What Happens If You Don’t Pay Medical Bills?

Unpaid medical bills can be a significant source of stress. This article explores what occurs when medical bills remain unpaid and outlines options for addressing such situations.

Understanding Medical Billing and Debt

A medical bill itemizes the services received, listing provider charges, procedure codes, and dates of service. It represents the amount a healthcare provider believes is owed for care provided. Understanding these statements is the first step in managing medical debt effectively.

The Explanation of Benefits (EOB) from an insurance company details how your insurer processed your claim. It outlines the total charges, the amount the insurer paid, any discounts applied, and the portion you are responsible for. An EOB is not a bill, but a summary of how your insurance benefits were applied.

Comparing your medical bill against your EOB is a crucial step to verify accuracy. You can identify potential billing errors such as duplicate charges for the same service, incorrect procedure codes, or charges for services not rendered. Services already covered by insurance may also appear as an outstanding balance if the EOB was not properly reviewed.

Proactive communication with healthcare providers and insurance companies can clarify discrepancies or charges before they become delinquent. Addressing these issues early can prevent a bill from escalating into debt.

Immediate Repercussions of Non-Payment

When a medical bill remains unpaid, the healthcare provider initiates a series of communications. These may include reminder letters, follow-up phone calls, and eventually, final notices of delinquency. This internal collection process allows the provider to attempt direct recovery of the outstanding balance.

If direct collection efforts are unsuccessful, the medical bill often gets sent to a collection agency. This agency then takes over collecting the debt, communicating through letters and phone calls.

Unpaid medical debt can impact an individual’s credit report, although the rules have evolved. Medical collection debt under $500 generally does not appear on credit reports, and paid medical collection debt is removed.

For medical debt exceeding $500, a waiting period of at least 180 days occurs before it can be reported to credit bureaus. This grace period allows individuals time to resolve the debt with their provider or insurer before it negatively affects their credit score. Unpaid medical collections on a credit report can lower credit scores.

Legal Actions for Unpaid Medical Debt

If a medical debt remains unpaid after significant collection efforts, a healthcare provider or collection agency may pursue legal action. This process begins with the individual receiving a summons, which is a formal court document notifying them of a lawsuit. Responding to the summons within the specified timeframe is important to avoid a default judgment.

Should the court rule in favor of the creditor, a court judgment is issued. This judgment grants the creditor more tools for debt recovery. A judgment remains on public record and can impact financial standing.

One common post-judgment enforcement mechanism is wage garnishment. This allows a portion of an individual’s earnings to be directly withheld by their employer and sent to the creditor. Federal law limits wage garnishment to 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage, whichever is less.

Bank levies are another enforcement tool, where funds can be frozen and seized from an individual’s bank accounts to satisfy the judgment. A property lien may also be placed on real estate, such as a home, as a claim against the property. This lien can complicate or prevent the sale or refinancing of the property until the debt is settled.

Strategies for Addressing Unpaid Medical Bills

Individuals facing unpaid medical bills have several strategies for resolution. Negotiating directly with healthcare providers can often lead to favorable outcomes. Many providers are willing to offer a discount for a lump-sum payment or to establish an affordable payment plan over time.

Healthcare providers, particularly non-profit hospitals, often have financial assistance programs, also known as charity care, for eligible patients. These programs can reduce or eliminate a patient’s financial responsibility based on income and family size. Inquiring about these programs is an important first step.

When a debt has been sent to a collection agency, negotiation is still possible. It may be feasible to negotiate a lower settlement amount, often paying a percentage of the original debt rather than the full sum. Establishing a structured payment plan with the collection agency can also help manage the debt over a period.

If errors are suspected on a medical bill, disputing the charges is important. This involves formally challenging the accuracy of the bill, often by providing documentation such as the EOB to highlight discrepancies.

Bankruptcy can serve as a last resort for overwhelming medical debt, offering a legal pathway for financial relief. Chapter 7 bankruptcy can discharge eligible medical debts, meaning the individual is no longer legally obligated to pay them. Chapter 13 bankruptcy allows for the restructuring of debts into a manageable repayment plan over several years.