What Happens When You Get Sent to Collections for a Medical Bill?

When a medical bill goes to collections, it means a healthcare expense has remained unpaid for an extended period, leading the original provider to transfer the debt to a third-party collection agency. This often arises from misunderstandings about insurance, billing disputes, or financial hardship. The transfer indicates the provider has exhausted internal attempts to recover payment, shifting the debt from the healthcare entity to a debt collector.

Understanding Medical Debt in Collections

Medical debt presents unique challenges compared to other financial obligations. Unlike predictable monthly bills, healthcare expenses are often unanticipated, arising from sudden illnesses, accidents, or complex treatments. The billing process can be convoluted, involving multiple providers, insurance companies, and varying benefit explanations, making it difficult to ascertain true financial responsibility.

A medical bill typically goes to collections after a healthcare provider’s internal billing department has attempted to collect payment for 90 to 180 days. If these efforts are unsuccessful, the provider may sell the debt to a third-party collection agency or hire them to collect. The collection agency then becomes the primary entity pursuing payment.

It is important to distinguish between the original healthcare provider, the original creditor, and the collection agency now responsible for collecting the debt. The collection agency acquires the right to pursue payment, but the underlying debt still originates from the medical services rendered.

Evaluating the Collection Account

Before engaging with a collection agency, evaluate the specifics of the claimed debt. Gather all relevant information about the medical bill and compare it against personal records. Confirm details such as the original healthcare provider’s name, the amount owed, and the dates of service.

Request an itemized bill directly from the original healthcare provider. This document provides a detailed breakdown of services, procedures, and charges. Also, confirm if the bill was properly submitted to your health insurance carrier and verify the insurance company’s processing and Explanation of Benefits (EOB).

The Fair Debt Collection Practices Act (FDCPA) grants consumers the right to request debt validation from a collection agency. Within 30 days of initial communication, send a written request for validation. This request should ask for evidence that the debt is legitimate and that the agency has the legal right to collect it, including documentation like the original contract, payment history, and the original creditor’s name.

Maintain thorough documentation throughout this process. Save every communication, copies of all bills, insurance EOBs, and notes from phone calls, including dates and names. This record-keeping provides a clear timeline and evidence for any disputes regarding the debt’s validity or handling.

Responding to the Collection Agency

After evaluating the collection account and gathering documentation, communicate with the collection agency. All interactions should be in writing, preferably via certified mail with a return receipt requested. This creates a verifiable paper trail, offering proof of what was sent and when it was received, which is invaluable for future disputes.

If the evaluation reveals discrepancies or if the collection agency fails to provide adequate validation, formally dispute the debt. A dispute letter should clearly state the debt is contested and outline specific reasons, referencing any lack of validation or inaccuracies. Send this letter within the 30-day validation period to preserve consumer rights under the FDCPA.

For validated debts, several resolution pathways exist. One common approach is negotiating a settlement, where you offer to pay a portion of the total debt as a full and final payment. Collection agencies, having acquired the debt at a reduced rate, may accept a settlement ranging from 30% to 70% of the original amount, especially if offered as a lump sum. Confirm this negotiation in writing before any payment, explicitly stating the agreed-upon amount will satisfy the debt in full.

If a lump sum settlement is not feasible, negotiate a manageable payment plan. This involves agreeing to pay the full debt or a negotiated amount over scheduled installments. Before committing, ensure the terms are clearly documented in a written agreement from the collection agency, detailing the total amount, payment schedule, and confirmation that no further collection activity will occur as long as payments are made on time.

When paying a validated medical debt, consider requesting a “pay-for-delete” agreement. This is an arrangement where the collection agency agrees to remove the collection entry from credit reports in exchange for payment. While not always granted, obtaining such an agreement in writing before making payment can benefit your credit score. If a pay-for-delete is not possible, ensure the written agreement confirms the debt will be reported as “paid in full” or “settled” once payment is received.

Addressing Credit Reporting

Medical debt in collections can significantly affect your credit report and score. Collection accounts appear as negative entries, remaining on reports for up to seven years from the original delinquency date, even if paid.

Recent changes in credit reporting practices affect medical debt. As of July 1, 2022, medical collection debt under $500 no longer appears on credit reports. Paid medical collection debt is removed from credit reports as of March 30, 2023. There is also a 180-day waiting period before unpaid medical debt can be reported, allowing time for insurance processing and payment.

After resolving a medical collection account, monitor your credit reports to ensure accurate reporting. You are entitled to a free copy of your credit report annually from each of the three major credit bureaus via AnnualCreditReport.com. Review these reports for any lingering inaccuracies related to the medical debt.

If an inaccurate or unresolved medical collection appears, or if a paid medical debt has not been removed, dispute the information directly with the credit bureaus. Submit the dispute in writing, providing supporting documentation of payment or resolution. The credit bureau typically has 30 days to investigate and correct inaccurate information.