What happens to unpaid medical bills

By Matt Mayerle
Modified on May 8, 2023
what happens to unpaid medical bills

Throughout our lives, we deal with all sorts of unexpected bills. Maybe you’ve experienced a vehicle breaking down, home repairs you weren’t expecting, or children’s school costs that came out of nowhere. But one of the most common unexpected bills is a medical bill for an emergency that catches you off guard. If this is the situation you’re in right now, you’re probably wondering what happens to unpaid medical bills. We’re here to give you the answer.

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.

The paper also revealed that from 2009 to 2020, the largest source of collections debt became outstanding medical bills. This may not surprise you if you’ve ever had to deal with an unexpected medical emergency. After all, how do you account for the unexpected within your budget? It’s not easy.

If you’re one of the many Americans struggling with medical debt, then this article is for you. Read on to learn more about medical bills and how to handle them when they arise.

What Is Medical Debt?

Medical debt is much like any other form of debt; 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.

This type of 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 is by signing up for health 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. And for 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 usually associated with medical bills.

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 bills 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 healthcare bills on time isn’t always easy. But it’s crucial so that you can avoid the 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.

A collection agency will usually pay the hospital bill or other debt from the facility for less than what the consumer owes. Once this happens, they 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 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.

Here’s the specific path your bill will take if you don’t pay it off:
  1. You go to the doctor, hospital, or other medical facility and receive a bill that your healthcare provider doesn’t cover.
  2. The medical facility reaches out to you and lets you know about the bill and the due date.
  3. For whatever reason, you fail to pay the bill by the due date.
  4. The medical facility considers the bill past due. They may reach out to you to settle the debt. Or they may move on to the next step.
  5. If you still don’t pay the bill, the medical facility will sell this debt to a collection agency.
  6. The collection company will now start reaching out to you to receive payment.
  7. Your credit score and credit report may show that you have a bill in collections. This type of note on your credit report can remain for up to seven years.
  8. The company will continue to pursue you for payment. They may be able to garnish your wages through your employer until you pay what you owe.

How Does An Unpaid Medical Bill Affect My Credit Report?

Credit reports are essentially lists of your financial accounts and behaviors. They’re maintained by companies called credit bureaus. These credit bureaus 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 a no credit check loan.

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 credit reports can have errors, which need to be reported to the bureau immediately. Since credit reports are responsible for so much of our financial lives, it’s essential to ensure they’re accurate.

Many different things can affect your credit report, and ultimately, your credit score as well. For example, any bill or balance that you don’t pay on time can end up hurting your overall score. And a low credit score can make it difficult to get loans, credit cards, or other financial services.

If you have medical bills that you haven’t been able to pay, it’s in your best interest to talk to the medical facility and try to settle the debt.

They may be willing to work with you and settle the amount for less than the actual cost of the medical bill. Find out if they’re willing to set up a payment plan so that you can pay off a small amount every month.

If you can’t come to an understanding to settle the amount, and the facility moves the debt over to a collection agency, then your credit score can suffer. Having a debt in collections on your credit report can cause your overall score to drop by quite a bit.

According to some accounts, a medical bill in collections could lower your score by up to 100 points or more.

This is one of the main reasons why paying medical bills on time is so important. Credit scores are ever-fluctuating things, and you need to pay your bills on time to keep yours in good standing. 

In Conclusion

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.

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.


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