How to Keep Medical Bills From Going to Collections and Save Your Credit

This post is from our regular contributor, Leslye.

One of the most debated topics is healthcare.  The costs of medical care is steadily rising, making it difficult for many consumers to keep up.

It is estimated that about 1 in 5 adults have past due medical bills, and 1 in 4 among millennials and Gen-Xers. Medical bills can be overwhelming once they start to pile up. If you ignore or simply can’t keep up with your medical bills, they can start to impact your credit.

So how can you protect your credit and keep medical bills from going to collections? Let’s explore this in detail.

What Caused the Medical Bills?

Medical bills happen to us all.  Sometimes they are the result of a lack of filing insurance, incorrect procedure codes, or maybe a car accident in which you weren’t at fault.

There are various reasons you can be billed, even when you have coverage.  There are also instances where you may have had a lapse in coverage or no coverage at all.  Once you determine whether or not this is your debt, you better understand how to approach it.

Check Your Credit Report

In some cases, if the healthcare provider has reached out to you and not received a response, the will discharge the debt to a collection agency.  This is when things get particularly uncomfortable.

Typically the collection agency first notifies you by mail, advising that you should they not receive a response they will assume the debt is yours.

They work for a fee or purchase your debt for a fraction of what you owe then bill you for the full amount.  The goal of the collection agency is to make money. However, collection agencies often use tactics that are less than scrupulous.

For example, that initial letter they send is usually dated two weeks before it was sent.  This reduces the 30 days they give you to respond, by cutting that time in half.

Or the collection agency “re-ages” the debt.  This happens to consumers all the time and not just with medical bills.  Say that your doctor’s visit was in 2012.  But the collection agency reports the bills from that visit as having been in 2016.  Why does this matter?

After seven years, a creditor can no longer report a debt (save for judgments).  So if the debt is 6 years old, a consumer may choose to just wait another year instead of trying to resolve it.  If they change the date, you may feel compelled to pay.

It’s a dirty trick, but an effective one.  It is also illegal, and you have rights that protect from this under the Fair Debt Collection Practices Act.  Examine your credit report for any errors (i.e. date, amount, facility, etc).

Know What You Owe

One of the most unfortunate issues with medical bills is that they are often inaccurate. In fact, it is estimated that 80 percent of medical bills contain errors. As much as healthcare should be about “care”, it is also a business.  A billion dollar business that works in its own best interest.

Over-inflated charges (i.e. $800 for an Advil), miscellaneous fees that aren’t explained, even charges that are not applicable to your visit can be placed onto your bill.

It is your responsibility to catch these things because the provider certainly won’t tell you. This is why it helps to stay organized as opposed to avoiding your bills. Review your bill with a fine tooth comb and document any inconsistencies you notice.

If you don’t have a copy of the bill request it from the provider.  Contact the provider as soon as you’ve gathered your information and discuss the inaccuracies.  Do not initiate a payment until these issues are resolved.

Understand Your Resources

If you can validate the bills but they should have been covered by your insurance, contact your insurance company.  Insurance companies (and in some cases your employer) have patient advocates.  Patient advocates will work with health care providers on your behalf to clarify and resolve charges.

They are well versed on the industry and equipped with the tools to combat the provider.  There are also patient advocates at healthcare systems who work to dispute issues between patients and providers.  Understand your resources and who can assist you should you find yourself with medical bills. You don’t have to fight alone.

Negotiate, Negotiate, Negotiate

Medical bills can be overwhelming, but not impossible to manage.  If you have done your research and you are responsible for the bill you’ve received, you have options to keep medical bills from going to collections. Let’s address these at the stages they may occur.

If your bill is still with the healthcare provider:

Did you know that hospitals have financial aid programs?  These programs could reduce or even waive the bill for patients with demonstrated need.  Communicate your financial limitations to see if you qualify for this assistance.

If you don’t qualify for assistance or it is unavailable, negotiate the bill.  The provider would much rather resolve the debt for something than to have to discharge it to a debt collector.  They also tend to be more reasonable.

Use resources like the Healthcare Bluebook and Amino to calculate and compare the cost of your care to other providers in the area.  If you can determine that your bill is higher than the average costs in the area, use that to negotiate.

You can also simply ask for a reduced rate. Again, they want to get paid.  It never hurts to just ask for a lower rate in an effort to pay.

At minimum, consider arranging a payment plan.  Set up a plan that realistically fits into your budget that you can stick to.  You don’t want to enter into an agreement that isn’t feasible for you and end up defaulting on payments.  Payment plans allow you to clear the balance over time without depleting your savings.

If the bill has been discharged to a collection agency:

Proceed with caution.  Any interaction with the agency will be documented on their end.  You have a few options.

1. Consider reaching out to the original provider. Even if your debt has been discharged, you can still work with the provider and cut out the middleman. This will work in some cases, but not all.  If the collection agency has already submitted it to a credit bureau, that could eliminate this option.

2. If the debt has been reported to a credit bureau but “re-aged”, contact the agency directly (in writing) and advise them that they are in direct violation Fair Debt Collection Practices Act. Request that they remove the debt (give them a specific deadline) and provide a copy of your credit report to confirm.

This does work.  They won’t want to risk being reported to the FTC (which you can do if they attempt to play hardball).  You can also submit a dispute to the credit bureau and if the agency doesn’t respond within 30 days, the debt is removed.

3. Negotiate. Even if the debt is in collections, you can still negotiate to lower the bill.  You can also negotiate a payment plan as well. Offer to pay one-third of the debt and start from there.

If the debt has been reported to the credit bureau, request that it be removed from your report as part of the payment arrangement. <—— This is super important! Most important, get an arrangement you agree to in writing.  This will prevent headaches down the road.

Pay Off the Debt to Keep Medical Bills From Going to Collections

Once you’ve chosen the method that’s best for your situation, pay off the debt.  If you need to make extra money, there are multiple resources and tips on this site that can show you how to do so.

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However, do not use credit cards to pay off your medical debt.  Unless you know that you have the funds to pay off the balance immediately, the interest could end up being more than the debt itself.

Medical bills don’t have to ruin your credit.  Use your knowledge and resources to resolve them.

Have you ever felt overwhelmed by medical bills? What are some action steps you’ll take to regain control over these expenses?