How to Deal with Medical Debt Caused by Overwhelming Hospital Bills

Last Updated: July 19, 2017

Hospital bills are the number one reason for filing for Chapter 7 bankruptcy in the United States. Even if you are not forced to the brink of bankruptcy, you don't have to end up plowed under by excessive medical debt. There are many options and resources available to get help with your hospital bills. Some of these methods will work even if the hospital bill is already in collections.

Note: Keep in mind that medical bills wind up in collections very quickly, and collection agencies handling these accounts usually have good records. Debt validation does not usually work with a medical collections firm. Do everything you can to keep accounts out of collections.

Contact Hospital Financial Assistance

Most hospitals have a financial assistance expert on staff. Sometimes this expert can set you up with a payment plan right at discharge, and so long as you follow the plan the hospital will basically leave you alone. The expert can also offer help with insurance. He can, for example, often set you up with a county or state insurance plan that you've never even heard of. He can sometimes get those plans to retroactively pay the bill, too.

This person is also the gatekeeper for the hospital charity application. If a charity application gets approved then a portion of your bills, maybe even all of your bills, will wind up forgiven.

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These programs are only available to those who get injured because of someone else who is committing a crime. Note that you can't have been committing a crime yourself at the time! These programs will pay your hospital bills, but you have to file the claim correctly and in the proper fashion. Ask the police or the hospital for help with contacting the Victim of Crimes department. If your bill is in collections already the agent may be able to get this information to you as well, provided the statute of limitations on filing has not already expired.

If your trip to the hospital is the result of a workman's comp case, you should be prepared for events to slow to a crawl. It takes a lot of time to resolve these cases and a lot of conversations, so make sure you keep all of your case information handy at all times. Many of these cases do wind up at the collection agency before they end up getting paid. Since the collection agency knows the workman's comp insurance provider has bigger pockets than you do, they will typically want to push it with the insurance provider instead. You just need to make sure the bill in question relates, directly, to the workman's comp injury. Be sure you give the agency all of the information they ask for.

There's a hierarchy of responsibility when it comes to automobile accidents, as multiple insurance companies and individuals are typically involved. A lot of who has to pay what depends on the circumstances of the accident. Make sure the hospital or collection agency has all of the information they need to resolve the problem. That information includes the contact information and car insurance information for everybody involved in the accident. They will also need your medical insurance information. If any attorneys are involved, the hospital or collection agency will need that information too.

If you can't turn anywhere else, there are several charities that help out with medical bills. Try the Access Project, the CancerCare Co-Payment Assistance Foundation, Children's Health Fund, Catholic Charities and Free Medical Camps, just to name a few. There are also charities that target prescriptions, diapers, and other needful things.

Double Check Your Insurance Company

Sometimes, insurance refuses to pay the bills for reasons that are easily fixed. The most common fixable problem is a co-ordination of benefits, where the insurance company believes you might have a second health insurance company. If you do, they need that information so the two insurance companies can decide who has to pay what. Usually a simple fax that outlines your insurance situation will solve the problem. Sometimes it can even be done through an automated system phone call. Some insurance companies ask for co-ordination of benefits information every year as a matter of policy. Make sure you read everything that comes from your medical insurance company to avoid this problem.

Going bankrupt over hospital bills should always be a last resort, after every other option and resource has been exhausted. If you're sick right now, know that the financial troubles can eventually be solved one way or another. Concentrate on healing for now, and worry about the price tag later.

How Do Medical Bills Affect Your Credit?

Medical bills credit report law

Questions regarding your credit generally do not have a simple cut and dried answer. Instead, credit-related questions more often require the rather ambiguous and sometimes frustrating response of, #8220;It depends.#8221; The answer to the question #8220;How will medical bills affect my credit?#8221; is no different.

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Medical bills credit report law

The impact your medical bills will have on your credit reports and credit score is going to depend on a variety of factors. Sometimes medical bills can be extremely damaging to your credit reports; sometimes they will have little impact; and sometimes medical bills will not impact your credit in any way whatsoever.

When Medical Bills Do Not Matter

The good news is that medical bills do not have to spell trouble for your credit reports and scores. The myth that medical bills will automatically damage your credit scores is, well… a myth. In fact, it is only unpaid medical debt which typically leads to credit problems in the form of collection accounts and potential court judgments.

If you have outstanding medical debt that is not being paid in full by your insurance provider (or is not being covered by insurance at all) the first step you should probably take is to give your medical service provider a call. In fact, even if you have health insurance, it#8217;s important to be sure that you#8217;re not responsible for any co-pays or deductibles.

If you find yourself holding the check for any uncovered medical debt, keep in mind that many (though not all) medical providers are willing to set up affordable payment plans. In the event a payment plan is accepted by your medical provider, you can generally keep unpaid medical debt from ever turning into troublesome medical collections as long as you consistently hold up your end of your payment agreement.

As alluded to above, ignoring your medical bills is a mistake, potentially a very big mistake, in the credit score department.

Unpaid medical bills generally turn into medical collection accounts, and sometimes can even lead to judgments if your creditor decides to sue you for your outstanding debt and you lose the case.

The addition of any new collection account to your credit reports is likely to be problematic, but the degree of the damage is going to depend upon other score factors from your credit reports.

Credit scores tend to take the path of least resistance. That is to say, it is easier for a good credit score to turn into a bad score than it is for a bad credit score to turn into an abysmal score. If you already have problems with derogatory information appearing on your credit reports, then adding one more medical collection account to the mix may not have much additional negative impact on your credit scores. However, if your credit is currently problem-free, then the addition of a collection account, even #8220;just#8221; a medical collection, could potentially have an extremely damaging credit score impact.

Many consumers incorrectly believe that medical collections are actually insignificant when it comes to the calculation of their credit scores. To be fair, in newer credit scoring models (such as FICO Score Version 9 and VantagesScore 3.0), medical collections generally do cause less credit score problems than other types of collections might cause.

However, while this special treatment of medical collections might sound like good news for consumers who are currently facing this credit problem, it#8217;s important to keep in mind that most lenders, especially mortgage lenders, still rely on older versions of the FICO credit scoring model. These older credit scoring models will still judge the existence of medical collections just as harshly as any other type of collection account.

Therefore, if you plan to use your credit to apply for a loan or credit card in the future, your medical collection accounts could potentially cause you problems.

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.

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Medical Bills On Credit Report - How To Remove Medical Bills From Credit Report

Medical bills credit report law

Medical bills can be tricky. There is a new law that says if you pay medical bills in full instead of settling, they will not put satisfed on your credit report and you can dispute it after. I wonder has anyone tried it.

Medical bills credit report law

I like your enthusiasm. Has anybody tried the advice he gave? Did it work?

Medical bills credit report law

some say send letter to credit bureaus and some say send letter to collection agencies. .what is what.. I#39;m lost

Medical bills credit report law

Texas stature of limitations is 4 yrs

Medical bills credit report law

I called I said i wanna settle and they told me no

Medical bills credit report law

What if i already have begin making payments on an old debt, but then learn they do not have proof I owe this? They said once i begin making payments, my dispute is not valid..

Medical bills credit report law

Wow, thank you so so much for this video. I called wanting to pay they told me I owed more, asked for debt validation just to make sure. I owed less due to some credits on other accounts, then asked for a settlement and paid even LESS! Thank you !

Medical bills credit report law

What if i already made my first payment? they supposed to sent me a letter via mail with all the info and details but soon is about to be a month never received anything :/ they gonna call me anytime this week for the second payment :/ what to do what to do .

Medical bills credit report law

How do they guarantee that they will stop reporting it if you settle and pay? You just take their work for it?

Medical bills credit report law

I just got FUCKED. I saved 20,000 in my life, paid off a whole truck, always have been on time, and a medical bill for $200 I didn#39;t know I had was sent to collections and I never got a phone call and it dropped me from Excellent to Poor and now I have a dream of owning a home and it raised my interest and PMI rate. FUCK THE SYSTEM. $200 oversight costs me THOUSANDS in increased interest.

Medical bills credit report law

This is true, many medical billing companies nowadays let your credit company know about this. I was charged with a medical billing from CMRE, but instead of holding it off for a while, they notified me right away and I was able to pay it off with having it affect my credit score.

Medical bills credit report law

If Debt forgiven. Does it stop being reported thus boost my credit score?

Medical bills credit report law

Great info thank you!

Medical bills credit report law

Clarification PLEASE.. Do I send letters to the Credit Burreau#39;s?? such as: TRANSUNION, EQUIFAX, EXPERIAN. -OR- the annoying credit agencies that bought out my debt??

How Medical Bills Impact Your Credit Score

Written By : MBAA

Medical bills credit report lawMedical bills have the potential to wreak absolute havoc on a person’s credit. Large amounts of debt, medical or otherwise, have a long history of demolishing credit scores and taking away financial freedom.

Given the often unexpected and sudden way in which medical bills can hit credit reports, this type of debt can be especially damaging. Unlike credit cards and other debt, medical bills are not built up slowly and there is no spending limit, so the potential for large-scale damage is much greater.

According to Anthony Sprauve, a spokesman, accounts in collections can lower an individual’s FICO score by up to 100 points. If you have ever tried raising your credit score, you can attest to how hard it is to raise it by as few as 10 points. Imagine trying to recover from a 100-point hit.

Those with the highest credit scores definitely have the most to lose as far as credit worthiness, and they are the ones who usually see the largest dings as a result of collections.

Even after the bill is paid in full, the item remains on a credit report for seven years. Although the impact of the collection on your credit score will diminish as the collection gets older and will eventually “fall off,” medical bills can cause quite a stir in your finances by limiting your credit opportunities. As a result, you might only qualify for high-interest, high-fee loans and credit cards.

Medical bills are the number one reason for filing bankruptcy in the U.S. Adding insult to injury, bankruptcy can stay on a credit report for up to a decade, three years longer than a negative credit rating due to a debt collection.

Medical bills credit report lawA lender will determine how much to lend you based on your credit score. Varying opinions exist on the ideal percentage of credit utilization. However, let’s assume that the ideal goal for percentage of available credit is 30 percent or less.

According to this figure, you should not have a balance of more than $3,000 if you have a $10,000 limit on a credit card. If you have the aforementioned $10,000 of available credit, but a $15,000 medical bill gets reported to your credit report, you will be in debt $5,000 more than you have been officially allotted.

This is a red flag alerting lenders that you live beyond your means. This may not sound fair since your high debt is not due to frivolous spending, but sadly, it is the truth in many situations.

Some lenders do their own calculations, removing medical debt from the equation because they believe that medical debt is usually incurred out of necessity rather than poor spending habits. Therefore, these lenders might be more willing to take the risk of lending money as long as the credit report is otherwise healthy.

Because some lenders have chosen to be flexible about the presence of medical collections on a credit report, and there hasn’t been much backlash or a notable number of companies reporting remorse for extending credit to these individuals, it raises the question of why any credit scoring model would take medical bills into consideration.

Of course, there are people who could pay their medical bills and don’t, but can a score damaged from a one-time incident involving one’s health be a true indicator of whether or not a person is financially responsible?

Unfortunately, about 80 percent of all medical bills have some type of error on them, whether from double billing, abuse, inflated charges, or billing for services that were not received. Improper reimbursement from a patient’s health insurance company accounts for a large amount of billing errors. These instances only drive up the cost of your bill, further impacting your score via collections and credit utilization ratio.

One good thing is that, with the latest system of FICO credit scoring, collections under $100 will no longer be considered when calculating a credit score. This will eliminate the negative impact of nearly one third of medical debt from affecting FICO scores. The other two thirds, however, will still make their negative marks.

The new Vantage Score system is a potential method of relief for consumers who are making payments on a medical bill. Created by the three major credit bureaus, TransUnion, Equifax and Experian, VantageScore offers a unique algorithm that better represents today’s consumers, offering numerous updates to the old systems of credit calculation.

Medical bills credit report law

Under the newest version of this system, called VantageScore 3.0, medical debt cannot contribute to a credit score unless that debt has been given to an outside collection agency.

If passed, a new law will soon assist in lifting some of the burden. Under this proposed regulation, collection agencies cannot report negative scores to the credit bureaus for six months if the consumer is disputing or negotiating the bill.

This is a great solution for anyone who feels their bill is inaccurate, believes the insurance company paid less than they should have or who might qualify for any type of financial assistance. After all, the system of calculating a credit score neither knows nor cares whether or not a charge is valid and what the consumer is planning to do about it.

This law would keep the consumer’s credit report clear of this debt until a reasonable amount of time has been given to the consumer to fix any errors.

There are steps you can take to minimize the chances of having a medical bill negatively affect your credit score. Because of the large number of medical billing discrepancies, be sure to keep detailed records on all services, procedures and supplies you received as well as the names of doctors who treated you.

This will give you a jump-start on double-checking each charge’s validity. Often, medical bills do not arrive right away, and without accurate records, it may be difficult to discern valid from invalid charges.

If you receive a bill with charges for medications, services or procedures that you don’t remember, you can easily pull out your records and compare them with the bill. Place a check mark on any charge that does not seem correct.

Call the billing department immediately and question the validity of the charges in question. Keep asking for help from the billing department until you fully understand and agree with the charges.

The sooner these potential inconsistencies are taken care of, the better, since your prompt response will alert them that you have kept meticulous records and refuse to be overcharged.

Furthermore, they are already well aware of the high number of inaccuracies that occur in medical bills and may be more likely to work with you before the debt is sent to collections.

Communicate With Debt Collectors

Stay in constant contact with the billing department. A debt collection agency could begin reporting negatively to the credit bureau between one and six months after the first billing date.

If there are any questions or perceived discrepancies, stay in communication with them. This tells them that you are diligent and are working on it. If they know that you are not avoiding them but simply questioning the validity of some of the charges or having a hard time coming up with the funds, it might help prevent a negative report to the credit bureau.

It is much easier and often more cost effective to prevent a problem before it starts. It is clearly easier to keep bad marks off of your credit report than it is to remove them once they have been reported.

Whether medical bills should show on a credit report has been a subject of debate for quite some time. Many consumer advocates believe that unpaid medical bills are not a reliable indicator of a person’s credit worthiness but simply a sign that he or she had an expensive medical issue at some point within the past seven years.

Credit Repair: Do You Have Unpaid Medical Bills On Your Credit Report?

Medical bills credit report law

Credit Repair: Do You Have Unpaid Medical Bills On Your Credit Report?

Learn How Unpaid Medical Bills on a Credit Report Can Affect You

Whether it’s a minor injury or a serious illness, when healthcare issues arise, the primary focus is always on getting better. Unfortunately, when insurance doesn’t cover the entire cost of treatment, the financial impact must be addressed as well.

Medical bills can and do impact credit scores. The FICO 8 scoring method, which is the most widely used today, does not distinguish between paid and unpaid bills, only looking at whether they were reported in the first place. The most current method, FICO 9, does distinguish between the two — and gives less weight to bills or accounts that were successfully paid in full and closed — but it has not yet been widely adopted. This means that, for now, it is crucial to keep track of how medical expenses could impact your credit report.

Medical bills credit report law

First of all, it is important to note that medical bills may not impact your report and score automatically. Most healthcare providers do not have a relationship with the three major bureaus, and they are not in the habit of reporting late or unpaid bills. However, they do eventually turn over those accounts to a collection agency, and that is where the trouble will start. The collection agencies will report the debts to the bureaus, and that is the point where they will show up on your credit report.

Having medical bills impact your credit report because you legitimately didn’t pay a bill is one thing, but every day many people across the country are facing problems with medical bills impacting their score that they don’t believe they owe. There are a variety of reasons for that:

  • The paid the bill in full before it went to collections,
  • They never received the bill or
  • They thought insurance was handling it.

All three of these can be dealt with, but each part of the process can be time-consuming. If you believe you have already paid the bill in full, the most important thing you can do is gather the documentation proving that fact. Pull old checks or credit card statements, call the office you made the payment to and ask them to provide you with written statements saying you did, in fact, make the payment.

Next, pull the bank statements that show the money coming out of your account. With that data in hand, reach out to the credit bureaus, in writing, and explain the dispute, providing the evidence. There is no guarantee they will remove the incorrect items from your report, but they are required by law to go over every dispute, so it is absolutely worth the hassle.

If you never received the bill in the first place, that can get trickier. In this case, the best option is to call the collection agency that reported the unpaid bill. Some will be willing to negotiate with you if you explain the problem and may even agree to remove the report if you pay off the debt.

Again, there are no guarantees, but there is a proven method: Stay polite, explain your situation, stress that you would have paid the bill if you had seen it, be willing to pay off the debt now, and — it is worth repeating — stay polite. The collection agency is under no obligation to remove the report from your credit since you did, in fact, not pay the bill, regardless of the circumstances.

As a side note, debts can sometimes accidentally be turned over to collections before the first bill is even sent by the healthcare provider. If that’s the case, the strategy above can work, but it might also be worth calling the medical provider directly and requesting that they reclaim the debt, offering to pay it in full to them directly.

Perhaps the most jarring form of medical debt comes from costs you thought your insurance provider would cover. In this case, unfortunately, you have the least amount of leeway. Again, it is possible to call the collection agency that ends up with your account, and you might have luck negotiating with them, but the best strategy here is to know your policy so it doesn’t come to that.

No one likes reading the technically-heavy “explanation of benefits” documentation that comes with every policy, but if you are experiencing a situation in your life that requires taking advantage of a higher than usual amount of medical care, it is worth it to go back through your benefits and make sure you understand up front what is and is not covered. It is better to be proactive about following up on expenses and making sure they never make it to the collection stage.

If all of these strategies fail to get the debt removed from your credit report, then the only thing you can do, unfortunately, is wait. It can take seven years for this type of debt to come off of your credit report; however, their impact will begin to decrease as the years roll on.

Unfortunately, life doesn’t always give you a choice when it comes to medical problems that lead to debt, and there isn’t always room in the finances to cover those unexpected, and often high, expenses. And in the meantime, the best strategy is to practice good credit repair habits, rebuilding your credit profile one step at a time.

Need more information? Download our Credit Tip sheet for more credit repair help!