Medical Bills and Collections

Medical debt collection occurs when an overdue medical bill is sent to a debt collection agency. Though there are ways to deal with the situation, the stress caused by hearing from collections can be significant.

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Medical debt collection occurs when an overdue medical bill is sent to a debt collection agency. Though there are ways to deal with the situation, the stress caused by hearing from a debt collector can be significant.

Hefty medical bills can be a staggering burden for consumers. Only the best health insurance policies cover all costs, leaving people who don’t have access to those top policies wondering where they will find the money to pay what the insurance company won’t.

And there are eye-opening numbers of those people. As recently as two years ago, 43 million people had unpaid medical bills on their credit reports. A September 2023 study by The Commonwealth Fund found that about 40% of U.S. adults (about 100 million people) currently carry medical or dental debt, whether those debts are in collections or not.

In fact, medical bills make up about 58% of all debt currently being turned over to collectors, according to the CFPB.

Making matters worse, medical billing is an inexact science. It’s a complex procedure, and mistakes happen. Most are innocent errors, but some meet the standard of fraud. From the consumer’s standpoint (meaning, you!), challenging a bill, especially once it’s in collections, is difficult and aggravating.

The situation is dire, nonetheless. The CFPB says medical debt right now is greater than debt from credit cards, personal loans, utilities, and phone bills. No wonder medical debt is the leading cause of bankruptcy in America.

Learning how the system works and seeking financial help for medical bills might save you from financial ruin. Explain your situation to a hospital or health-care provider with the hopes of working out a settlement you can afford or reach out to a nonprofit credit counseling agency for help getting out from under your medical debt.

Medical Bills Can Go to Collections Even If You’re Paying

Many of us pay down our medical bills by making regular payments. This approach may be financially beneficial, but it does not guarantee you will avoid collections. Those who think they can get away with paying only a portion of the bill could suddenly find themselves hearing from a collection agency if the debt hasn’t been paid off in an acceptable time frame. Same with those who aren’t paying on time.

It’s important to talk with the provider or hospital when you can’t pay all of what is due. Providers typically will set up a payment plan, but be sure to get it in writing. Some hospitals have agreements with certain banks that will spread payments over 2-3 years at no interest, provided payments are made on time.

Communicating with the provider or a certified debt counselor is key to making payments affordable and avoiding collection agencies.

Does Insurance Cover All Medical Costs?

It is a major, major mistake to assume insurance will cover every penny of a major medical expense. With rare exceptions, it doesn’t.

Study and understand your coverage. Ask for an Explanation of Benefits (EOB). Make calls to your insurance company before the procedure to be sure you understand what they will pay and what you are expected to pay.

The Healthcare Bluebook is an online service that allows consumers to gauge a fair price on medical procedures where you live.

When speaking with a hospital, ask if you qualify for the “financial assistance policy,” also called “charity care.” If your income qualifies you for the program, bills could be reduced significantly – or forgiven completely. Nonprofit hospitals are required by law to have these programs in place. Even if you don’t qualify, you could try to negotiate the price down.

Using important terms can help your cause. You might ask if you’re being billed the “chargemaster rate” for a procedure. That is the full cost hospitals use with insurance companies, costs that are frequently reduced. Ask the hospital if you can pay the lower rate given to insurance companies or Medicare.

Medical Bills without Health Insurance

If you have a long-standing relationship with your doctor, try to deal with him or her directly to reduce costs or work out a payment plan. When it comes to hospital costs, ask the billing office to explain all charges. Auditing every detail is the best way to protect against honest mistakes or outright fraud. Don’t be afraid to challenge unexpected charges; the relatively new “No Surprises Act “ is on your side when you’ve been staggered by a bill you hadn’t anticipated.

Medicaid is a federal/state program that helps low-income people and families. If you qualify, take advantage of it.

Finally, some states require hospitals to offer discounts to uninsured patients regardless of income. 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

Carefully read and re-read your policy; it’s not easy for any of us, but the more you delve into it, the more you’ll understand. If you think charges that aren’t covered should be, contact your insurance agent. If you are certain you should be reimbursed, or that your doctor or hospital should be paid by your healthcare 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: In the end, you may still have to pay the bill.

How Do Medical Collections Affect Your Credit Score?

There is some recent good news on this front. As of April 2023, Equifax, Experian and TransUnion – the three main credit reporting companies – agreed to remove negative credit marks created by certain medical debts. That is a very good thing, because a single medical debt in collections can harm your credit score by as much as 100 points. A negative mark stays on reports for up to seven years.

Medical debt under $500 and in collections is excluded from credit reports, and medical debts that have been paid are being removed. In addition, unpaid medical debts only appear on a credit report after a year of being in collections rather than the six-month timetable under the previous rules. That gives consumers more time to address the debt.

Once the last medical collection has been removed from a credit report, a consumer’s credit score improves by an average of 25 points within the first three months, according to analysis by the CFPB.

Many of these changes resulted in part from No Surprises Act, which took effect in 2022. We’ll detail how it works a little later.

Another improvement: The latest tweaks to credit scoring models give less weight to unpaid medical collections than to other kinds of debt collections that appear on credit reports. All told, the recent reporting updates have resulted in the removal of medical debt from the credit histories of about 50% of people whose credit reports previously included it, according to CFPB estimates.

Even before all those positive recent developments, medical debt was treated differently than other kinds of debt when it comes to its effect on your credit. Most health care providers don’t report to the credit bureaus, so overdue medical payments usually aren’t a factor at all on your credit rating unless you’ve taken no action to resolve the debt and the bill has been sent to a collection agency.

The credit scores most at risk of being hurt, then, belong to people with large, unpaid medical debt who have trouble appeasing the collection agency, and there are still plenty of people in that situation. The Peterson Center on Healthcare and KFF estimated early in 2023 that over 3 million people owe over $10,000 in medical debts.

If you’re having an issue, try to take care of your 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.

If you are worried that medical debt is hurting your credit, check your credit report. The law guarantees that you can get one credit report a year from each of the three major credit bureaus. A nonprofit credit counseling agency can assist you in getting those reports and will review them with you to help develop a personalized plan to solve your medical debt.

Here are deeper looks at the two government initiatives we just mentioned, one involving direct billing from hospitals and medical providers, and the other involving the role of collection agencies.

The No Suprises Act

In 2020, NPR ran a monthly series on surprise and expensive medical bills, and what it took to lower them. Its story told of a Colorado man who needed an appendectomy, then had a follow-up surgery for a blood clot. His initial hospital bill was $80,232 – and he did not have health insurance. After a protracted period that included filing a grievance and months of phone calls, the hospital reduced the bill to $22,304.

That kind of predicament caught the attention of Congress. Led by Republican Bill Cassidy from Louisiana and Democrat Maggie Hassan from New Hampshire, the Senate Health, Education, Labor and Pensions (HELP) Committee introduced the No Surprises Act (NSA) to protect people against unexpected gaps in insurance coverage and “surprise medical bills” when patients unknowingly obtain medical services from physicians and other providers outside their health insurance network. The NSA took effect on Jan. 1, 2022.

Even if you are uninsured, the NSA, along with similar laws passed by many states, often makes it possible to get an up-front, good-faith cost estimate before the treatment is provided. Whether you’re insured or not, the NSA makes it easier to dispute unexpected charges on medical bills. It has played a major role in alleviating unlawful medical debt collections.

Consumer Financial Protection Bureau Action

In September 2023 in conjunction with the Biden Administration, CFPB director Rohit Chopra announced a couple of new rule proposals aimed at stopping efforts by hospitals and other medical providers from using credit reporting to pressure patients into paying charges they can’t afford or that don’t reflect the actual treatment they received.

In the announcement, Chopra acknowledged the recent voluntary moves by the three major credit bureaus to reduce the number of bills on consumers’ credit reports, but he pointed out that many creditors still use older reporting models that haven’t adopted those changes. The CFPB proposal would make the changes mandatory.

In many cases, Chopra said, bills that have been turned over to collection agencies don’t match the records from the healthcare providers’ billing or don’t include updates involving insurance adjustments or financial assistance.

“Together, the two parts of the proposals we are outlining today would ensure that credit decisions are based on someone’s ability to repay a debt, not their ability to file disputes and navigate red tape,” Chopra said. “This will provide peace of mind to millions of Americans who won’t be forced to battle errors and junk data on their credit report when they get sick.”

The proposed regulations aren’t in effect yet, and their future won’t be decided until sometime in 2024 at the earliest. They are expected to be opposed by the hospital industry.

How to Pay off Medical Debt

The goal, as with any kind of debt, should be to keep the collection agencies from darkening your doorway, or your telephone, or your mailbox about your overdue medical bills. Even with the recent modifications to the credit reporting system that give consumers some protection for their credit rating, you want to avoid collections.

You do that by being pro-active, by treating your medical bills the way you do (or should) any other debt: honestly and responsibly.

Here are some steps you can take to get control of the medical bills that are giving you trouble.

  • Make the effort to understand the charges: Make sure you know how much your insurance company will cover and how much you’re expected to pay. Check to see if you’ve been double billed for any services or if the statement includes any unauthorized charges. And when in doubt, ask questions!
  • This sometimes requires finding the right person to talk to in the medical office or hospital. The right person might be a billing administrator rather than your doctor, although your physician should be included in the discussion. Ask what rate you’re getting and what other rates might be available. Explain your financial limitations. It’s best to have this conversation on the front end of the treatment you receive, but you can always try to negotiate later, too.
  • Inquire about hardship plans: Your income and/or your debt level might qualify you for reductions in the cost of your treatment. But you won’t know until you ask.
  • Check into financial assistance or charity care: If your treatment is from a nonprofit hospital, it must offer these sorts of options by law. But some for-profit medical providers extend them too. If you qualify, part (or perhaps even all) of your debt might be forgiven.
  • Look into payment plan alternatives: This is a part of negotiating. Many hospitals or medical providers will work with you to make your monthly bills more manageable at a lower interest rate or over a longer term.
  • Use a medical credit card: The key word in that phrase is ‘medical.’ A medical credit card usually comes with a 0% annual percentage rate (APR) over a term of anywhere from six months to two years. On the other hand, putting your medical bills on a regular credit card means you could be paying an APR of 25% or higher. You don’t have to be an Einstein to figure out that a medical credit card will cut more quickly into the size of your medical bills.
  • Find an advocate: A professional advocate can speak for you with your insurance company or your medical provider, taking care of the hard-to-understand intricacies of billing and appeals and payment options. It’ll cost you, but it might save you money in the long run if your bills are sizeable.

There are other considerations to explore as well when the medical bills begin to drag you down.

Settling Medical Debt

The possibility of settling medical debt for less than what is owed is there for the taking. It involves some work, but a nonprofit credit counselor, an experienced debt specialist or a professional debt settlement firm can help.

Settling a medical debt is done in similar ways to settling any other debt. You or someone working on your behalf contacts the doctor, hospital, or collection agency to negotiate an agreed-on amount for both parties. Experts advise starting this settlement process as soon as possible, preferably before the debt is turned over to a collection company.

Don’t be scared dealing with collection agencies. An honest and confident approach that works for everyone can lead to a negotiated agreement to pay the collections.

Medical Bill Forgiveness

If you have a verifiable hardship, such as a disability that 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 shows you have no means to pay your medical bills. You can also apply to nonprofit organizations such as the PAN Foundation and CancerCare for help with your medical bills.

Using Credit Cards to Pay Debt

As we mentioned earlier, a medical credit card might be worth looking into. It can be used to pay medical bills, including dentists and eye doctors, at deferred interest, meaning if you pay the debt in an agreed-on timeframe, no interest will be charged. The catch: If you don’t make the payments on time, you’ll have to pay the interest retroactive to when you first made a payment.

But remember: Using a normal credit card for medical debt is the last resort of last resorts.

Credit cards charge high interest rates. Medical debts rarely charge any interest. Also, once the debt is transferred from medical to credit card, the protections afforded consumers for medical debts are wiped out. The debt becomes solely credit card debt. Medical debt transferred to a credit card looks like “regular” debt to creditors. Try to work out a payment plan with the creditor instead of using a credit card.

Only use credit cards to consolidate medical debt if you can’t 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.

Personal Loans

One option to consider when others have been exhausted is a personal loan that could be used to pay medical debt. Personal loans could consolidate medical expenses into one loan, which eases payments and could lower interest rates.

These loans could be helpful for large amounts of debt. A nonprofit credit counselor can help find the right approach that fits your personal situation.

0% Interest Credit Card

Some credit card companies will offer a special 0% interest rate to those who have great credit, and/or are new to the credit card company.

Typically, 0% interest has the same major catch as the medical credit cards: The interest only remains at zero provided you pay off all the debt in a certain timeframe, be it 12 or 24 months. If you don’t, the interest not only is added to the payment, it is added (accelerated) to all previous payments. Not paying the entire amount on time becomes punitive.

If you do sign up for zero interest, be sure to understand the terms and be aware of the timeframe for paying the debt.

Using a Medical Bill Advocate

We’ve already suggested the benefit of having an advocate to guide you through the process. Different kinds of advocates can help on both the front and back ends of your treatment experience.

On the back end, medical bill advocates are people who understand the medical delivery system, and they can 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 help you review, analyze and appeal bills, saving you time and probably money.

On the front end, patient advocates often focus on procedures you are contemplating or currently undergoing.

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, although they often charge a fee. Some work for an hourly rate; others charge a percentage of the money they save you. It’s usually 25%-35%, though some charge less. You can find one by contacting the National Association of Healthcare Advocacy Consultants or the Alliance of Claims Assistance Professionals. Some churches and nonprofit organizations also provide advocacy assistance, or you might have a relative with knowledge of healthcare who can help you at little or no cost.

Rebuilding Your Credit After Medical Collections

OK, so let’s say you’re among that group of people whose credit rating hasn’t been saved by the No Surprises Act or the recent relaxed rules on reporting medical debt to the credit bureaus. Your medical bills have been sent to collections and your credit score has suffered as a result. Can you recover?

The answer is yes, though as you might expect, the steps you take to improve your credit score in the wake of medical collections aren’t necessarily easy and won’t show results as quickly as you’d like. They are, however, very much worth taking.

  • Pay off the medical debt first: Yes, we’re being Captain Obvious here, but it’s Priority No. 1. That’s what’s dragging your credit score down after all, right?
  • Pay off any other pastdue debts: This is Step No. 2, even though it’s true that in most cases, other kinds of debt, especially credit card debt, can do more damage to your credit score than medical debt can. If the medical debt is the one in collections, deal with it first. But then make sure your credit card debt doesn’t wind up in collections, too.
  • Get into the habit of making all your payments on time: The credit bureaus reward your score when you show them you can do this. Your payment history makes up 35% of your credit score. The longer you keep current with those obligations, the more the medical debt collections will fade as a factor.
  • Do all you can to pay down your credit card balances: Another factor in your credit score is called your credit utilization ratio. It’s the amount of revolving credit you’re using divided by the total credit available to you, expressed in a percentage. You want it to be low to show the credit bureaus how well you manage your debt. You get it there by paying your credit card balances down as quickly as possible.

Debt Help For Medical Bills

Here’s a sobering truth: Medical debt can affect more than your credit rating. The Sycamore Institute, an independent nonpartisan public policy research center, found that people struggling with medical debt are more likely to experience high blood pressure, poorer mental health, and a shorter life expectancy, among other things. In many cases, it turns into a nasty downward spiral; overdue bills from previous medical needs can be the cause of further medical expenses.

That’s a must to avoid if you can. Better to explore your options sooner rather than later to get the medical debt relief you need when you can’t keep up with your doctor and hospital bills, especially when those bills are headed to, or are already in, collections.

One of those options is a medical debt consolidation loan. Yes, the loan is a new financial obligation that must be paid off, but it allows you to combine your multiple medical debts into a single account. You make one monthly payment on the loan instead of a fistful of payments to the doctors, the different hospital departments that provided the services you received during your treatment, or the various collection agencies harassing you about unpaid bills.

Among the advantages of medical debt consolidation, as opposed to consolidating credit card debt, is the flexibility in the loan terms you might get. Because the loan can only be applied to medical debts and because there usually is no interest attached to medical debt, a lender can work with you on repayment conditions or even how much you’ll need to repay. You might find a medical consolidation loan that takes into consideration your specific needs such as housing, food and transportation. Banks, credit unions and online lenders are the best options for finding a medical debt consolidation loan that works for you.

Another benefit: If you keep up the regular payments on a medical debt consolidation loan, it can help revitalize your credit score.

A nonprofit credit counseling agency can advise you about the best debt help for medical debt, including your medical debt consolidation options based on your income and indebtedness level. A credit counselor might also discuss the viability of a debt management program that can address your credit card debts along with your medical debt.

About The Author

Michael Knisley

Michael Knisley was an assistant professor on the faculty at the prestigious University of Missouri School of Journalism and has more than 40 years of experience editing and writing about business, sports and the spectrum of issues affecting consumers and fans. During his career, Michael has won awards from the New York Press Club, the Online News Association, the Military Reporters and Editors Association, the Associated Press Sports Editors and the Sports Emmys.


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