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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Health care and hospitalization costs have soared far beyond what most people can cover on their own. Unless you have a rock-solid insurance policy, a medical emergency could suck up your savings like a vacuum cleaner, leaving you with debts you can’t cover.

Medical bills, even major ones, can be negotiated, and the cost of chronic health problem can be managed through various assistance programs. Learning how the system works and seeking financial help for medical bills might save you from financial ruin. It’s important not to run away from a debt or fail to deal with it quickly. Explain your financial situation to a hospital or health-care provider with the hopes of negotiating a settlement you can afford.

Medical debts take a while to show up on your credit report, but when they do, they can be as damaging as a default on your credit cards. The delay can be to your advantage, giving you a half year or more to arrange a financing plan or, better yet, pay the debt. If you have insurance, it’s important to discuss your coverage as soon as you get a bill to see how much is covered. You should take whatever steps possible to avoid your debt going into collection, which can seriously undermine your credit worthiness.

Legal complications resulting from medical debt can severely impact the financial well-being of your family. Medical debt is the leading cause of consumer bankruptcy in America.

But if you’re in medical debt, you’re far from alone. One study by the National Center for Health Statistics found that more than 43 million American adults have had problems repaying medical debts.

Know Your Insurance Coverage

Sometimes health insurers misinterpret a bill and refuse to pay it even though your policy ought to cover all or part of it. Before you begin to panic, call your insurance company to review your coverage. A clerical error in today’s complicated insurance reporting system might be to blame for a bill you shouldn’t have received.

Study the bills and contact the healthcare provider. Ask if all procedures were necessary and whether all the supplies allegedly used to treat you were used. Next, look for coding errors. Look for expenses that are especially high and use available online references for common medical procedures to compare the costs in your bill with those paid elsewhere for the same procedures.

Study your insurance policy to determine your coverage and compare it to the explanation of benefits you receive from your insurer. If you find discrepancies, call your insurance company to discuss your questions. If the bills are too complicated for you to decipher, you might want to contact a patient advocate or medical billing expert to review your documents and charges.

In many cases, especially those involving a hospital stay or visit, covered and non-covered expenses can be commingled in a bill. The doctor who worked on your injured leg might be an in your health insurer’s network, but the anesthesiologist who attended during surgery might not be. You need to study your bills and discuss them thoroughly with your insurer to learn if an uncovered expense can be handled by the company.

How to Deal with Medical Debt and 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.

Medical Bills Without Health Insurance

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 dnot 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,  a federal/state program that helps low-income people and families who are struggling with medical costs. Medicaidmay 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.

Medical Bills with Health Insurance

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. It often is just 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 must 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.

How To Pay 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 ­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 for less than what is owed.

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.

Medical Bill Forgiveness

If you have a verifiable hardship, like a disability which prevents you from working, you may be able to seek medical bill forgiveness. In this case, you petition the provider to forgive the debt entirely. Your provider will want to see proof, in the form of tax returns and written documentation, that you have no means to pay your medical bills. You can also apply to nonprofit organizations like the PAN Foundation and CancerCare for help with your medical bills.

If debt settlement or forgiveness aren’t options for you, consider employing these other debt reduction strategies:

Using Credit Cards to Pay a Debt

Before paying a medical debt with credit cards, understand the consequences. Credit cards are best used to cover short-term expenses – those that you can repay at the end of a monthly billing cycle. If you don’t have the money to pay your credit card bill, you’ll almost certainly face a new problem: credit card interest and growing debt.

Interest on credit cards can be very high, and if you don’t have enough to pay the credit card bill you are essentially transferring your medical debt to credit cards that will begin demanding payment. Even if you can afford the minimum monthly card payment, the interest on the unpaid debt will add quickly to your debt. Before using a credit card, consider how you will pay off the card debt and know the terms. Know the credit cards’ APR and use cards that charge the least interest. Also make sure that you have enough available credit to cover the bill.

If you conclude that you won’t be able to pay your credit card debt, consider other options. Paying a medical bill with a credit card might stop the hospital or medical practice from contacting a collection agency, but will only delay a collection action if you miss credit card payments.

Many financial experts say you should never use credit cards for medical bills unless you are confident you can pay the credit card bills promptly. If you can’t, first discuss whether the medical provider might offer an interest-free payment plan, which would be more manageable than a credit card debt that accrues interest.

Some patients opt to use medical credit cards, which are like conventional cards but are designed exclusively for medical expenses. Application forms are sometimes available in doctors’ offices.

Before applying for a medical card, especially one that advertises no interest on balances, carefully review the terms. You probably will discover that the no-interest grace period ends in several months and the interest rate charged after that is quite high.

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. The Consumer Financial Protection Bureau said that in 2014 more than 43 million Americans had medical debt in collections that was affecting their credit score.

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. 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.

That, and several other complaints, helped convince the three major credit reporting bureaus (Experian, TransUnion and Equifax) to set a 180-day waiting period before including medical debt on a person’s credit report.

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. However, the credit reporting bureaus decided in 2017 that once you pay the medical bill, it will come off your credit report.

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.

Using a Medical Bill Advocate

Medical bill, or patient advocates are people who understand the medical delivery system, explain it to you and negotiate for you. If you are overwhelmed with the complexity of the system or simply don’t have time to unpack your medical bills or proposed charges, advocates can save time and probably money.

Patient advocates often focus on procedures you are contemplating or currently undergoing, while billing advocates can help you review, analyze and appeal bills.

You might have a relative with knowledge of healthcare who can help, but often advocates charge a fee. Some churches and non-profit organizations also provide advocacy assistance.

If you have already received a medical bill and need help with unmanageable costs, you might want to hire a billing advocate. If you received treatment at a hospital, ask if the institution has advocates on staff. If not, consider hiring one that you know will put your interests first.

Advocates can save you hundreds, or even thousands, of dollars. Some work for an hourly fee, others charge a percentage of the money they save you – usually 25% to 35%. Some charge less. You can find one by contacting the National Association of Healthcare Advocacy Consultants or the Alliance of Claims Assistance Professionals.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at


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