NBC6 Miami reveals some of the traps you can face with medical debt collections.
Despite ongoing changes and adjustments to our healthcare system, medical debt collections continue to plague millions of Americans. They’re one of the leading causes of collection actions in the United States and they can be even harder to deal with than other types of debt collection. In fact, medical debt is now the number one cause of bankruptcy in the U.S. But why are medical debt collections so difficult?
NBC6 Miami focused on medical debt during a week-long investigation into debt collection. Consolidated Credit’s Financial Education Director April Lewis-Parks spoke with them to explain what can and can’t be done when a hospital wants to collect on a medical debt.
Consolidated Credit Interview: How to Handle Medical Debt
When Rachel Stamatyades got a bill for more than $3,200 after a trip to the emergency room, she was overwhelmed. “It feels like a waste of money,” she told NBC 6 Responds back in 2016. The bill for the hour she says she spent at a local emergency room included a $60 charge for ibuprofen and left her questioning why she had been charged so much. NBC 6 Responds helped reduce her bill by a few hundred dollars after calling the hospital. “Most people believe that the bill is what they owe,” said Michael Walrath, a Miami attorney who helps patients fight exorbitant medical bills. If a medical bill ends up in collections – and on your credit report – there is some good news. “Medical Debt does not impact your credit score the way other debts do,” said April Lewis-Parks of Consolidated Credit Counseling Services. Lewis-Parks said it could take up to 6 months for medical debt to appear on your credit report and when it does, it counts less toward your credit score than other types of debt. “Within 6 months of on-time payments, your credit score should increase,” said Lewis-Parks. “If you stay on that path, it should get better again to the way it used to be.”
NBC6’s Alina Machado: Well, if you’ve gotten calls from debt collectors, you know how annoying those calls can be. So annoying that debt collection is the top complaint that the Federal Trade Commission gets from Florida. All this week, we’re devoting time to one of the biggest reasons you get in debt – medical bills. Here is what can and cannot be done to collect on those debts.
NBC6’s Alina Machado: Eduardo Gandolfo says he is meticulous about keeping track of money at home and for his business.
Eduardo Gandolfo: You have to keep a good record of your money.
NBC6’s Alina Machado: That’s why he was surprised when we showed him a lien with his name on it.
Eduardo Gandolfo: Totally surprised.
NBC6’s Alina Machado: Indicating a debt of more than $7,000 to Baptist Hospital.
Eduardo Gandolfo: For everybody, $7,000 is a lot of money.
NBC6’s Alina Machado: He says his son Matteo had been in an accident about a month before the date on the lien. But he told us he didn’t owe a thing, because insurance covered the emergency room visit.
Eduardo Gandolfo: I want to contact Baptist and say, “What is this?”
NBC6’s Alina Machado: So did we. Baptist Hospital told us they could not comment on his case specifically, but in a statement told us: “For cases involving accidents, it is standard practice to file a lien that attaches to the proceeds of any claims associated with the accident.” They said they do it because, “Many times these payment from third parties are made directly to the patient.”
Attorney Michael Walrath: So, there is money that is available to pay the hospital.
NBC6’s Alina Machado: Attorney Michael Walrath says hospitals file a lien to make sure they get a portion of a settlement, if an accident leads to a lawsuit. But if there is no lawsuit and the debt is paid, the lien is meaningless. Gandolfo told us the hospital confirmed his bill had been paid and the lien would be released.
Eduardo Gandolfo: I really thank you, you brought it up because I was not aware of this at all.
NBC6’s Alina Machado: These liens are one way hospitals make sure they can collect. Another is to send unpaid debts to collection agencies.
April Lewis-Parks: Usually, you have about six months – three to six months – before will go into a collection agency.
NBC6’s Alina Machado: April Lewis-Parks of Consolidated Credit says debt collectors have limits on what they can do, including only being able to call during the day between 8AM and 9PM.
April Lewis-Parks: They’re not allowed to come to your house. They’re not allowed to threaten you. They’re not allowed to talk to your neighbors and tell them that you owe money. So, they have to deal directly with you.
NBC6’s Alina Machado: Now, Consolidated Credit says if debt collectors call you and you want it to stop, tell them that moving forward you want everything in writing. And, if you have unpaid medical debt, you could be getting one of these letters. It means that your debt has been paid thanks to donation our company made to a nonprofit called RIP Medical Debt. They buy debt at a lower cost, but they will not collect it on you. So, again, if you get one of these letters, please let us know.
How to avoid medical debt collections
“You need to read and thoroughly understand your health insurance policies so you know what’s covered and what’s not,” April-Lewis Parks explains. “If you’re in doubt or have any questions, call to speak with an agent so they can clarify. Many basic insurance plans may not cover things like trips to the ER. ER visits can run up thousands of dollars in bills. So, if your insurance doesn’t cover them, you may need supplemental insurance.”
Supplemental insurance is often necessary to secure full coverage, particularly if you get health insurance through your employer or Medicare. And even though it means you’ll pay more, it’s worth it to have the coverage when you need it.
“No one plans to go to the emergency room,” Lewis-Parks says. “So, skipping ER coverage because you’re healthy is not a good strategy. Better to absorb the cost of the extra insurance now than to face debt that can quickly drive you into bankruptcy.”
You should also be highly focused with any bills or invoices you receive during an ER visit. Make sure you keep any documentation you receive so you can call your insurance to make sure it’s paid. If you learn that your insurance won’t cover a bill you already incurred, talk to the hospital and work out a payment plan.
How to get out of medical debt collections
“If a bill slips through the cracks and goes into collections, don’t panic,” Lewis-Parks continues. “Call the hospital or medical service provider directly to ask them to work out a payment plan with you. You may also be able to negotiate with them to ‘re-age’ the debt. In other words, they can pull it back from collections in exchange for your commitment to stick to the payment plan your arranged. This will remove the collection account from your credit, so your credit score won’t suffer.”
You should also review the bill thoroughly to make sure you received all of the tests and services that they say they performed. If you find something you think is an over-charge, bring it up and ask them to remove it.
“If all else fails, it’s possible to include medical debt in a debt consolidation loan or a debt management program,” Lewis-Parks concludes. “If you have good credit and the medical debt collections haven’t hurt your score yet, look into debt consolidation loans. Otherwise, if you have bad credit, you can contact a consumer credit counseling agency. They can help you enroll in a debt management program, which can help pay off medical debt.”
Ask the Expert: Counseling for Debt Collections
President Gary Herman helps you understand how credit counseling may be able to help with debts that have been moved to a charge-off status – even if those debts have already been sold to a third-party collector.
Debts in collections absolutely can be included on a debt management program. If it’s with the original creditor, even if it’s not with the original creditor, in a lot of cases we’re able to get the original creditor to accept the payments back again. Any card that’s closed and you’re still carrying a balance – any payments that you make directly to the creditor will be applied 100% to the balance. The only thing that may vary by account is whether there’s still late fees or interest being applied.
Most of the benefits from a debt management program come before accounts get charged off – basically before an account gets closed is when we can have the biggest effect on saving you money and helping you get out of debt sooner. Once an account’s closed, it’s charged off – the bank has already written it off, but you still owe them the money, it still shows up on your credit report, and you’re still obligated to make payments.
If it’s sold to a collection agency and now someone else owns it, we can still attempt to help you with them, although it’s not a credit card company and it may be a collection agency that we don’t have a relationship with, it’s included in our service for us to reach out to them and try to work out a payment plan for our clients. The major benefits of the program really come when you’re working with the credit card companies because they have an interest in seeing you rehabilitated, educated, and they want you back as a customer.
BONUS QUESTION: Credit counseling agencies, in general, do not help with removing things that are accurate from a credit report. And, in fact, if you did owe the money and you were behind on it, and even if you make an agreement to pay it, the credit card companies are obligated to report – not why – but if something happened.”
If you have medical debt collections and other bills to pay, talk to a certified credit counselor to see if a debt management program can help you.