Medical Debt Collection

By Mary Reed. Updated October 9, 2020.

A serious illness, an ambulance ride, or even a relatively brief hospital stay are apt to leave you with a pile of medical bills that you cannot afford to pay, even if you have health insurance. And, if you don’t pay them, or don’t pay them quickly enough, the bills are likely to be sent to medical debt collectors.

Medical debt collection is a serious problem affecting millions of Americans. Strategies for dealing with medical bills in collections include:

• Payment plans
• Negotiating settlements
• Disputing medical bills and
• Filing for bankruptcy

Here we will help you understand your options for dealing with medical bills you can't afford, including those that have been turned over to collection agencies. 

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What Happens if I Don't Pay a Medical Bill?

Every medical provider has its own policies, but here are some of the things that a doctor, a hospital or another medical service provider may do to collect the bills you don’t pay:

• Turn your account over to a collection agency.
• Sue you for the money that you owe in order to get the court’s permission to put a lien on your home or to seize your other assets such as money from your bank account.
• Obtain a court order to garnish your wages, assuming wage garnishment is legal in your state.
• Threaten to ruin your credit by reporting your past due medical debt to one or more of the credit bureaus. Having even a small medical debt show up in your credit report as past due or in collections can seriously damage your credit history and lower your credit score. (Note that medical providers must wait 6 months before reporting medical debts on credit reports.)

Warning: When you don’t pay a medical debt, the amount of the debt may increase over time because the medical provider’s billing department may add late fees every month to your outstanding balance.

When Can A Bill Be Sent to a Medical Debt Collection Agency?

You may end up with a medical debt in collections:

• While you are waiting for your insurance company to pay a medical bill or if you are disputing the bill. 
• If you are on a payment plan and are late – even by one day - with a payment. There is no federal law that prevents a medical provider from turning a medical bill to collections when you are making payments on it.
• Even if you never received a billing statement from your medical provider. We have heard from consumers who did not know that they had past due health care bills until medical debt collectors contacted them! Federal law generally does not explicitly protect you from this problem.

What Are My Options for Dealing With Medical Bills I Can’t Afford to Pay?

Here are 3 options if you are facing medical bills you can't pay. 

1. Set up a payment plan with the provider. Contact the billing offices of your medical providers to find out if you can pay your past due bills over time. But first, make sure you have a realistic idea of exactly how much you can afford to pay each month and never agree to a payment amount you don’t think you can make. Making small payments indefinitely is not likely to solve the problem.

Also, if a medical provider agrees to a payment plan, get all of the terms of the plan in writing and don’t sign the agreement unless you are clear about the interest rate on the plan and the plan’s other terms, including when will you be considered to have defaulted on the agreement and what will happen if you do. For example, if you default (fall behind), the medical provider may refuse to provide you with any additional health care until you get caught up.

Once an installment plan is in place, let the medical provider know immediately if you are not going to be able to make a payment in a particular month or if you need to renegotiate the terms of plan because you cannot keep up with the payments you agreed to. Being proactive may help you avoid the consequences of a default. 

2. Set up a payment plan with the debt collector. If the debt collector has already turned your account over to collections you may be able to work out a payment plan. Be careful though: If you agree to very small payments on a large debt you may never be able to pay it off, and if you fall behind with the debt collector it may sue you to collect. 

3. Settle your medical bills. When you settle a debt with a medical provider, the billing office or the collection agency agrees to accept less than the full amount that you owe. Never pay any money to a provider unless you have all of the terms of the settlement in writing and you understand each and every one of them. You may want to get professional help to settle debts if you cannot do it yourself.

4. File for consumer bankruptcy. Sometimes, filing for bankruptcy is the best way to deal with medical debt collection accounts. In fact, past due medical bills are one of the leading causes of bankruptcy in this country. Always consult with a consumer bankruptcy attorney to find out whether it’s a good option for you.

Talk with a bankruptcy attorney for free by calling 1-888-495-0133.

Tip: Although having a bankruptcy in your credit report will harm your credit scores, your past due bills have already badly damaged your credit score, and filing for bankruptcy may be the wisest way for you to get out of debt. A consumer bankruptcy attorney will help you figure it out.

Try not to ignore your health care bills. Even if you cannot pay them, contact the billing department of the medical providers to whom you owe money. Let them know that you want to pay what you owe and explain why you can’t do that right now. You may also want to explore one or both of the options below for resolving your debt.

How Do Statute of Limitations Affect Medical Debts?

The statute of limitations on a debt may make it more difficult for medical providers as well as debt collectors to successfully sue you for the money you owe after a certain period of time has passed. The clock starts ticking after you have missed your first debt payment. Once the statute of limitations is up, a health care provider or a debt collector may be able to still try to get you to pay the debt, but if they file a lawsuit you may stop it by raising the statute of limitations as a defense.

The length of the statute of limitations differs by type of debt and also varies from state-to-state. If you want to know what it is in your state, check with a consumer law attorney or state attorney general’s office. By the way, a debt that you can no longer be sued for is referred to as a "time-barred" debt.

Warning: Some consumers believe that their medical debt will magically go away after seven years. Not true! Although the debt will no longer appear on their credit reports and no longer affect their credit scores, they still owe the money and medical debt collectors can still try to collect it. Again, though, the statute of limitations may help if you are sued for that debt. 

In addition, some medical providers may try to pressure you into paying your delinquent debts by refusing to provide you with additional medical care until you do. This may happen even if you are paying off your debts over time by making monthly payments on an installment plan that you and a provider agreed to.  Also, some of your medical providers may have a policy that as long as you owe them money, you must pay up-front for any future health care they provide to you.

What Other Options Are There for Getting Rid of Medical Collections Debt? 

If you have no success pursuing an installment plan or debt settlement, here are some other options you may want to consider in order to pay your past due medical bills:

• Contact churches and social services organizations in your area. Explain that you have delinquent debts in collections and ask if the organizations can provide you with financial assistance.
• Get in touch with your local and county governments. They may have programs that can help with unpaid medical bills or they may be aware of a non-profit program that can be of help.
• Have your medical bills audited by a firm that analyzes such bills in order to find overcharges and other errors. An audit is an especially good idea if you owe medical debt to a hospital because studies show that most hospital bills are wrong. A medical debt audit company may charge you an hourly fee, or it may get paid by taking a percentage of the money it saves you.

What If My Health Insurance Company Refuses to Pay All or a Portion of My Medical Bills?

It’s not unusual for health insurers to deny coverage for health care bills. If this happens to you and you believe that the care should be covered by your insurance, or if your insurer pays some but not all of a medical bill and you think it should pay the entire bill, here’s what we recommend:

• Review your health insurance policy for an explanation of why the insurance company made the decision it did.
• If you don’t find a good explanation in your policy or you don’t understand what your policy says, call the company’s customer service office. If you are unhappy with the explanation you receive from that office, or if you don't understand it, contact your insurance agent or your health plan administrator if you receive your health insurance through your employer.
• If your agent or the plan administrator cannot help you with your claim, you can appeal the decision of your health insurance company. Your agent or plan administrator can tell you how to do that.
• Seek help from a medical bill advocate. The Patient Advocate Foundation provides free help to individuals who are having problems with their insurance company. To qualify for this help however, you must be dealing with a chronic, life-threatening or debilitating illness or be seeking screening services related to such an illness. There are other criteria as well, which are outlined on the Foundation’s website. The Foundation may also be able to connect you with a medical bill advocacy organization in your community.
• Consider filing a complaint against your insurance company with your state’s insurance commission or department, which is the government entity that regulates insurance companies in your state. The company may decide to rethink its decision about your claim because it wants to avoid having a problem with the state commission or department that is regulating it.
• Contact a consumer law attorney with experience in medical debt collection issues if none of the actions you take get you the result you hoped for. Sometimes, simply receiving a letter from an attorney will motivate an insurance company to reverse its decision. It’s possible though, that you will have to file a lawsuit against the company in order to get action; however, an attorney will not take your case unless he or she thinks that you have a strong chance of winning your lawsuit. If you do find an attorney to represent you, he or she will probably represent you on a contingent fee basis, which means that you won’t have to pay the attorney’s legal fees up-front. Instead, the attorney will get paid by taking a share of whatever money he or she may win for you.

What If I Need Health Care, But Have No Health Insurance?

If you receive medical care inside or outside a hospital and/or if you are transported to a hospital in an ambulance and you have no medical insurance, a limited income and/or if you own few assets, find out if you qualify for charity care. Also, some doctors provide this kind of care to their low-income patients. To qualify for charity care however, you may have to prove that you applied for and were denied Medicaid coverage for the services you cannot pay for. Medicaid is a federal-state program that helps pay the costs of medical care for people with low incomes and few if any assets.

Tip: Some doctors and hospitals offer discounts to uninsured patients even if the patients are not low income.  

If you are not already enrolled in Medicaid, find out if you qualify for the program. If you do, Medicaid will pay any medical debt that you’ve already incurred, assuming that the debt was for care and services that it normally covers and that the debt is not more than three months old.

Be aware that some medical providers refer patients who can’t afford to pay for their medical care to creditors who will finance its cost, but at a very high interest rate! These creditors include finance companies and some credit card companies.

Other medical providers may encourage you to come up with the money you need to pay your medical expenses by getting a personal loan, by refinancing your home and getting cash out, or by borrowing against the equity in your home. The latter two options are especially risky because if you can’t keep up with the payments on your new mortgage or fall behind on your home equity loan, you risk losing your home. 

Other Helpful Resources

• The Consumer Financial Protection Bureau or CFPB is the federal agency that enforces consumer protection laws and provides consumers with information about their legal rights as well as information to help them make wise financial decisions. For example, on its website you’ll find many helpful articles and how-to guides including information about debt collection practices, how to deal with debt collectors, and your legal rights when debt collectors contact you. The Consumer Financial Protection Bureau also offers a step-by-step guide to settling a debt.


• Your state attorney general’s office. Contact this office if you want to know more about the laws of your state that help protect you when you cannot pay your health care bills or when you have questions about the debt collection practices of a medical debt collection agency.


• Kaiser Health News. This nonprofit news service provides information about a wide variety of health-related topics including crowdsourced medical bills.

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