Medical Bills and Debt Collection

Managing and resolving medical debt these days might seem as impossible as world peace.

Especially when medical bills that are difficult to decipher let alone verify get turned over to a collection agency that might be working with sketchy information about how much consumers actually owe.

Hefty medical bills – are there any other kind? – can be a staggering burden for consumers. And while the Consumer Financial Protection Bureau tried to reduce stress by removing medical debt from credit reports in a January 2025 ruling, not only must that debt still be paid but the consumer protection rule itself is under fire by the new Republican administration.

“While medical debt has long been a silent burden, dragging down millions of Americans, we suspect (the CFPB rule) will be rescinded along with other critical consumer protections,” said Gwyneth Borden, founder and CEO of San Francisco-based Remynt.

“The Trump Administration has asked the courts to pause the implementation of the medical debt reporting rule. Before the pause, Cornerstone Credit Union League and Consumer Data Industry Association filed a lawsuit to prevent its implementation. Even if the pause is lifted, the future of medical debt reporting could be tied up in courts, delaying or eliminating implementation.”

The impact of rescinding the medical debt reporting rule would be felt in every state, red or blue, given that a 2023 study by the Commonwealth Fund found that 40% of adults carry medical or dental debt. Medical debt collections comprise 58% of all debt turned over to collectors, according to the CFPB.

Eight-five percent of those responding to the Commonwealth Fund’s 2023 Health Care Affordability Survey said they had medical or dental debt in excess of $500. Nearly half said they owed $2,000 or more, roughly the same number that say they had been surprised by a medical bill they thought was covered by insurance.

No wonder medical debt is the leading cause of bankruptcy in America, underscoring the need to learn how the system works and seek financial help for medical bills.

What Is Medical Debt Collection?

Medical debt is money you owe to healthcare providers, whether that’s  hospitals, doctors or pharmacies, for services received. Having a health care insurance plan through an employer, or individually in the marketplace, doesn’t preclude amassing medical debt.

Medical debt arises from unpaid bills, out-of-pocket expenses not covered by insurance and high-cost treatments and procedures.

Medical debt typically is turned over to a collection agency after 90-180 days, depending on your provider’s practices.

An April 2023 decision by the major credit reporting agencies removed medical debt below $500 from credit reports. If the CFPB 2025 ruling is rescinded, unpaid medical debt over $500 can appear on your credit report once it’s turned over to collections, and can negatively affect your credit score.

Consumer protections vary by state. Several states, led by Colorado in 2023, enacted legislation prohibiting medical debt collections from appearing on credit reports. Some have passed laws to restrict the garnishing of wages to collect on medical debt. Minnesota passed a law prohibiting providers from denying care for people with unpaid medical bills.

Does Insurance Cover All Medical Costs?

With rare exceptions, health insurance will not cover every penny of a major medical issue.

With that in mind, you should study and understand your coverage. Ask for an Explanation of Benefits (EOB). Make calls to your insurance company before the procedure to determine what they will pay and what you are expected to pay.

The Healthcare Bluebook is an online service that allows consumers to gauge a fair price on medical procedures where you live.

When speaking with a hospital, ask if you qualify for the “financial assistance policy,” also called “charity care.”

If your income qualifies you for the program, bills could be reduced significantly – or forgiven completely. Nonprofit hospitals are required by law to offer these programs. Even if you don’t qualify, you could try to negotiate the price.

Using certain terms can help your cause. Ask if you’re being billed the “chargemaster rate” for a procedure. That’s the full cost hospitals use with insurance companies, costs that are frequently reduced. Ask the hospital if you can pay the lower rate given to insurance companies or Medicare.

Medical Bills without Health Insurance

If you have a long-standing relationship with your doctor, try to deal directly with that office to reduce costs or work out a payment plan. When it comes to hospital costs, ask the billing office to explain all charges.

Auditing every detail is the best way to protect against honest mistakes or outright fraud. Don’t be afraid to challenge unexpected charges; the relatively new “No Surprises Act “ is on your side when you’ve been staggered by a bill you hadn’t anticipated.

Medicaid is a federal/state program that helps low-income people and families. If you qualify, take advantage of it.

Finally, some states require hospitals to offer discounts to uninsured patients regardless of income. Some hospitals and medical groups have funds set aside for individuals who do not qualify for other types of assistance.

Medical Bills with Health Insurance

Understanding health insurance policies and medical bills is daunting, so carefully read (and re-read) your statements.

If you think charges that aren’t covered should be, contact your insurance company. If you’re certain you should be reimbursed, or that your doctor or hospital should be paid by your healthcare provider, file an appeal in a timely manner as most insurers limit the time you have to question a benefit to 30 or 60 days.

Be prepared for denials and delays and be careful to keep records of all phone calls and correspondence. If you eventually must file a formal complaint with your state’s insurance commission or contact a consumer law attorney, you will have accurate records.

Be aware: In the end, you may still have to pay the bill.

How Medical Debt Collections Affect Your Credit Score

The CFPB January 2025 ruling, four years in the making, is meant to provide further protection following the steps taken by Experian, Equifax and TransUnion in 2023 to remove medical debt under $500 from credit reports.

Both decisions resulted from statistics that show a single medical debt in collections can harm your credit score by as much as 100 points. A negative mark, let alone a bankruptcy, could stay on reports for up to seven years.

But because of the Congressional Review Act that allows incoming administrations to challenge any significant agency rule or regulation passed in the final 60 working days of the previous term, a resolution of disapproval could bring the CFPB 2025 ruling up for another vote of Congress.

For now, another existing consumer protection provides that unpaid medical debts can only appear on credit reports after a year of being in collections rather than the six-month timetable under the previous rules.

Once the last medical collection has been removed from a credit report, a consumer’s credit score improves by an average of 25 points within the first three months, according to analysis by the CFPB.

Many of these changes resulted in part from the No Surprises Act, which took effect in 2022.

Another improvement: The latest tweaks to credit scoring models give less weight to unpaid medical collections than to other kinds of debt collections. All told, the recent reporting updates have resulted in the removal of medical debt from the credit histories of about 50% of people whose credit reports previously included it, according to CFPB estimates.

The most damaged credit scores belong to people with large, unpaid medical debt who have trouble appeasing the collection agency, and there are still plenty of individuals in that situation. The Peterson Center on Healthcare and KFF estimated in 2024 polling that 41% of adults carry health care debt and that despite 90% of people carrying some form of health insurance that “medical debt remains a persistent problem.”

If you are worried that medical debt is hurting your credit, check your credit report. The law guarantees one credit report a year from each of the three major credit bureaus.

A nonprofit credit counseling agency can assist you in getting those reports and will review them with you to help develop a personalized plan to solve your medical debt.

Here are deeper looks at the two government initiatives we just mentioned, one involving direct billing from hospitals and medical providers, and the other involving the role of collection agencies.

The No Surprises Act

In 2020, NPR ran a monthly series on surprise and expensive medical bills, and what it took to lower them. Its story told of a Colorado man who needed an appendectomy, then required a follow-up surgery for a blood clot. His initial hospital bill was $80,232 – and he did not have health insurance. After a protracted period that included filing a grievance, the hospital reduced the bill to $22,304.

That kind of predicament caught the attention of Congress which introduced the No Surprises Act (NSA) to protect people against unexpected gaps in insurance coverage and “surprise medical bills”  occuring when patients unknowingly obtain medical services from physicians and other providers outside their health insurance network. The NSA took effect on Jan. 1, 2022.

Even if you are uninsured, the NSA, along with similar laws passed by many states, often makes it possible to get an up-front, good-faith cost estimate prior to treatment.

Whether you’re insured or not, the NSA makes it easier to dispute unexpected charges on medical bills. It has played a major role in alleviating unlawful medical debt collections.

Consumer Financial Protection Bureau Action

In September 2023, in conjunction with the Biden Administration, CFPB director Rohit Chopra announced proposals aimed at stopping efforts by hospitals and other medical providers from using credit reporting to pressure patients into paying charges they can’t afford or that don’t reflect the actual treatment received.

Chopra acknowledged the voluntary moves by the three major credit bureaus but pointed out many creditors still use older reporting models that haven’t adopted those changes.

In many cases, Chopra said, bills that have been turned over to collection agencies don’t match the records from the healthcare providers’ billing or don’t include updates involving insurance adjustments or financial assistance.

In a June 2024 statement, Chopra said the new rule would “ stop debt collectors from using the credit report as a cudgel to coerce consumers into paying bills they may not even owe, and make sure the credit reporting system doesn’t unjustly punish people for getting sick.”

“For consumers,” Chopra added, “today’s proposed rule would have practical and positive real-world consequences. Medical bills on credit reports would no longer thwart big life milestones and aspirations like obtaining a home mortgage or small business loan.”

What to Do If Your Medical Debt Is Sent to Collections

Regardless of whether medical debt shows up on your credit report, you need to have a plan of actionable steps when your medical debt is sent to collections:

• Verify the debt. “By law, you can ask the debt collector for validation,” Borden said. “Which requires that they provide all bills and statements associated with your account.”
• Review your insurance benefits.
• Familiarize yourself with consumer protections that limit how and when collection agencies can contact you.
• Reach out to see if you can negotiate a lesser amount. “If the debt is with a debt buyer, you can likely negotiate a steep discount for a lump sum,” Borden said. “Your strongest hand is in being able to pay a one-time lump sum amount. If not, working on a discounted payment plan is your second-best option.”

How to Dispute Medical Debt in Collections

You may not owe what the collection agencies say you owe. If you have reason to doubt the accuracy of medical debt in collections, you should take certain  steps to protect yourself:

• Send a dispute letter requesting proof. This typically needs to be done within 30 days of receiving notice that your medical debt is in collections. Make sure to keep copies of all correspondence.
• File a complaint. This can be done through the Consumer Financial Protection Bureau or the FTC.
• Report errors on your credit report to the FTC.
• Seek legal help. Securing legal representation has the added benefit of stopping contact from collection agencies.
• Document, document, document. Keeping a record of your medical bills and correspondence with providers, insurance companies and collection agencies is smart whether you seek legal help or not.

How Long Can Medical Debt Stay in Collections?

Medical debt can typically stay in collections (and on your credit report) for seven years but mitigating factors can impact the length of time you can be held legally accountable.

The statute of limitations covering debt varies by state. The range is  anywhere from three years to 10 years. Before responding to the threat of a lawsuit for unpaid medical debt, make sure you check the laws governing the state where you live.

“In reality, all debt can stay in collections in perpetuity,” Borden said. “However, there’s a seven-year limit to it being on a credit report, and the statute of limitations – the ability to be sued for the debt – is determined state by state. With old debts, taking any action – like acknowledging or paying the debt –  can restart the statute of limitations in most states.”

Medical Bills Can Go to Collections Even If You’re Paying

Making regular payments on medical debt does not guarantee you will avoid collections. Those who think they can get away with paying only a portion of the bill could suddenly find themselves hearing from a collection agency if the debt hasn’t been paid off in an acceptable time frame. Same with those who aren’t paying on time.

It’s important to talk with the provider or hospital when you can’t pay all of what is due. Providers typically will set up a payment plan, but be sure to get it in writing.

Some hospitals have agreements with certain banks that will spread payments over 2-3 years at no interest, provided payments are made on time.

Communicating with the provider or a certified debt counselor is key to making payments affordable and avoiding collection agencies.

How to Pay off Medical Debt

The goal should be to keep the collection agencies from darkening your doorway, or your telephone, or your mailbox about your overdue medical bills. Even with recent modifications to the credit reporting system that give consumers some protection, you want to avoid collections.

You do that by being proactive, by treating your medical bills the way you do (or should) any other debt: honestly and responsibly.

Here are some steps you can take to get control of medical bills giving you trouble:

• Make the effort to understand the charges: Check to see if you’ve been double billed for any services or if the statement includes any unauthorized charges. And when in doubt, ask questions.
• Find the right person to talk to in the medical office or hospital: The right person might be a billing administrator rather than your doctor, although your physician should be included in the discussion. Ask what rate you’re getting and what other rates might be available. Explain your financial limitations. It’s best to have this conversation on the front end of treatment, but you can always try to negotiate later, too.
• Inquire about hardship plans: Your income and/or your debt level might qualify you for cost reductions.
• Check into financial assistance or charity care: If your treatment is from a nonprofit hospital, it must offer these sorts of options by law. But some for-profit medical providers extend them, too. If you qualify, part (or perhaps even all) of your debt might be forgiven.
• Look into payment plan alternatives: This is a part of Many hospitals or medical providers will work with you to make your monthly bills more manageable at a lower interest rate or over a longer term.
• Use a medical credit card: The key word is ‘medical.’ A medical credit card usually comes with a 0% annual percentage rate (APR) over a term of anywhere from six months to two years. On the other hand, putting your medical bills on a regular credit card means you could be paying an APR of 25% or higher. You don’t have to be an Einstein to figure out that a medical credit card will cut more quickly into the size of your medical bills.
• Find an advocate: A professional advocate can speak for you with your insurance company or your medical provider, taking care of the hard-to-understand intricacies of billing and appeals and payment options. It’ll cost you, but it might save money in the long run if your bills are sizable.

“One very helpful resource is Dollar For,” Borden said. “You can find out how much of a discount you can be eligible for by answering a few questions. If you find you’re eligible for a discount, you can apply.

“If you want to get a sense of how much of a discount you can get based on your income, if eligible, they will send an application to the hospital on your behalf.”

There are other considerations to explore as well when medical bills begin to drag you down.

Settling Medical Debt

The possibility of settling medical debt for less than what is owed involves some work, but an experienced debt specialist or a professional debt settlement firm can help.

Settling a medical debt is done in similar ways to settling any other debt. You or someone working on your behalf contacts the doctor, hospital, or collection agency to negotiate an agreed-on amount for both parties. Experts advise starting this settlement process as soon as possible, preferably before the debt is turned over to a collection company.

Don’t be scared of dealing with collection agencies. An honest and confident approach that works for everyone can lead to a negotiated agreement to pay the collections.

Medical Bill Forgiveness

If you have a verifiable hardship, such as a disability that prevents you from working, seek medical bill forgiveness. In this case, you petition the provider to forgive the debt entirely.

Your provider will want to see proof in the form of tax returns and written documentation that shows you have no means to pay your medical bills. You can also apply to nonprofit organizations such as the PAN Foundation and CancerCare for help with your medical bills.

Using Credit Cards to Pay Debt

As mentioned, a medical credit card might be worth looking into. It can be used to pay medical bills, including dentists and eye doctors, at deferred interest, meaning if you pay the debt in an agreed-on timeframe, no interest will be charged. The catch: If you don’t make the payments on time, you’ll have to pay the interest retroactive to when you first made a payment.

But remember: Using a normal credit card for medical debt is a last resort.

Credit cards charge high interest rates. Medical debts rarely charge any interest. Also, once the debt is transferred from medical to credit card, the protections afforded consumers for medical debts are wiped out.

The debt becomes solely credit card debt. Medical debt transferred to a credit card looks like “regular” debt to creditors. Try to work out a payment plan with the creditor instead of using a credit card.

Only use credit cards to consolidate medical debt if you can’t pay the credit card bills promptly. If you can’t, first discuss whether the medical provider might offer an interest-free payment plan, which would be more manageable than a credit card debt that accrues interest.

Personal Loans

One option to consider when others have been exhausted is a personal loan. Personal loans could consolidate medical expenses into one loan, which eases payments and could lower interest rates.

These loans could be helpful for large amounts of debt. A nonprofit credit counselor can help find the right approach that fits your personal situation.

0% Interest Credit Card

Some credit card companies will offer a special 0% interest rate to those who have great credit, and/or are new to the credit card company.

Typically, 0% interest has the same major catch as the medical credit cards: The interest only remains at zero provided you pay off all the debt in a certain timeframe, be it 12 or 24 months. If you don’t, the interest not only is added to the payment, it is added (accelerated) to all previous payments. Not paying the entire amount on time becomes punitive.

If you do sign up for zero interest, make sure you understand the terms.

Using a Medical Bill Advocate

We’ve already suggested having an advocate to guide you through the process. Different kinds of advocates can help on both the front and back ends of your treatment.

On the back end, medical bill advocates are people who understand the medical delivery system, and they can explain it to you and negotiate for you. If you are overwhelmed with the complexity of the system or simply don’t have time to unpack your medical bills or proposed charges, advocates can help you review, analyze and appeal bills, saving you time and probably money.

On the front end, patient advocates often focus on procedures you are contemplating or currently undergoing.

If you have already received a medical bill and need help with unmanageable costs, you might want to hire a billing advocate. If you received treatment at a hospital, ask if the institution has advocates on staff. If not, consider hiring one that you know will put your interests first.

Advocates can save you hundreds, or even thousands, of dollars, although they often charge a fee. Some work for an hourly rate; others charge a percentage of the money they save you. It’s usually 25%-35%, though some charge less. You can find one by contacting the National Association of Healthcare Advocacy Consultants or the Alliance of Claims Assistance Professionals. Some churches and nonprofit organizations also provide advocacy, or you might have a relative with knowledge of healthcare who can help you at little or no cost.

Rebuilding Your Credit After Medical Collections

OK, so let’s say you’re among that group of people whose credit rating hasn’t been saved by the No Surprises Act or relaxed rules on reporting medical debt to the credit bureaus. Your medical bills have been sent to collections and your credit score has suffered as a result. Can you recover?

The answer is yes, though as you might expect, the steps you take to improve your credit score in the wake of medical collections aren’t necessarily easy and won’t show results as quickly as you’d like. They are, however, very much worth taking.

• Pay off the medical debt first: Yes, we’re being Captain Obvious here, but it’s Priority No. 1. That’s what’s dragging your credit score down after all, right?
• Pay off any other past–due debts: This is Step No. 2, even though it’s true that in most cases, other debt, especially credit card debt, can damage a credit score more than medical debt can. If the medical debt is the one in collections, deal with it first. But then make sure your credit card debt doesn’t wind up in collections, too.
• Get into the habit of making all your payments on time: The credit bureaus reward your score when you show them you can do this. Your payment history makes up 35% of your credit score. The longer you keep current with those obligations, the more the medical debt collections will fade as a factor.
• Do all you can to pay down your credit card balances: Another factor in your credit score is called your credit utilization ratio. It’s the amount of revolving credit you’re using divided by the total credit available to you, expressed in a percentage. You want it to be low to show the credit bureaus how well you manage your debt. You get it there by paying your credit card balances down as quickly as possible.

Debt Help For Medical Bills

Medical debt can affect more than your credit rating. The Sycamore Institute, an independent nonpartisan public policy research center, found that people struggling with medical debt are more likely to experience high blood pressure, poorer mental health, and a shorter life expectancy, among other issues.

A nasty downward spiral can result; overdue bills become the cause of further medical expenses.

Better to explore your options sooner than later to get the medical debt relief you need, especially when bills are headed to collections.

One of those options is a medical debt consolidation loan that organizes your medical debt into one monthly payment.

Among the advantages of medical debt consolidation, as opposed to consolidating credit card debt, is more flexible loan terms because there usually is no interest attached to medical debt. Banks, credit unions and online lenders are the best options for finding a medical debt consolidation loan that works for you.

Another proven option:  a nonprofit credit counseling agency can advise you about the best debt help for medical debt, including your medical debt consolidation options based on your income and indebtedness level.

A credit counselor might also discuss the viability of a debt management program that can address your credit card debts along with your medical debt.

Medical debt is daunting especially when collection agencies are involved. Just know you don’t have to go it alone.

“If you’re struggling to pay your medical bills, don’t hesitate to ask for help,” Borden said.