, and bills can be overwhelming when you’re trying to focus on your health. Even if you have health insurance, a brief stay in a hospital can leave you with large and burdensome bills. Chronic or serious health conditions can wipe out your savings swiftly and put you in debt for years to come.

In addition, legal complications resulting from medical debt can severely impact the financial well-being of your family. Medical debt is fast becoming one of the leading causes of consumer bankruptcy in America.

But if you’re in medical debt, you’re far from alone. One study found that 40 percent of American adults have had problems repaying medical debts.

Dealing with Medical Bills

When tackling medical debt, you may have to deal not only with doctors and hospitals, but also with your health insurance company and even an army of debt collectors. Some medical establishments are quite aggressive about collecting debts and may even sue you or try to convince you that you can't seek further medical treatment if you owe them money.

When you receive your bill, you must first make sure it’s accurate. Look for overcharges, or charges for care and services you didn’t receive. If you find any errors, contact the billing office to have them fixed promptly.

Remember that your bill may be negotiable. Speak with your service provider to try to work out a lower total. Your provider may be able to cut fees, for example.

You can also try to work out a payment plan with your doctor or hospital. In that way, you’ll be agreeing to take on an unsecured debt just like credit card debt. You’ll be responsible for monthly payments of a certain amount, and you may be charged predetermined fees or interest.

When You Don’t Have Health Care Coverage

If you don’t have health care coverage and you know your doctor well, try to deal with him or her directly. See if you can receive a discount by paying in cash; try to work out a payment plan; and/or offer to pay your doctor the lower rate that his office has negotiated with the insurance providers for patients who are covered by major medical plans.

When dealing with a hospital, it's a good idea to have all of the charges fully explained to you by the billing office. Medical bills can be confusing, and auditing every detail is the best way to protect against honest mistakes or outright fraud.

If an expensive procedure has been added to your bill that wasn’t explained to you – assuming you were in a condition to understand and agree or not agree to it during treatment – fight it. By showing the hospital that you are not going to accept any unexpected charges, you can often increase its desire to settle your account.

If your income is very low, you may be eligible for Medicaid. Medicaid is a federal/state program that helps low-income people and families who are struggling with medical costs and may even cover expenses three months prior to your application for assistance.

In addition, some states require hospitals to offer discounts to uninsured patients regardless of income. Also, some hospitals and medical groups have funds set aside for individuals who do not qualify for other types of assistance.

When You Do Have Health Care Coverage

If you have health insurance and you think certain charges should be covered, carefully re-read your policy or contact your insurance agent. If you are certain that you should be reimbursed, or that your doctor or hospital should be paid by your health care provider, file an appeal in a timely manner, as most insurers limit the time you have to question a benefit – often to 30 or 60 days.

Be prepared for denials and delays, and be careful to keep records of all phone calls and correspondence. That way, if you eventually have to file a formal complaint with your state’s insurance commission or contact a consumer law attorney, you have accurate records.

Be aware that in the end, you may still have to pay the bill.

Paying Off Medical Debt

Once you’ve taken on a medical debt, you should treat it just like any other debt. Decide on a plan for tackling it, such as by ­working your necessary payments into your budget and cutting down discretionary spending.

You may be able to free up cash for medical bills by taking care of other debts. Look into settling your credit card debt, so that you’ll have extra money on hand to put toward medical bills.

Settling Medical Debt

If you cannot afford to pay off your medical debt, it’s time to seek alternative financial paths.  As with credit card debt, you may have the option of settling medical debt to pay less money and get rid of the debt faster.

Settling a medical debt is much the same as settling any other type of debt. You – or someone working on your behalf – will contact the doctor, hospital or collection agency to begin negotiations. Often, the creditor will agree to accept an amount that is less than your balance.

The process is often done with the help of a professional at a debt settlement firm. An experienced debt specialist can help you decide on a settlement offer. These professionals also may be well-versed in negotiating with creditors.

Experts advise that you start the settlement process as early as possible, before your health care provider turns the debt over to a collection company. In cases of medical debt, a collection agency has significantly less motivation to settle than a doctor or hospital would.

If debt settlement isn’t the right option for you, consider employing these other debt reduction strategies:

Medical Debt Collections

If you take no action to resolve your medical debt, the bill will go into collections. Medical debt collections are incredibly common; one study found that in 2010, 30 million Americans had collection actions against them for unpaid medical bills. This was up from just 22 million five years earlier.

Medical debt collectors must abide by specific regulations, as set forth by the Fair Debt Collection Practices Act. Collectors cannot harass or lie to debtors, or perform any other practices deemed unfair.

However, the collection process can still be quite harsh, and it can start sooner than you think. It came to light in early 2012 that major debt collection companies had representatives working in hospitals and emergency rooms, attempting to collect payment for treatments that patients had yet to receive.

Officials believe these debt collectors regularly broke the law in a few ways. Debt collectors allegedly did not make clear that they were, in fact, debt collectors; instead, they purposely blended in with hospital staff by wearing scrubs in the emergency room. Additionally, officials believe some collectors had access to patient health records, a violation of federal privacy laws.

This isn’t the norm, however. If the debt collection process goes in the typical fashion, your bill will be turned over to a collector after several months of delinquency. This will likely be followed by frustrating paperwork and phone calls from debt collectors.

Medical Debt and Your Credit Score

A single medical debt in collections can harm your credit score by as much as 100 points. And once the debt appears as unpaid on your credit report, it takes up to seven years to disappear, even if you pay the bill in full. In that time, you can work toward undoing the damage to your score by paying all bills on time and reducing your debts.

However, the score drop can affect your finances considerably. Even with otherwise pristine credit, the unpaid medical debt can stop you from receiving the best lending options on new loans, costing you extra money in interest.

Avoid negative consequences to your credit by taking care of medical debt as soon as you receive the bill. Contact your service provider or a debt specialist with any questions, and resolve the matter as quickly as possible.

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Staff Writer

Bill Fay is a journalism veteran with a nearly four-decade career in reporting and writing for daily newspapers, magazines and public officials. His focus at is on frugal living, veterans' finances, retirement and tax advice. Bill can be reached at


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