If you have had an injury, illness, or surgery, you know what happens next. This means that it can cost you expensive medical expenses.
If you are struggling to pay these bills on time, you are not alone. But if they don’t get paid, the health care provider can turn the bill over to a collection agency. In fact, according to the Journal of the American Medical Association, medical debt is the main reason consumers turn to debt collectors.
When your medical debt ends up going up, it can hurt your credit rating. And if you use a credit card to pay for medical expenses, there can be repercussions.
How common is medical debt?
According to the Peterson-KFF health tracking system, about 23 million people, 9 percent of the adult population, have more than $250 in medical debt. About 1% of adults owe more than $10,000, and these bills account for the majority of U.S. medical debt.
According to the Consumer Financial Protection Bureau (CFPB), as of June 2021 there is $88 billion in consumer credit debt. Most of this debt was less than $500.
Total U.S. medical debt is likely to exceed $88 billion because not all unpaid or collectible medical debt is reported to the credit agency.
How can Medical Debt hurt you?
Medical debt is still debt, and any debt hurts your credit. With a FICO score of 300 to 850, “a collection that looks at a credit report can have an impact of up to 100 points. “This is a great opportunity,” says Nancy Bystritz-Balkan, Equifax vice president of communications and consumer education.
Whatever the reason, a low score will affect whether or not you can borrow money, get a loan and the terms on which you can get it. For example, the loan is still approved, but the interest rate may be higher. Some employers check credit reports when they evaluate applicants. And many lenders still use older versions of FICO when evaluating consumer credit risk, so there’s no guarantee that any medical debt you have will be less weighted.
If your doctor or hospital hires a collection agency to collect payment or sells your debt directly to a collection agency, you can expect a steady stream of calls, letters and emails demanding payment. The federal Fair Debt Collection Practices Act summarizes your rights and options in dealing with debt collectors.
Like credit cards or personal loans, medical debt is considered “private debt.” Failure to pay is not a crime, but a creditor or collection agency can sue you in civil court and demand that your property or wages be seized. (Social Security and veteran’s benefits cannot be applied to medical debt, but earned income can.)
How medical expenses affect your credit report
If you ignore a bill you cannot pay, it will go on your credit report. Medical expenses are generally not listed on your credit report until they are sent to a collection agency for additional charges.
The three major credit bureaus – Equifax, Experian and TransUnion – now have to wait 180 days before adding medical expenses to their credit reports. This gives you time to talk to your provider and make a payment plan.
If medical expenses are added to your credit report and your insurer pays you later, the Credit Bureau may not automatically charge them, but you must exclude the medical expenses from your credit report. You can send proof of this payment to the Credit Bureau to remove paid medical bills from your credit statement.
Once your medical expenses are listed on your credit report, your credit will be affected. Your credit score may go down and be listed on your credit report for seven years if your insurer does not pay your bill.Even if 1 minute of reading is paid directly, medical bills will remain on your credit report unless you remove them or negotiate a bona fide payment with a collection agency or health care provider.
Some modern credit rating models do not disadvantage you because of unpaid medical bills on your credit report. However, some companies may still use outdated credit rating models that disadvantage medical expenses.
How to Prevent Credit Damage with Medical Debt
If you are facing medical debt, consider taking the following steps to avoid affecting your credit history:
Carefully review your invoice and EOB.
When you receive medical care, you should get a bill from your health care provider. If you are covered by health insurance and your doctor has declared coverage on your behalf, you should also get an explanation of wages (EOB).
The bill shows the amount and the amount charged by the hospital. The EOB is provided by the insurance company and describes the cost of providing coverage.
Review the itemized bills to accurately describe the care you received. The hospital may make mistakes and charge for treatment it did not receive.
Then look at the EOB to see if your insurance has refused to pay certain rates. In this section, you can prepare for the costs you will have to pay.
Check the medical bill on your credit report.
There may be errors on some medical charge accounts. If so, contact your health care provider or collection agency first. You can also contact each credit reporting agency that lists incorrect information. According to Experian, the reporting is free, but you may need to show why you think there was an error. These may include:
- Collection agency records.
- A document provided by an insurance company or health care provider.
- Document to prove payment of a bill, such as a copy of a check or credit card statement.
- If the dispute is resolved in your favor, the Credit Bureau will update or remove the foreclosure account from your credit report. It typically takes up to 30 days for updates to appear on your credit report. According to Experian, three major credit agencies will eliminate medical debt reported by a collection agency if you can prove that your health insurance company paid your bills.
Negotiate with providers.
If you are uninsured or if you cannot cover a certain portion of your medical expenses with insurance, you may not have to pay premiums.
Contact your health care provider’s billing office to try to negotiate. Many providers charge incredibly high amounts with the expectation that insurers will pay premiums for much lower amounts. For example, you might charge $500 for a service that involves a $100 copayment.
If you negotiate with your provider, you can significantly reduce your billing amount.
Formulate a payment plan.
If you still can’t pay the full amount of your medical expenses up front, talk to your provider to formulate a payment plan. Many providers are fine with this, so they can convince you to accept a monthly payment or other payment plan until the debt is paid in full.
Talk to your medical billing attorney.
Medical expenses can be complicated. Even if your bill is itemized, you may not fully understand what you are seeing.
Consider working with a medical billing attorney-someone who has experience with medical bills and helps patients pay medical bills. A medical billing specialist can be an employee or a volunteer.
You can look for a lawyer who can help you online or in your area. If you are covered by Medicare, you can also go to your state’s health insurance program. You can pay up to $100 an hour or pay a percentage of what your lawyer saves if you work as a billable service.
Your legal counsel will review your bill and help you understand every part of the bill. You can also work with your insurance agent to help you get all the benefits you deserve. This is especially true if your insurer refuses to pay a certain part of the bill. You can also help negotiate with your doctor or make a payment plan.
Check your credit report regularly.
Even if you don’t have credit problems, we recommend that you take a close look at your consumer credit report. This allows you to review your credit history and identify items that are negatively affecting your score.
The best way to check your credit report is with an annual credit report.It involves using com. This is a government-authorized site where you can get a copy of your credit report from each of the three major consumer credit bureaus. You can get one free copy of your report from each credit bureau each year.