What Happens If I Don’t Pay Medical Bills?

Unpaid medical bills can lead to a cascade of financial and legal consequences. Healthcare billing complexities and unexpected medical events often leave people with significant debts. This article explains the consequences that can arise when medical bills are not addressed, from initial verification steps to severe legal proceedings.

Verifying Your Medical Bill

Before addressing any medical bill, verify its accuracy. Many medical bills contain errors, so a thorough review is a first step in managing potential debt. Request an itemized bill from the healthcare provider.

An itemized bill provides a detailed breakdown of all services, procedures, medications, and supplies. Examine this document for duplicate charges, incorrect dates of service, or services you did not receive. Checking the Current Procedural Terminology (CPT) codes can help ensure the services billed accurately reflect the care provided.

Compare the medical bill with the Explanation of Benefits (EOB) received from your health insurance company. The EOB outlines what your insurance covered, the amount paid to the provider, and your remaining financial responsibility, including deductibles, co-pays, and co-insurance. Discrepancies between the EOB and the medical bill, such as payments not applied or charges for services your insurer denied, indicate potential billing errors.

Common billing errors include:
Incorrect patient information
Wrong procedure codes
Unbundled charges where services that should be grouped are billed separately
Charges for services not rendered

If you identify errors or have questions, contact the provider’s billing department and your insurance company for clarification or correction. Resolving these issues early can prevent the escalation of an incorrect debt.

Provider and Collection Agency Communications

When a medical bill remains unpaid, healthcare providers initiate communications to secure payment. They begin with reminder statements and collection letters from their internal billing department. These may include notifications of late fees or interest charges.

If internal collection efforts are unsuccessful, the healthcare provider may transfer or sell the debt to a third-party collection agency. This transfer typically occurs 90 to 180 days past the original due date. Once the debt is with a collection agency, expect direct communication through phone calls and letters.

Consumers have rights when dealing with debt collectors, governed by the Fair Debt Collection Practices Act (FDCPA), which protects individuals from abusive, unfair, or deceptive practices. Under the FDCPA, you have the right to request validation of the debt within 30 days of receiving the initial communication from a collection agency.

A debt validation request requires the agency to provide written proof of the debt, including the amount owed and the name of the original creditor. If the collection agency fails to provide this validation, they must cease collection activities. You can also send a written “cease and desist” letter to stop further communication, though this does not eliminate the debt.

Ignoring an unpaid medical bill can affect future healthcare access. While emergency care cannot be denied, some healthcare providers may refuse non-emergency services, such as elective procedures or routine appointments, if there is an outstanding balance with them. This policy varies by provider and healthcare system.

Impact on Your Credit and Financial Standing

Unpaid medical bills can affect an individual’s credit score and financial well-being. Recent changes have altered how medical debt is handled on credit reports. The three major credit bureaus no longer include paid medical collection debt on consumer credit reports.

Medical collection debt under $500 is no longer included on credit reports. For medical debts exceeding $500 that remain unpaid and in collections, they can still appear on credit reports after a one-year waiting period, allowing time for insurance processing or payment resolution.

Unpaid medical collection debt on a credit report can lower credit scores. A lower credit score can make it challenging to secure loans like mortgages, auto loans, or personal loans at favorable interest rates. Lenders may view lower scores as increased risk, leading to higher borrowing costs or loan denials.

A reduced credit score can affect other aspects of financial life. Landlords review credit reports for rental applications, and a poor credit history might lead to denial or a larger security deposit. Some employers may also check credit reports as part of background checks, potentially influencing employment decisions. A lower credit score might result in higher premiums for auto or home insurance, as some insurers use credit-based scores.

Potential Court Proceedings

If medical debt remains unpaid after collection efforts, creditors or collection agencies may resort to legal action to recover the outstanding amount. This involves filing a lawsuit in civil court to obtain a judgment against the debtor. A judgment is a formal court order establishing the debt and its amount owed. The statute of limitations for filing a lawsuit varies by jurisdiction, often three to six years.

A consequence of a court judgment is wage garnishment. This process allows a portion of the debtor’s earnings to be withheld by their employer and remitted to the creditor. Federal law, the Consumer Credit Protection Act (CCPA), sets limits on the amount that can be garnished from disposable earnings.

Under the CCPA, the maximum garnishment is the lesser of 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage. Disposable earnings are the amount remaining after legally required deductions like federal, state, and local taxes, Social Security, and unemployment insurance. Many states have their own wage garnishment laws, which can offer greater protection than federal law, and the more favorable state law applies.

A judgment can also lead to a bank levy, allowing a creditor to freeze and seize funds in the debtor’s bank account up to the judgment amount. Banks must comply with court-ordered levies. A judgment can also result in a property lien on the debtor’s real estate or other assets.

A lien is a legal claim against an asset, preventing the owner from selling or transferring the property until the debt is satisfied. While a lien does not immediately force an asset’s sale, it can complicate selling or refinancing the property, as the lien must be cleared from sale proceeds. This ensures the creditor recovers the owed amount when the asset is liquidated.