There are a few kinds of unexpected expenses that are common in America, but few are as prevalent and as devastating as medical bills. The healthcare system is a mess, with a gigantic feedback loop between hospitals and providers, third-party labs, insurance companies, and reimbursement programs, all trying to raise numbers to get their own cut and remain solvent. Prices are constantly rising to compensate for the rise in other prices, deferring costs on and on until it all ends up with a bill with a few too many zeroes arriving in your mailbox.
If you have medical debt, can you dispute it? If it goes to collections, are you on the hook? Or can you get out from under it?
Here are some of the most commonly asked questions and answers!
First, let's get the first question out of the way. Are you on the hook for medical bills you receive for services rendered?
The healthcare system is massively complicated, with dozens of organizations butting in, from insurance to labs to providers to facilities.
There are a ton of opportunities for paperwork, authorization, and information to get lost along the way. So much so that it's extremely common to receive bills for services that should have been covered by insurance simply because the facility billing you never received your insurance authorization.
If you've received an unexpected medical bill in the mail, you'll want to follow a process to verify it before you pay.
First of all, look at the bill and make sure it's relevant to the procedures you actually received. Medical billing is often handled by numerical codes identifying various procedures, from a simple X-ray or an antibiotic prescription all the way to major surgeries. It's extremely easy for a typo to make its way into the system, whereupon your insurance rejects a claim for a procedure it didn't authorize, and you receive a bill.
You'll also want to check any records of the procedures you actually received. It's possible in some instances that you may have received certain kinds of treatment, and you didn't really understand what was happening, or you may have been unconscious when they had to perform the procedure. Many small details can slip through the cracks.
Also, check your explanation of benefits statement. This statement should come from your insurance company and explains what they cover and what they don't. Make sure coverage is applied properly; sometimes insurance authorization isn't properly used, and sometimes something that should have been covered actually isn't.
Another question you may have is whether or not the facility or practitioner's office can help you or if you're stuck trying to negotiate with insurance companies.
You often have many options, in fact:
If you can't pay an even discounted version of your bill, you can discuss payment plans, but you may also want to put that off in favor of other discussions.
Another call you'll want to make is to your insurance company. Your insurance company may actually be obligated to cover a bill you received, especially if they were supposed to but never received the claim themselves.
Another common issue is double billing, where the bill is processed normally, insurance pays it, but somehow a duplicate bill is created and sent to you. In these cases, the hospital has already been paid, and you aren't beholden to pay it again. This is very common with certain third-party labs for blood tests and biopsies, for example.
If a claim was made with your insurance and it was denied, you may also be able to file an appeal. Unfortunately, insurance companies are quite adversarial, so they'll likely fight if they can.
The American healthcare system is massively exploitative, but there are some legal restrictions in place. In particular, there are two you'll want to learn.
For debt collectors, who are third parties who buy up the debt from hospitals, it's even more important to verify the debt. The transition from hospital to debt collector is a prime opportunity for mistakes or for lost paperwork, and if the debt collector can't verify the debt, they can't charge you for it.
The FCRA also limits how debt collectors can contact you and limits "coercive credit reporting," where a debt collector threatens to report to the credit bureaus if you don't pay right away.
It's also worth knowing that credit bureaus treat medical debt less harshly than other forms of debt. From Experian:
"FICO 9, the most recent FICO credit scoring model, as well as the VantageScore® 3.0 and 4.0 credit scoring models, don't weigh medical collections as heavily as other collections. Additionally, the three major credit bureaus (Experian, TransUnion, and Equifax) will remove the collection account from your credit history if it's been paid."
"Not every medical collection will be included on your credit report. The three major credit bureaus wait 365 days before adding medical collections to your credit history. The purpose of this yearlong grace period is to give you a sufficient amount of time to resolve any errors on your bill, pay your bill, design a payment plan or consult your insurance company so they can take care of it."
What this all means is that medical debt is generally among the least impactful forms of debt when it comes to your credit report. It can still bring your score down, but it won't be as much of a decrease as a similarly-sized personal loan or a defaulted mortgage, and it goes away much more easily than other forms of debt.
In particular, one of the common sources of high bills was when a facility like a hospital is in-network for your insurance, but the doctor who actually saw you is a contractor from a private practice that is out of network. Thus, you're billed out-of-network rates instead of in-network rates. Obviously, this is terrible for the consumer. The No Surprises Act prohibits this practice and puts limits on how much you can be billed.
Furthermore, if a medical bill is sent to the credit reporting agencies, you can dispute the entry on your credit report. The credit bureaus will also ask for verification of the debt, and if they do not receive it, they will remove the debt from your credit report.
Another option you can consider is what's called a Pay For Delete.
Truthfully, you probably don't need to worry about a Pay For Delete, as the behavior is now the default. When you pay off a collections account, that account is removed from your credit report.
First is a patient advocate. Patient advocates are generally employees of the healthcare provider, and their job is to fight on your behalf and see what strings they can pull to reduce or remove your financial obligations. It's also possible that your insurance company has patient advocates as well.
The second option is your state's insurance commissioner. This is most relevant if your insurance company is refusing to cover something they should. The insurance commissioner should be able to help you navigate your situation and can verify that the insurance company is or isn't doing everything right, with penalties if they're trying to do something wrong.
Some states, like California, also have processes like an Independent Medical Review, which uses a third-party investigator to handle the verification and validation of services, billing, and other aspects of the process.
A third option, and usually your last resort, is a lawyer. Legal counsel can advise you on steps you can take and the options you have. Unfortunately, lawyers are often expensive themselves, so even if you get a medical bill removed, you may end up owing the lawyer almost as much.
Bankruptcy is a legitimate process, and as unsecured debt, medical debt can be discharged. After all, it's not like a hospital can repossess your health!
That said, bankruptcy is harsher on your credit score and lingers longer than medical debt, so this should be an option of last resort. Additionally, there's no such thing as "medical bankruptcy"; you cannot declare bankruptcy just from your medical debt; it's an all-or-nothing process. Don't take this step lightly, but keep it in mind as the ultimate out.
If you've received a medical bill and you don't think you should have, follow this process.
1. Contact your healthcare provider and ask for an itemized bill.
2. Compare the itemized bill with the explanation of benefits from your insurance company, looking for errors.
3. Examine your insurance policy for limits, maximums, coverage details, and other processes that may be used to cover the bills you receive.
4. Dispute any errors you find, either with the insurance company or the healthcare provider.
5. Consider a payment plan. If your bill is legitimate but just hard to pay, you can often negotiate with the provider to pay a portion of it or establish a payment plan. Facilities are often much happier with partial payments than they are with no payments at all.
6. Monitor your credit report in case a bill slips through and defaults or is sent to collections.
7. Dispute any errors or issues with your credit report.
8. Dispute any medical debt that has been sent to collections.
9. Consider contacting various forms of assistance, like a patient advocate, state insurance commissioner, or lawyer.
Throughout this entire process, the #1 thing you should be doing is documenting everything. Save all paperwork and communications, request letters rather than phone calls and verbal agreements, and get things in writing. The paper trail is hugely helpful if you end up in a situation where you need to pursue legal action, though 99% of the time, you won't.