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Handling Your Medical Debt

On Behalf of | Mar 2, 2016 | Consumer Protection

For most consumers, medical debt is one of the strongest sources of stress and is largely responsible for consumer bankruptcy filings in the United States.  Medical debt can wipe out savings for even the most responsible consumer.  Medical emergencies can appear out of nowhere and even one who saves and plans for their future may not be prepared for these unexpected expenses.  According to the Consumer Financial Protection Bureau (“CFPB”), the government agency in charge of consumer protection in the financial marketplace, medical debt accounts for half of all debt reported to the credit reporting agencies and 1 in 5 consumers have unpaid medical debt reported on their credit report.

Both the Fair Debt Collection Practices Act (“FDCPA”) and your state laws will protect you, but you must be aware of your rights to shield yourself from being taken advantage.  The FDCPA and your local government limit what action a collection agency may take against  you when collecting on medical debt.  Most states allow the original creditor, a doctor’s office or healthcare provider to reach out to a consumer directly for collection.  But it is when the debt is passed on to a collection agency for reimbursement, that consumer rights are called in question.

As a consumer, you are entitled to dispute any and all debts with a collector at any time, under the FDCPA and your state’s laws, you have the right to request additional information and validation of a debt that is being collected from you.  Once a dispute is received a collector must cease all collection efforts until the information is provided.  Studies show that medical debt has the largest amount of error so it is best to always dispute your medical debts before making a payment.  When disputing a debt always ask the collection agency to provide you with an itemization of the bill.  Often times during this process, consumers may discover that insurance did not pay their portion of the bill and the doctor or healthcare provider received it but did not account for it in their billing.

After making a determination that your medical debt is legitimate, developing a strategy for payment does not have to be impossible.  If medical expenses are in your foreseeable future, ask for pricing information upfront and talk to your doctor or healthcare provider about discounts or a payment plan for any treatment not covered by your insurance company. Planning for medical expenses may help alleviate accruing debt and help you to get it paid off in a timely manner.

However, not all medical expenses can be planned for.  After receiving notice of a debt, the first step is to reach out to your insurance company and find out if any of your debt is covered.  In the event your debt or a portion of it is covered by insurance, let the collector know what amount you will agree to pay based on your coverage.  Try contacting the healthcare provider directly to make payment instead of paying a collector directly.  If the doctor’s office or healthcare provider refuses payment, try negotiating a payment plan or settlement amount for the balance with the collection agency.

In the event medical debt is reported on your credit file, it won’t destroy your credit forever.  Several credit scoring models have recently announced that paid collection accounts will not longer be used to calculate your score.  Furthermore, the three major credit reporting agencies, Equifax, Experian and Trans Union announced that they would wait 180 days before reporting medical debt on consumer credit files.  This delay will allow the credit reporting agencies to more fully investigate medical debt based on the fact that the medical industry’s reporting history is riddled with errors.

If you are being contacted by a collection agency regarding medical debt and need the advice or assistance of counsel, contact SmithMarco P.C. for a completely free case review.