Personal Finance Coach: Addressing medical collections on your credit report
“A Uniquely American Injustice,” our new ongoing series, explores how to navigate medical debt and health expenses.
This is the first post in our new ongoing Personal Finance Coach series, “A Uniquely American Injustice,” on navigating medical debt and health expenses.
By Dametria Douglas
Yesterday, the Consumer Financial Protection Bureau announced complaints about medical debt collectors pursuing paid or not owed debt jumped 31% from 2018 to 2021. The news followed The White House’s rollout last week of new reforms to “protect consumers and lessen the burden of medical debt on American families.”
Medical debt, what nonprofit RIP Medical Debt calls a “uniquely American injustice,” is having a moment thanks to the avid advocacy of mission-aligned partners who recognize the scope of the problem: One-in-three adults in the United States now struggle with medical debt, which is the largest source of debt in collections; more than credit cards, utilities, and auto loans combined.
If you or someone you know are dealing with medical collections, you are not alone. Here are the steps you can take to resolve and prevent medical collections on your credit report.
Dealing with medical debt in collections can be overwhelming, but if you take things step by step, you can systematically resolve these collections and stop future medical bills from reaching collection status.
The first step is to gather all the documentation you have for the debt. A paper trail is necessary to compare services received with services billed. In the case of a medical bill that has gone to collections, you may not have kept all of the bills from the doctors, insurance coverage letters, and letters from the collection agency, but don’t worry — there are ways to recover those documents.
Here’s an overview of the documents you’ll want to have on hand:
If you received a bill from a collections agency, you will want to send them a debt validation letter as soon as possible. By sending a letter via certified mail, the debt collector is obligated by the Fair Debt Collection Practices Act (FDCPA) to prove they legally own the debt. This is vital if the debt was sold to a collection agency that is not a part of the provider’s business. Some doctors/hospitals have their own collection departments, while others sell the debt to debt buyers that will then try to collect the past due amounts from you. The debt collection agency is obligated to provide you with the following information:
- Proof of your agreement to pay the original creditor
- A copy of the final account statement issued by the original creditor
- A breakdown of the total amount due, showing principal, interest and other charges; and for all other charges, the date of and basis for each charge
- Agreement with the original creditor that grants them the authority to collect the debt
- Verification that the debt was assigned or sold to a collector
- Complete accounting of the alleged debt
- Commission for debt collector if collection efforts are successful
As a requirement of the FDCPA, the collection agency has 30–45 days from the receipt of the request to provide this information to you, so look out for any mail from them.
Once you’ve collected the documentation listed in Steps 1 and 2, review the paperwork to make sure everything looks correct. Analysis of the itemized bill can reveal cost savings for you due to incorrect coding: in fact, upwards of 80% of medical bills contain errors due to the complex billing system we have in the American Healthcare System.
Your itemized bill should include five-digit billing codes for each cost, which you can use to look up a description of the service you were charged for and compare it to the service you actually received. Use websites like findacode.com to determine if adjustments are needed.
If you discover a billing code error, reach out to the original provider and ask for an adjustment. In a lot of cases, correcting the coding will cover the unpaid balance and resolve your financial obligation to the debt.
If there is still money owed after the medical bill has been analyzed and adjusted, ask the doctor/hospital about financial assistance and debt forgiveness programs. Nonprofit hospitals (more than half of the hospitals in the U.S. are nonprofit) are required to give patients a grace period of 240 days (about eight months) from the initial billing date to apply for financial assistance, though hospitals are allowed to send bills to collection agencies much earlier. Even if a collection is showing on your credit report, there may still be time remaining to apply for forgiveness. Eligibility is typically based on income, family size, and other factors. Ask about debt forgiveness even if you think your income is too high to qualify.
Ask the provider if you can settle the debt directly with them instead of the collection agency. If the debt is settled directly, the medical provider may be able to remove the account from collections so it will no longer be reported to the credit bureaus and appear on your credit report.
If you are not able to settle with the medical provider, you can save for a settlement with the collection agency.
Reach out for help
Fighting medical collections can seem like an impossible task. Connect with a TrustPlus Personal Financial Coach to work alongside you to tackle these steps. Providing assistance with letter writing, phone call preparations, and expert out-of-the-box thinking, we will help you get closer to your debt resolution goals more effectively, and help you navigate your finances to avoid future medical collections.
