How to Deal with Medical Debt Effectively

Cropped shot of young female doctor explain symptoms to her patient with digital tablet

With the current pandemic situation, tens of millions of Americans are adding significant medical debts. Medical costs continue to rise more rapidly than the economic growth we recently experienced. The percentage of medical expense covered by insurance companies are rising all the time. 

If you experience a chronic condition or medical emergency, you likely will add big amounts of medical debt and have no way to pay them off except over long periods of time, if ever.


How Unpaid Medical Bills Can Affect Your Credit Score

If you miss a payment, you get hit with lower credit scores. Then your interest expense on loans and credit cards is higher, and you feel like you are in a whirlpool of debt you can never escape. 

Most doctors and hospitals never report debts to credit agencies. But the medical offices send their unpaid bills to bill collectors (collection agencies), and most of these agencies report these debts to the 3 major credit score bureaus.

Debt collections that are reported to the bureaus stay on your report just like other debt issues, seven-years. Of course, over time, their impact on your scores decreases.

Will Medical Collection Debts Hurt My Credit Scores?

Yes, they can negatively impact your credit scores by as much as 50 to 100 points. Medical collections do carry less weight under the most recent FICO score system. There are other systems that score these types of bills, and they weigh their impact on your credit differently. Generally, they all consider medical collections of less importance to your scores, but it does not eliminate the overall impact on your scores.

These newer systems are not used by all creditors, so unpaid or missed medical debt payments may hurt your credit score. 

There are some things you can do that may reduce the impact of your outstanding medical bills on your credit.

  • Review All Your Medical Bills

Medical billings have become increasingly complex, and most people cannot decipher many of these bills. Contact your insurance company to help you determine what is covered or not and what your portion of the cost really is. Do not pay a bill as soon as you see it. Today it is rare that your insurance will cover 100% of your medical costs.

One thing you should do is pay a small portion of the bill not covered by insurance, often the co-pay. This will help keep the medical office or hospital from hounding you about payment. Review your Explanation of Benefits* from your insurance provider and call them if you do not understand it. Mistakes are made so don’t assume it is always correct. Once you are sure what you owe, you can establish a plan to pay it. For many people paying it over time is the only real choice, but making regular payments, no matter how small, will keep your accounts from going to a collections agency.

  • What is Your Explanation of Benefits*

These are statements from your health insurance provider that detail what has been paid on your behalf. It should also state the amount you owe and should pay. Although it is time-consuming, you may have to contact both your insurance company and medical provider(s) to determine exactly what you owe. 

  • Ask Your Medical Provider(s) for Itemized Bills

Most medical providers do not provide an itemized bill, but instead, give you a summary. The problem is that you cannot really tell what is paid for or not. So, if you have questions, you will not be able to discuss this with your insurance company and get answers. If the items look incorrect or too high, you should call your medical provider and/or your insurance company to make sure they are correct – before you pay!

  • Negotiate with Collectors

If you are unfortunate enough to have a medical bill or bills go to the collections, the agency will contact you demanding payment. Immediately ask the collection company if they have reported the bill to credit bureaus. Many will not have done so. If not, ask them how you can begin paying the bill if they will not report it. If they agree, get it in writing. Also, many collection agencies will “discount” what you owe if you pay in full. But, be sure they will not report you because you did not pay the full amount.

If the debt has been reported to the credit bureaus, then paying the bill will not remove it. You can request that the item be removed if you pay it, but not all collection companies will agree to do so. If they do agree, work with them to get an agreement of exactly what you will pay. Collection companies call this “pay for delete.” 

Most collectors will reduce your total due to get the payment. They get a percentage of what they collect, and they want to get it and move on as quickly as possible to the next collection. Again, whatever they agree to, make sure you get it in writing, and it is what you believe they said they will do.

If any bills seem unfair in any way, there are state and federal agencies you can report them to.

  • Check ALL Your Medical Bills for Accuracy

In today’s world, you should make it a standard procedure to contact your doctor’s office or hospital billing to ensure they sent the bills to your insurance company. Then, verify with the insurance company they have received those bills. Be specific when verifying these bills. Always ask your insurer if there are items that should be covered that are listed as not covered. It is surprising how many billing errors are made by medical offices for items that would be covered by your insurer. These are often simple coding mistakes; using the wrong medical code can make a procedure not covered.

  • Work on a Payment Plan

When you know the medical expenses are going to be too much to, for example, a major hospitalization or surgery with a significant co-pay or limited coverage, you should contact the hospital and doctor offices. Try to setup a payment plan as most hospitals and doctors will accept one. They would rather get some money every month than have the account go to collections.

Hospitals and medical offices are in no way obligated to accept your payment plan offers. They may not agree if you offer meager payments. For example, you owe $25,000 for a major hospitalization and offer to pay $30 a month. They will probably consider this to be too low and feel better sending you to collections. Ask the provider what they would accept, but don’t assume that is the amount you have to pay. You can negotiate with many offices. One thing to know, it is not against the law to send you to collections even when you are making payments.

If you are able to get a verbal agreement for a monthly payment, then request it to be in writing. If you have an agreement in writing, you can dispute any collections or credit reporting of the same.


If you remain removed from the process of reviewing your medical bills, you are assuming they are always correct and billed in your favor. This is a risky plan.

The accuracy (or lack of) for medical billing combined with the complexity of insurance coverages is the perfect setting for many mistakes… and you could be paying for them.

Today, we all have to become involved in our medical treatments and what we will pay for them. 

It is an unfortunate demand on our time, but it is worth it given the results it will bring!


Author: Robin Williams


Company: CashOne