Negotiating medical bills in collections


Medical bills are among the costliest forms of debt. Americans hold a staggering $140 billion in outstanding medical debt, according to data from the Institute for Economic Policy Research at Stanford University. In fact, a 2014 study by the Consumer Financial Protection Bureau found that 52% of collections activity was related to medical debt.

The average amount of such debt was $2,424 in 2020. As medical bills grow, they can quickly become unmanageable. 

“It can be tempting to not open the mail and let medical bills pile up,” says Katy Cook, who teaches financial planning courses at Southern New Hampshire University in Manchester. “They can be overwhelming and confusing.”

However, if you stop making payments, there’s a good chance your bills may end up in the hands of a debt collector.  

Finding yourself saddled with a large amount of debt that you can’t pay is scary. But it often makes sense to face your fears and see if you can negotiate the debt down to something more reasonable. 

What Should A Person Do When A Medical Bill Is About To Go Into Collections?

Across the nation, 17.8% of people with a credit report had medical debt in collections as of 2020, according to Stanford research. Another 13% of such folks had accrued medical debt in the prior year that was not yet in collections.  

Your debt is most likely to go into collections if you fall deeply and consistently behind in your payments. Once that happens, you likely will receive many phone calls from the collector as he or she tries to get you to pay. 

To try to avoid this fate, take a proactive approach. “There may be more options if you act before a bill goes to collections,” Cook says.

For example, if you know a large bill is looming, try talking to the hospital or provider right away. 

“Tell them that you want to work this out and ask to pause the account, so it does not go to collections,” Cook says. 

One strategy Cook recommends is asking a hospital or provider to reduce the amount you owe to the negotiated insurance rate or Medicare rate. 

“Many hospitals offer ‘charity care’ and will reduce bills for people meeting certain criteria, typically low-income,” Cook says. “You can call your hospital’s billing department and ask about financial assistance or charity care. Hospitals may also be open to setting up a payment plan with you.” 

What To Do If You Are Unable To Reach An Agreement With Collectors

If you’re unable to reach an agreement with the hospital or provider, your unpaid medical debt may end up with a collection agency. An account that goes into collections can deeply damage your credit score. 

In fact, Equifax says having an account in collections is among the most damaging events when it comes to your credit score. In addition, the toll on your score can remain for a long time. So, it makes sense to do everything you can to negotiate, before you get to that point — or as soon as possible after.

What Is The Best Way To Negotiate Medical Bills In Collections?

The ongoing harassment from a debt collector and the damage to your credit score may motivate you to try to end the situation as soon as possible by negotiating your bill lower. 

However, before you pay a medical bill that is in collections, make sure you definitely owe the money being sought from you. 

“Ask for documentation of the debt and review names, dates, locations, and procedures to make sure the bill is for you or your family,” Cook says. 

Also, check your health insurance explanation of benefits and any bills you received from the hospital or provider. 

If you’re sure that you don’t owe the medical bill, call the hospital and your insurance company to explain the situation. 

If you find that you do owe the money, you typically have three options, Cook says:

  • Pay in full
  • Ignore the bill
  • Negotiate a reduced amount to pay 

Of course, paying the bill makes the most sense, if you can find a way to do so. 

“If you can afford to pay a small medical bill in collections, it may make sense to not bother with negotiating,” says Cook, who also is a principal at Abacus Financial Planning in Kirkland, Washington. “Just pay the bill and move on.”

She notes that paying your bill promptly can help protect your credit score. Most health care providers don’t report the medical debt to credit-reporting agencies.  

What Happens When Your Account is Handed Over to A Collection Agency?

The situation changes when the provider gives your account to a collection agency. In such situations, the agency can report your lack of payment to the credit bureaus after 180 days. So, you want to pay before that.

“Medical debt may be removed from your credit report when paid, and it may not be factored into your credit score,” Cook says. “If you are thinking of applying for credit, such as for a home or car, you want to keep your credit report in good shape.” 

On the other hand, simply avoiding your bills in the hope they’ll disappear is usually a mistake. 

“Ignoring the bill may lead to a lawsuit, bankruptcy, and even more stress down the line,” Cook says. “So, I do not recommend it.”

If you can’t pay your debt in full, negotiating a reduced monthly payment amount might be your top option. In many cases, the debt collector will be motivated to work with you. 

“The collections agency will make a profit even if you settle the bill for less than the original amount,” Cook says. 

When Negotiating Medical Bills Isn’t An Option

However, there can be situations where negotiating your debt isn’t an option. For starters, not every collector will agree to such a settlement. Instead, the collector may continue to push for payment in full. 

But if the collector is tired of the time, money, and effort needed to pursue the matter, a negotiated settlement may become a possibility. 

If you and the collector reach a negotiated amount, make sure both sides agree to the terms in writing. It’s important that such agreements state that the debt will be paid at a lower rate than what is owed, but still reported as “paid in full” or “paid as agreed.” debt settlement company

Agreeing to pay less than the full amount will hurt your credit score. But, over time, the damage will fade.

Getting Additional Help 

If you’re uncomfortable negotiating your debt, explore other options. A debt settlement company might help you create a plan to pay off your debt. 

You might also consult with a nonprofit credit counselor who can help you craft a negotiating strategy, according to Cook. She recommends finding a counselor by searching for one at the National Foundation for Credit Counseling website. 

If all else fails, bankruptcy may be an option for resolving your debt. “Bankruptcy is an option of last resort,” Cook says. She adds that a credit counselor can offer crucial assistance in this process.

At National Debt Relief, we take pride in empowering people to regain their financial stability through our proven debt relief program. Contact us and talk to a financial expert who will work with you to find the best option to settle your debt and help you achieve financial independence



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