What Happens When You Don’t Pay a Medical Bill?
Explore the unfolding trajectory of an unpaid medical bill, understanding the various stages and their potential impact on your financial standing.
Medical bills detail charges for healthcare services, including diagnoses, procedures, medications, and supplies. Understanding the progression and consequences of unpaid bills is important for individuals navigating the healthcare system.
Provider Billing and Internal Processes
When a healthcare service is provided, the facility or practitioner generates a bill, often referred to as a claim, which is initially submitted to the patient’s insurance company. After the insurer processes the claim and determines its portion of payment, any remaining balance becomes the patient’s responsibility. This balance is then presented to the patient through an initial invoice or statement.
Healthcare providers initiate a billing cycle for unpaid balances, starting with an initial statement. If payment is not received, follow-up statements are issued as reminders.
Many providers have internal departments for accounts receivable management. They send reminder letters and make phone calls to secure payment or establish payment plans before escalating the debt to external collection entities.
Providers typically escalate unpaid bills after 90 to 180 days. During this time, the original provider attempts to resolve the balance directly with the patient before external agencies become involved.
Debt Collection Practices
If a medical bill remains unpaid after internal collection attempts, the debt may be transferred to a third-party debt collection agency. The agency then becomes the primary entity pursuing payment.
Collection agencies employ various methods to recover the outstanding amounts, including frequent communication via mail and telephone calls. These communications aim to inform the debtor of the outstanding balance and demand payment.
A waiting period, commonly 180 days, often precedes medical debt appearing on credit reports, allowing time for payment or dispute resolution. Larger unpaid medical debts can still negatively affect creditworthiness, potentially hindering access to loans or other financial services.
Legal Actions and Their Consequences
If a medical debt remains unpaid, a debt collection agency or the original healthcare provider may initiate legal action. A lawsuit in civil court seeks a judgment against the debtor, beginning with a summons notifying the individual and requiring a response.
Failure to respond to a summons can lead to a default judgment. Even with a response, a judgment can be issued if the court finds the debt valid. A judgment legally confirms the debt, empowering the creditor to pursue enforcement.
Wage garnishment is a common consequence of a judgment, where a portion of the debtor’s earnings is withheld by their employer and sent to the creditor. Federal law limits garnishment to 25% of disposable earnings or the amount by which disposable earnings exceed 30 times the federal minimum wage, whichever is less.
A bank levy allows creditors to seize funds from bank accounts. Property liens can also be placed on real estate, preventing its sale or refinancing until the debt is settled. These actions can significantly impact financial stability and assets.
Consumer Rights Regarding Medical Debt
Consumers have specific rights and protections concerning medical debt under the Fair Debt Collection Practices Act (FDCPA). This federal law regulates third-party debt collectors, prohibiting abusive, deceptive, and unfair practices.
The FDCPA establishes communication rules, restricting when and where collectors can contact individuals and requiring them to cease communication if requested in writing. Consumers also have the right to request debt verification, requiring written proof of the debt’s validity and amount.
Recent changes have also impacted how medical debt is handled in credit reporting. As of July 1, 2022, paid medical collection debt is no longer included on consumer credit reports. Additionally, as of early 2023, medical collection debt under $500 is generally not reported by the major credit bureaus. These adjustments aim to reduce the negative impact of medical debt on credit scores, particularly for smaller, resolved, or recent obligations.
Consumers should understand billing statements and verify debt accuracy. Review any medical bill or collection notice to ensure services were received and amounts are correct. Address discrepancies or errors promptly with the provider or collection agency to prevent complications.