What You Must Know About Medical Debt Collection

What Is Medical Debt?

Medical debt is any amount or balance owed after receiving medical goods or services from the medical service provider. In an extended term, it would include the owed amounts that are not past due as well as the charges that are not paid and is delinquent and have been sent to the debt collections.

A significant part of the debt in third-party debt collections in the United States comes from medical bills, which is 58%, according to CFPB (Consumer Financial Protection Bureau). Medical debt is more relevant in minor communities and people with disabilities. In addition, about 43 million U.S. adults have medical bills mentioned on their credit reports, and the complete account of the outstanding medical debt is $88 billion.

Insurance Coverage and Medical Debt

Sadly, health insurance does not cover all medical expenses. There are always some out of the pocket costs such as copays, coinsurance, and deductibles. When the health insurance cannot be able to pay the total fee of the medical goods or services you received, the patient is responsible for the rest of the balance. You have to pay off the remaining balance. You can expect to be billed by the healthcare service provider.

Virtually any healthcare type can put you in medical debt, where the most common care types are diagnostic tests, hospitalizations, emergency room visits, and outpatient services. Unpaid bills often cause lousy debt, and bad debt often leads to rising costs for the healthcare service provider and patients.

Medical debt frequently occurs when patients are living with long-term illness and chronic illnesses, and routine costs are expected. For example, one common medical debt source usually comes from hospitalization costs such as emergency room visits, often a surprise cost.

What Happens If You Ignore Medical Debt?

Primarily, you should know the rights concerned with medical debt collection. Medical debt usually goes to a debt collection agency that will make attempts to collect the owed amount after a period of 90 days of non-payment. The debt collectors can contact you only for the actual owed amount, but you should make sure that it is your debt. Make sure to ask the debt collectors regarding the repayment options if you genuinely have an owed amount. Many times, the debt collectors can settle the owed amount in a lesser amount than the total amount or reschedule the repayment options that may be set according to convenience. You can ask to arrange the payment again in a nominal amount that you can indeed pay.

“The provider may also involve a law firm to pursue legal avenues of recovery, including filing a lawsuit, obtaining a judgment, and then executing upon that judgment,” explains Miller. In some states, this means the ability to garnish wages, bank accounts, or levy on property, such as cars and even a home. Also, your credit score could take a hit if your debt is reported on your credit report as delinquent by collections.

The health care service provider may also involve a legal firm to take the legal routes for debt recovery and file a lawsuit. It will help the collection agencies to obtain a judgment and execute the decision. In a few states, it targets the abilities of a wage garnishment, a levy on property such as homes or cars. Also, your credit score will drop if the debt is reported on the credit report, such as delinquent by the debt collection agencies. This process sounds scary, but the patients have protection from it. According to the debt collection rule and federal laws, debt collectors cannot harass you. If they call you, do not worry; you will not suffer behind bars. This is so because medical debts are civil debts and jail time against these debts is not in the law.

In this case, the Medical and Healthcare Debt Forgiveness Act 2021 will help you. This act proposes to extend the waiting period for medical debt on the credit report once a year. In addition, this act also targets eliminating the paid medical debts from the credit reports of the consumers.

How Can You Tackle Medical Debt?

There are multiple ways to handle medical debt, including –

Understanding your health insurance policy – You can take time to review the health insurance plan carefully. You must know what it covers and what is not covered. If you are not sure, you can reach the health care service provider.

Setting up a payment plan – The medical bills can be sent to the healthcare debt collection seven if you are making the payments. For example, if you make partial or regular payments but go past the due dates, the remaining amount will go to the collections. You can talk to the debt collection agency if you cannot pay whatever is due. They may be willing to set up a new payment plan.

However, many service providers wish to give a discount, it may go up to 50%, if you can pay the balance that day, based on the duration and of type treatment. This way, they can go easy on the administrative costs of payment plans.

Negotiating a lower price: Do not hesitate to deal with the healthcare service provider for a lower payable amount. You should explain to the healthcare service provider that you cannot make the complete payment and why. In addition, you should ask what they usually charge to the insurance companies or what Medicare covers.

Avoiding credit cards: When it could be pretty enticing to put the medical bills on credit cards, it can affect you more than doing good if you fall behind in paying the entire credit card bill. In addition, certain credit cards have higher interest rates and will increase the total debt amount.

Considering credit counseling: Credit counseling agencies are nonprofit organizations that can assist you with medical debts. You can search online to find a reputable agency.