Did you know that 23 million Americans actually owe money on their medical bills? That’s 1 in 10 adults! Medical debt has become a huge problem in this country, totaling over $195 billion dollars according to recent estimates. So many people end up with surprise medical charges they never saw coming, sending their finances into a tailspin.
If you don’t start making payments, though, the consequences will catch up to you fast. Collection calls, damaged credit scores, liens on property, and in rare cases even bankruptcy. The hospitals and doctors have bills to pay too, and they will come after their money one way or another if you drop the ball.
Together, let’s explore what you need to know about medical bill collections, how they affect your credit score, and how to remove them from your credit report. Also, learn about your rights and responsibilities and some strategies to manage your medical debts.
Can Medical Bills Go To Collections?
Yes, just like any other type of debt. Medical bills in collections will not simply go away on their own accord. No one recovering from illness or medical care wants to face such hassles, but overlooking these debts only makes the damage worse. Once they are sent to collections, your medical bills can devastate your credit and financial health if left unsettled.
The Medical Bill Collections Process
Unpaid medical bills have a major impact on medical providers’ bottom line, so they take collections very seriously. If you think they’ll just eventually write off your unpaid balance, think again. They have an entire process dedicated to hunting people down and recovering what’s owed.
How medical providers handle unpaid bills
Before sending unpaid bills to collections, hospitals, and doctors will attempt to collect payment themselves through internal collections efforts like:
- Sending monthly billing statements for a period of 3-6 months. The longer the bill goes unpaid, the more persistent their calls become.
- Calling the patient directly to request payment and set up a payment plan. They will call your closest contacts too, so be prepared for family members and friends to start hounding you about the bills.
- Sending Pay-or-Else letters threatening to report non-payment to credit bureaus or turn accounts over to collections. This is a last-ditch scare tactic before further actions are taken.
Turning over to third-party collection agencies
If internal efforts are unsuccessful, the account will likely be turned over to a third-party collection agency. These agencies will continue collection efforts through:
- Calling you repeatedly at all hours, sometimes dozens of times per week.
- Sending strongly worded letters demanding lump sum payments or threatening a lawsuit.
- Reporting unpaid debts to credit bureaus, damaging your credit score.
- Filing a lawsuit against you to recover the amount owed plus any legal fees. In some cases, they may pursue wage or bank account garnishment.
- The entire collections process can take 6-24 months or longer based on the amount owed and the persistence of the agencies.
Key parties involved in collecting unpaid medical bills
- Healthcare providers (hospitals, doctors, labs, etc.): They make multiple attempts to collect payment directly from the patient before turning to other options.
- Insurance companies: For insured patients, the provider will work with the insurance company to verify coverage and determine the patient’s out-of-pocket responsibility. They rely on the patient to pay their share.
- Third-party collection agencies: They act on behalf of the healthcare providers to collect unresolved debts for a percentage of the amount recovered.
The process can be frustrating to deal with but keep in mind that most medical providers and collection agencies are just trying to recover costs rightfully owed to them. The best approach is to communicate with them directly, take responsibility for your bills, and set up reasonable payment plans.
Legal and ethical considerations
While collection agencies have the right to pursue your debt, there are limits to what they can do. They must adhere to the Fair Debt Collection Practices Act (FDCPA) and cannot engage in harassing or abusive behavior to force you to pay.
How Unpaid Medical Debt Affects Your Credit Score
Reporting to Credit Bureaus
When you don’t pay your medical bills, the healthcare provider or collections agency may report your debt to credit bureaus, such as Equifax, Experian, and TransUnion.
But here’s some good news:
Medical collection debts under $500 will not be reported to credit bureaus starting in the first half of 2023. Also, the grace period for medical debts appearing on credit reports is being extended to a year under the updated policies. Medical collections won’t impact credit for 12 months now, not 6 months.
And some bad news:
Although medical debts have a grace period before they appear on your credit report, once reported, they can remain on your credit report for up to seven years. Medical bill collections can still pursue you even if seven years have elapsed and your credit score has improved.
Impact on Creditworthiness and Interest Rates
Unpaid medical debt can significantly lower your credit score, affecting your creditworthiness. A low credit score may result in higher interest rates on loans, credit cards, and mortgages. Additionally, you may have difficulty obtaining new lines of credit or face unfavorable terms when borrowing money.
Affecting Future Access to Healthcare, Housing, and Employment
Although not a general rule, some providers may require upfront payment or refuse to offer you services if you have a history of unpaid bills. Furthermore, a low credit score can impact your ability to rent housing, as landlords may perceive you as a high-risk tenant. Employers may also check your credit report during the hiring process, and a poor credit score could potentially influence their decision to hire you.
Legal Actions and Potential Repercussions
Lawsuits and Wage Garnishment
If you fail to pay your medical debt, the healthcare provider or collections agency may decide to sue you for the outstanding balance. Should the court rule in favor of the creditor, they may have the right to garnish your wages, meaning a portion of your income will be withheld to repay the debt. Wage garnishment can create additional financial strain and make it more challenging to meet your essential living expenses.
Bankruptcy as a Last Resort
In extreme cases, unpaid medical debt can lead to bankruptcy. While bankruptcy may discharge your medical debt, it has severe and long-lasting consequences for your financial well-being. Bankruptcy remains on your credit report for up to 10 years, making it difficult to obtain credit, loans, and mortgages. It should only be considered as a last resort after exhausting all other possible avenues for resolving your medical debt.
How to Remove Medical Collections From Credit Report
There are several ways to remove medical debt collections from your credit report. Here are some of them:
- File a credit dispute. If you see a medical collection account on your credit report, the first thing to do is to file a dispute with the credit bureau that reported it. You can dispute the account if it contains inaccurate information.
- Pay off your medical collection. Paying off your medical debt is the simplest way to get it off your credit report. Once you pay off the debt, the collection agency will update your account status to “paid” or “settled.”
- Negotiate with your debt collector. You can negotiate with your debt collector to remove the medical collection account from your credit report in exchange for payment.
- Bring your debt below $500. The three credit bureaus announced in July 2022 that medical collections no longer appear on consumer credit reports if they are under $500.
- Hire a credit repair expert. A credit repair expert can help you remove medical collections from your credit report by disputing them with the credit bureaus or negotiating with the collection agency.
How to Dispute Medical Collections
If inaccurate medical debts appear on your credit reports, you have options to address the errors. The simplest approach is to contest the incorrect information with each of the three credit bureaus. Check your credit reports through Annual Credit Report and dispute any inaccuracies. The CFPB provides template letters helpful for disputing errors.
Here are the steps to dispute medical bill collections:
- Gather your medical records and bills. Obtain copies of all medical invoices, receipts, billing statements, correspondence with your healthcare providers, insurance statements, etc. They will provide the details needed to dispute the bills.
- Check your insurance eligibility and benefits. Review your insurance documents to ensure you were eligible for coverage and the services were covered under your plan. Determine if the appropriate in-network or out-of-network fees were charged. This will help you identify any inflated or erroneous charges.
- Check for coding and billing errors. carefully review each charge and code on the bills. Ensure there are no overlapping charges, no charges for services not received, no upcoding, etc. Identify any errors and find the correct codes.
- Contact your healthcare providers. Reach out to doctors, hospitals, labs, etc., and ask them to explain any questionable charges or provide more details to support the bills. Request adjustments or issue credits for any errors. Get any agreements or concessions in writing.
- Send disputes to the collection agencies. Contact each collection agency in writing via certified mail. Provide a detailed explanation of your disputes along with any supporting evidence you obtained. Request itemized bills, verification of the debts, and proof that you owe the amounts claimed.
Managing Medical Bill Collections
While collection calls and threats of damage to your credit can be frightening, working with your providers and medical billers to set up realistic repayment plans is often the smartest decision. Collection agencies are still ultimately trying to get the money you owe on behalf of the medical companies, so negotiating in good faith with them can help find a compromise.
Rather than ignoring calls or threats, call them back and explain your situation. Ask if they can reduce or settle the debt for a lump sum that you can pay over time. Every dollar recovered help, even if it’s not the full amount. Many providers also offer discounted settlement options or payment plans with little to no interest.
The damage to your credit has already been done by the unpaid bills, so dealing with them constructively at least avoids the much higher penalty of a collection or judgment on your reports. The peace of mind will be worth the effort.