How to Stop Your Medical Bill From Going to Collections

Mark Rukavina
November 19, 2013

Health care is on the front burner yet again, and the Obama administration is in the hot seat. Talking heads are blasting the botched launch of the health insurance marketplace website. President Obama recently held a press conference to publicly reverse his position on skinny insurance coverage. And millions of Americans are waiting for the promise of affordable healthcare to be fulfilled.

As they wait, out-of-pocket costs continue to climb. Last year, for privately insured patients, these costs grew faster than the rate of overall healthcare spending. Unanticipated healthcare expenses can send a family teetering on the edge of economic disaster.

One recent study on financial capability in the U.S. found that 26% of American adults have unpaid medical bills that are past due. Those with unpaid medical bills are twice as likely than those without to report spending more than their income, and three times more likely to report that it is “very difficult” to cover their expenses and bills each month. The study found that having an unpaid medical bill is the strongest predictor of someone feeling that he or she has “too much debt.”

Typically, having too much debt creates problems. In 2012, 32 million American adults with medical bills were contacted by a collection agency for these unpaid bills. Such a blemish on a credit report can do serious damage, lowering one’s credit score by more than 100 points, especially for someone with a good credit history.  This connection between medical debt and credit has not been lost on the Consumer Financial Protection Bureau, which publishes its database of consumer complaints against collection agencies, including ones involving medical debt. The medical debt collection complaints varied from attempts to collect a debt that had been paid, incorrect amounts, or trying to collect from people not responsible for the debt.

How to Deal With Your Medical Bills

Given the cost trends, the challenges of the Affordable Care Act, and the serious consequences of having medical debt turned over to a collection agency, what can you do if you have medical debt? To start, do everything to avoid having a bill sent to collection. Never ignore a medical bill.

Communicate with your healthcare provider. Too few people know that many providers offer assistance in resolving bills.  They’ll work to help find coverage for uninsured patients and many offer financial assistance and extended payment plans to help those with outstanding bills.

If you owe money to a nonprofit hospital, there are existing protections. New federal requirements dictate that hospitals have written financial assistance, billing and collection policies. The policies should be posted on hospitals’ websites. The policies are to explain how to apply for the hospital’s assistance and how to work with them to avoid having bills sent to collection.

Better Support Systems in the Works

Proposed regulations issued by the IRS prohibit hospitals granted federal tax exemptions from using “extraordinary collection actions” until they’ve made reasonable efforts to determine whether the patient qualifies for financial assistance. (This assistance is available to low-income patients of nonprofit hospitals).

The healthcare and collection industries are also concerned that American consumers get a fair shake when it comes to medical bills. Earlier this year, the Healthcare Financial Management Association (HFMA) and the Association of Credit and Collection Professionals (ACA, International) convened a medical debt task force.  The task force was charged with establishing guidelines outlining the step-by-step actions needed to resolve patient payments after care was provided to them. The guidelines recommend that providers make reasonable efforts to ensure accurate and complete patient bills, work to enroll self-pay patients in any applicable public or other insurance programs, screen for financial assistance, offer payment plans and ensure that all processes adhere to HFMA’s Patient Friendly Billing Principles.

So even while ObamaCare is experiencing technical difficulties, there is much that can be done to avoid having a medical bill sent to collection. Know your rights. Research the financial assistance and billing/collection policies of your provider. Utilize industry guidelines to negotiate payment terms based on your financial resources. Finally, if you are able to stay current with your payments and communicate with your provider, it is likely that your medical bill will not be turned over to collection and your credit will be spared.

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