What to Know About Medical Debt Collection

Millions of Americans are saddled with medical debt. And the amount owed totals more than $88 billion, according to a 2022 Consumer Financial Protection Bureau report. In fact, Americans are more likely to be contacted by debt collectors about medical bills than any other type of debt.

However, it’s not uncommon for medical bills to end up in collections by mistake. For example, the CFPB recently took action against medical debt collector Phoenix Financial Services for attempting to collect debts from consumers who had disputed the validity of those debts. In short, Phoenix was pressuring patients to pay medical debts they didn’t owe.

Because inaccuracies in medical billing actually are common, it’s important for consumers to understand their rights to avoid being coerced into paying incorrect bills. Consumers also have rights when it comes to collection practices for valid debts. Here’s what to know about medical debt collection.

What is medical debt?

About 20% of U.S. households have medical debt, according to the CFPB. They end up with this debt when they don’t pay the bills for medical treatment they have received.

According to a survey by the Kaiser Family Foundation and The New York Times, the bills people have trouble paying for are from a variety of sources: doctor visits, diagnostic tests, lab fees, hospital stays, prescription drugs and dental care. Problems paying medical bills are more common among those who are uninsured or who have low to moderate incomes. However, about one in five people with health insurance also report having trouble paying medical bills. Often, those with higher insurance deductibles are the ones with bills they can’t afford.

While chronic conditions and ongoing medical care can lead to unpaid bills piling up, the survey found that two-thirds of medical debts come from a one-time or short-term acute medical need. In other words, one trip to the emergency room can leave people with medical debt. And a majority of those surveyed said they were no longer receiving the treatment that led to their unpaid bills.‍‍

What happens when a medical bill goes to collections?

Medical providers will make several attempts through letters, emails and phone calls to collect what is owed. If medical bills aren’t paid in full within a certain time period, providers often turn over those accounts to third-party collection agencies to seek payments. Before doing so, though, providers typically send a written notice that the debt is being turned over to a collection agency.

Collection agencies will then contact patients to collect what is owed. According to the CFPB, they may even sue to recover what is owed. However, collection agencies can’t report the debt to the credit bureaus without first trying to collect what is owed.

Medical collections under $500 don’t appear on credit reports. Medical collections over $500 can appear on credit reports if the bill remains unpaid a year after it became late and can remain on credit reports for up to seven years. Medical debt does hurt your credit score.

What to do if medical bills go to collections

If debt collectors are contacting you about unpaid medical bills, you need to know your options and your rights. Don’t ignore collection notices, but before you make any payments, take these steps.

Make sure the bills are accurate. Medical bills often contain errors. Locate the original bills you were sent (not the collection notices) to check for duplicate charges or charges for services you might not have received. If you have health insurance, compare those bills with your insurance explanation of benefits statements to look for discrepancies between what the insurer paid and what the provider claims is owed. And compare your bills with the amounts listed on any collection notices you receive.

Know your rights. The CFPB’s Debt Collection Rule requires debt collectors to provide a written statement detailing the provider or creditor you owe the debt to, the account number associated with the debt, an itemized list of the amount owed that includes fees, interest and any payments that already have been made, and an end date for the period you have to dispute the debt. If you get a call from a collection agency, ask it to send you a verification of debt letter (which it’s required to do within five days of your request).

You have 30 days after receiving a notice from a debt collector to dispute the debt in writing if you believe you don’t owe the debt or want more information about the debt. The CFPB has sample letters you can use. Be sure to send letters by certified mail. The debt collector must pause its collection attempts until it responds to your request.

Know the limits on what debt collectors can do. The Fair Debt Collection Practices Act prohibits debt collectors from using unfair, abusive or deceptive practices to collect debts. They can’t call between 9 p.m. and 8 a.m. or more than seven times in seven days. They can’t harass you by phone, email or text, and can’t publicly post on social media about the debt you owe. And they can’t report a medical bill to the credit bureaus without first trying to collect the debt from you.

You can sue debt collectors if they violate these rules. States also have laws that regulate what debt collectors can do. Contact your state attorney general’s office to learn more.

How to prevent medical bills from going to collections

If you can’t afford to pay medical bills, it’s best to take action before your providers turn your account over to a collections agency. Depending on your circumstances, these steps could help.

Find out if you qualify financial assistance. If you can’t afford to pay your medical bills, you might be able to get a portion or all of your medical bills forgiven. Nonprofit hospitals are required by federal law to make financial assistance available to low-income patients, but many don’t do a good job of educating patients about these programs. Dollar For, a national nonprofit organization, helps people navigate the application process for free. You can use Dollar For’s eligibility screener to see if you qualify for financial assistance.

Negotiate with the provider. Even if you don’t qualify for a hospital’s financial assistance program, you might be able to negotiate a deal with the provider over what is owed. Ideally, it’s better to do this before bills go to collections. However, you still might have success if you make an appointment to speak with someone in the billing department in person and come armed with proof that it would be difficult for you to pay in full based on his financial situation (such as your tax returns).

Take advantage of protections under the No Surprises Act. Since January 1, 2022, the No Surprises Act has banned surprise medical bills in certain situations. These include surprise bills for emergency services received from a provider or facility that you didn’t know was out of your insurance network and bills that are higher than the good faith estimate providers must provide to those without insurance before they receive care. You may be able to dispute charges if you received a surprise medical bill. The CFPB has more details on what to know about the No Surprises Act.

Seek help. Consider hiring someone to help you negotiate your medical bills if you aren’t successful doing it yourself. You find a professional near you who can negotiate on your behalf through the Alliance of Claims Assistance Professionals, the Alliance of Professional Health Advocates and the National Association of Healthcare Advocacy. You might also be able to get free or low-cost help negotiating medical bills from a certified financial counselor with the National Foundation for Credit Counseling network. At the least, an NFCC-certified counselor can help you create a debt repayment plan for your medical debt.

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