How to Handle a Medical Debt You Don't Owe

Recently released data from the National Health Interview Survey (NHIS) found that one in five Americans was in a family having problems paying medical bills. And, one in 10 Americans was in a family with medical bills that they were unable to pay at all. Not surprisingly, families with an uninsured member increased the odds that the entire family would experience a financial burden due to the cost of medical care.

Each year, millions of Americans have medical bills sent to collection agencies. A Commonwealth Fund study estimated 41 million working-age Americans had been contacted by a collection agency about medical bills in 2012. The majority of them (32 million) said that the collection agency contacted them about bills they could not pay. A smaller but significant number (an estimated 7 million adults) reported that a billing error resulted in the call from a collection agency.

Disputing a Medical Bill

If you are called by a collection agency for a medical bill that you either question whether you owe or believe it was sent to collection in error, act immediately. Contact the health care provider and the collection agency directly. Consumers have rights under the federal Fair Debt Collection Practices Act and these rights are best exercised within 30 days of initial communication from a collection agency.

What constitutes initial communication? This may be in the form of a letter, a telephone call, or a summons to appear in court; it is the agency’s prerogative.

If you do not believe that you owe the money, send a letter to the collection agency — using certified mail with a return receipted requested — asking for a verification of the debt. Include copies of any documentation that supports your claim (i.e., explanation of benefits form from an insurance company showing the claim was paid, a letter from a health care provider stating that the bill has been fully paid or settled). The letter should ask for the name of the original creditor and the amount of the debt. If this is done within the 30-day window, the collection agency must respond by either mailing the consumer the requested information or stop its collection efforts completely.

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If the collection agency determines that the bill was sent to you in error, they are required to notify the credit reporting agencies of this mistake, if it has been reported, and the error corrected. However, it may still be worthwhile to communicate directly with the credit reporting agencies informing them of the error and requesting that the inaccurate information be deleted from your report.

If the Debt Collector Insists You Owe

If the agency claims that you owe on the bill and you still believe that this is inaccurate, contact the health care provider again to see whether the provider can help to resolve the issue. Most providers are quite willing to work with patients on billing issues, but can only do so if they hear from the patient directly. Typically they will take steps to ensure that bills are accurate and will screen for available public or private coverage (generally, before bills go to collection, but mistakes do occur). Some providers also offer financial assistance or charity care — hospitals in particular — but other providers also offer it. Be sure to ask whether you might qualify for financial assistance.

In particular, nonprofit hospitals must follow new federal requirements in order to maintain their federal tax exemption. The IRS has issued rules on the new requirement for billing and collection policies of non-profit hospitals. The rules proposed by the IRS restrict nonprofit hospitals from using “extraordinary collection actions” until reasonable efforts have been made to assess whether the patient qualifies for financial assistance. Reporting medical debt to the credit bureaus is among the listed extraordinary collection actions.

Many health care providers have adopted the Healthcare Financial Management Association’s Best Practices Guidelines for medical account resolution or the organization’s Patient Friendly Billing Principles.

The guidelines and principles are intended to help clarify patient payments and resolve medical bills. Mention these resources when speaking with health care providers.

However, if after pursuing these avenues you are still unsatisfied with the resolution of your bill and it appears on your credit report, write a consumer statement. This is a letter that will be included in your credit file. This statement is limited to 100 words and should explain why you feel it is inappropriate for these bills to be included on your credit report. Letters should be sent directly to each of the three credit bureaus: Experian, TransUnion, Equifax. It may be a good idea to send a copy to your state’s Office of Attorney General and the federal Consumer Financial Protection Bureau. Both have an interest in consumer protections and accuracy when it comes to credit reports. And who knows, getting their attention may inject new life into the dispute resolution process and could help you reach a satisfactory outcome.

Finally, it is important to keep track of what is on your credit report, to ensure that everything is reported correctly (and to move to resolve any errors as soon as possible). You can get your free credit reports once a year from each of the major credit reporting agencies.

[Editor’s note: By monitoring your credit scores, you can monitor for signs of an unpaid medical debt — if it’s been reported to the credit bureaus. If your credit scores drop unexpectedly, that’s a sure sign to check your credit reports. There are paid as well as free services that allow you to monitor your credit scores. Credit.com’s Credit Report Card is a free tool that updates two of your credit scores as well as an overview of your credit reports every month.]