Key Takeaways
- If you don’t pay medical bills, they can be sent to collections, damage your credit score, and even lead to wage garnishment or legal action; unpaid debt may remain on your credit report for up to seven years.
- Medical debt is a leading source of collections in the U.S., with nearly one in five Americans affected, often due to unexpected or emergency medical costs.
- Health insurance and Medicaid can reduce expenses, but they may not cover all medical costs, so reviewing your coverage and communicating with providers is crucial.
- If you’re struggling to pay, contact your healthcare provider or debt collector to negotiate payment plans or settlements, as many are willing to reduce or spread out payments.
If you don’t pay your medical bills, your bills could go to collections, your credit score could take a hit, and in some cases, you might even face legal action. Unpaid medical debt can quickly become a heavy financial burden if it’s not addressed.
If you’re dealing with unexpected medical expenses, it can feel overwhelming, especially if money is already tight. Knowing your options, like negotiating payment plans or considering short-term medical loans, can help you manage the bills without derailing your finances.
What Is Medical Debt?
Medical debt is much like any other form of debt such as bad credit loans, payday loans, and other loans; It’s money that you owe. However, instead of the debt being from a purchase or credit card, medical debt comes from health and medical services. This could be anything from a broken leg to the costs associated with having a baby.
Essentially, any charge for medical expenses can become medical debt if you don’t pay it off right away.
Medical Debt In America
A medical bill is one of the most common bills that catches people off guard. New research published in July of 2021 by the Journal of the American Medical Association shows that 18% of Americans have medical debt in collections.1 The paper also revealed that from 2009 to 2020, the largest source of collections debt became outstanding medical bills.
Medical debt is widespread in America. If you’ve ever visited an emergency room or received treatment for an illness, then odds are you’ve accrued this kind of debt. And just like with any other type of debt, it’s essential to pay it off as soon as possible.
Medical Debt and Health Insurance
One way to help alleviate this burden of the cost of medical care is by signing up for insurance. Many people sign up for health plans through their employers. If you aren’t offered insurance through work, you can still sign up; it just might cost you a little bit more.
Those that have trouble affording health insurance, you may be able to qualify for Medicaid through your state government. Medicaid is a government-run program that offers certain health coverages to residents that can’t afford a standard health plan.
Having health insurance or Medicaid can potentially cover many of the costs of seeking medical care. But it’s crucial to keep in mind that just because you have a health plan doesn’t mean that all of the costs will be taken care of. Many programs only cover a certain percentage of medical costs.
Check with your specific insurance company to see what’s covered and what isn’t.
What Happens To Unpaid Medical Bills?
Now to the critical question: What happens to my medical debt if I don’t, or can’t, pay them? The simple answer is the same thing that happens to any other bill or debt you don’t pay—collections.
Leaving a bill unpaid is asking for financial trouble in the future.
Bills you don’t pay can gather a late charge and ultimately end up with a collections company. When this happens, your credit score can drop, your wages can be garnished, and you may have difficulty getting loans in the future. In addition, unpaid bills and collections can stay on your credit report for up to seven years.
What Are Debt Collectors and Collection Agencies?
Paying a medical bill on time isn’t always easy. But it’s crucial so that you can avoid the medical bill being sent to debt collectors. The terms “debt collector” and “collection agency” are interchangeable, and they both describe a company that purchases debt and then pursues the consumer to collect the money they owe.
Debt collectors or collection agencies will usually pay the hospital bill or other debt from the facility for less than what the consumer owes. Once this happens, the debt collectors own that debt. So now they’ll start reaching out to you instead of the medical provider.
One important thing to remember when dealing with a debt collection agency is that they will often allow you to settle the debt for less than what you owe to the medical provider.
So instead of avoiding the collection agency, it’s wiser to work with them to settle the amount. Since they pay less for the debt than what you owe, they may be willing to entirely get rid of the debt for much less than the total amount.
The Path Your Medical Bills May Take
Here is the typical path that medical bills take:
| The Path Involved With Medical Bills | Description of Each Step |
| Step 1 | You receive a bill from a doctor, hospital, or medical facility that your healthcare provider doesn’t cover. |
| Step 2 | The medical facility contacts you to inform you about the bill and its due date. |
| Step 3 | If you fail to pay the bill by the due date, the medical facility considers it past due. |
| Step 4 | The medical facility may reach out to you again to settle the debt, or they may proceed to the next step. |
| Step 5 | If the bill remains unpaid, the medical facility may sell the debt to a collection agency. |
| Step 6 | The collection agency starts contacting you to collect the outstanding payment. |
| Step 7 | A note about the bill in collections may appear on your credit report, potentially affecting your credit score for up to seven years. |
| Step 8 | The collection agency continues its efforts to collect the debt and may pursue wage garnishment through your employer until the bill is paid off. |
How Does An Unpaid Medical Bill Affect My Credit Report?
Beginning in July 2022, paid medical bills will not be included in your credit reports. While paid medical bills will not, unpaid bills will only show up if they are unpaid for 12 months.
How Do Credit Reports Work?
Credit reports are essentially lists of your financial accounts and behaviors. They’re maintained by companies called credit bureaus or credit reporting agencies. These credit reporting agencies track your financial habits and compile them into documents called credit reports.
This report is what the credit bureaus use to give you a credit score. And the credit score is what lenders use to decide whether or not they should offer you loans. When you apply for a new loan, the lender will likely want to run a credit check to see how financially trustworthy you are unless you’re applying for no credit check loans.
It’s vital to keep track of credit reports. The credit bureaus are required to make credit reports available to consumers. So make sure you check yours periodically to confirm that everything on it is accurate.
Some Things to Keep in Mind
Many different things can affect your credit report, and ultimately, your credit score as well. For example, misinformation on a credit report or an unpaid balance can hurt your overall credit score.
If you need help paying medical bills, it’s in your best interest to talk to the medical facility. They may be willing to work out a manageable payment plan with you.
If you can’t settle the unpaid amount, the facility can sell your debt to a collection agency. If this occurs, then your credit score could drop 100 points or more from having a medical bill in collections!
Keeping your credit score in good standing is one of the main reasons why paying medical bills on time is so important.
FAQS
What options are available if I can’t pay medical bills due to financial hardship?
Many medical providers and nonprofit hospitals offer financial assistance programs. Contact the provider’s billing department to discuss your situation and explore options like reduced fees or payment plans.
How do unpaid medical bills impact my credit report?
Unpaid medical bills can be reported to the three major credit bureaus, potentially damaging your credit score. It’s important to address these bills promptly to avoid negative credit reporting.
Can health insurance prevent medical debt when seeking health care?
Health insurance coverage can significantly reduce healthcare costs, but it may not cover all expenses, leading to unpaid medical bills. Always check what your insurance policy covers to avoid surprise healthcare bills.
What should I do if a debt collector contacts me about unpaid medical debt?
If contacted by a debt collector, verify the debt’s accuracy. Be aware of your rights under the Fair Debt Collection Practices Act, and consider negotiating a payment plan or settlement with debt collectors.
How can I negotiate medical bills directly with my healthcare provider?
Contact your medical provider’s billing department to discuss your bill. Ask if they can reduce the charges or offer a payment plan, especially if you received out of network services or were billed for the same service multiple times.
Are there financial assistance options for hospital bills?
Yes, many hospitals, especially nonprofit ones, offer financial assistance options. You may qualify based on income level or financial hardship. Contact the hospital’s billing department for more information.
How does the Affordable Care Act affect medical billing and insurance coverage?
The Affordable Care Act has provisions that can impact medical billing and insurance coverage, such as caps on out-of-pocket expenses and requirements for certain preventive health care services to be covered.
What is the impact of the No Surprises Act on unexpected medical debt?
The No Surprises Act protects patients from surprise medical bills for emergency services and certain services at in-network hospitals, reducing the likelihood of unexpected high medical bills.
Can I seek help from a financial counselor for managing medical debts?
Yes, financial counselors can provide guidance on managing medical debts, including negotiating with healthcare providers and understanding health insurance coverage and financial assistance programs.
What are the best practices for dealing with medical billing errors?
Review all medical bills and insurance statements for errors. If you find discrepancies, contact the doctor’s office or hospital billing department immediately to dispute the charges.
How do I handle medical bills from out-of-network providers?
For bills from out-of-network providers, first verify the charges with your health insurance company. Then, discuss with the provider about any possible reductions or payment plans, especially if the services were part of an emergency care.
What role do major credit bureaus play in unpaid medical debt reporting?
Major credit bureaus record unpaid medical debts, which can affect your credit score. However, there’s usually a delay before medical debts are reported, allowing time for payment or dispute resolution.
How can I avoid medical debt collections/debt collectors?
To avoid medical debt collections and debt collectors, promptly address any unpaid medical bills, communicate with your healthcare provider about payment options, and ensure your health insurance company has processed all claims correctly.
In Conclusion With CreditNinja
Medical bills can pile up quickly. If you don’t address them right away, they can get out of hand and snowball into a more significant financial issue. Having a health plan through an insurance company, your employer, or Medicaid can help to alleviate some of these costs.
Remember that many medical facilities are willing to work with patients. They might lower the overall cost if you speak with them and let them know your financial situation. This could make paying medical bills a little bit easier.
Ask them about setting up a payment plan if you can’t afford the total amount. Using a payment plan can help by spreading the payments out over time and making repayment more manageable.
CreditNinja wants you to emphasize that having medical bills is a normal part of life for many Americans. Learning how to manage them is the critical part. Don’t forget that credit reports and credit scores may be affected if you don’t pay them off. And low credit scores make every other aspect of your financial life more difficult. Low credit scores tell lenders, banks, and credit card companies that you aren’t trustworthy.
References:
- Americans’ Medical Debts Are Bigger Than Was Known, Totaling $140 Billion | The New York Times
- How to Get Help Paying Medical Bills | US News
- Medical Debt 101: How a Medical Bill Becomes Medical Debt | Sycamore Institute
- Does Paying Collections Improve Credit | Lexington Law
