70% Of Medical Collection Debt Will Soon Be Removed From Credit Reports: Here’s What You Need To Know
Almost all medical debt will be erased from consumer credit reports – Forbes Advisor

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Many U.S. consumers will soon see their medical debt erased from their credit reports, the three credit bureaus announcement last month.

Medical debt is ubiquitous in the United States. According to a report from the American Journal of Public Health.

But the way medical debt is reported on consumer credit reports is changing. And these changes may make it easier for people who have had to deal with the burden of unexpected medical bills to rebuild their credit. Collections on your credit reports can significantly lower your credit score, making it harder to get new credit (think auto loans, personal loans, and credit cards) with reasonable interest rates .

Here’s how medical debt reporting is changing and how you can manage medical bills to avoid lasting financial damage.

How medical debt credit reports are changing

Effective July 1, 2022, medical debt that has been paid will no longer be included in Equifax, Experian, and TransUnion credit reports, even if it has been on your report for several years.

In addition, the three credit bureaus are increasing the time before medical debt in collection appears on your credit reports. This cushion is now six months old but will be extended to one year.

If you are in the process of negotiating or paying medical debt, this may give you more time to work with providers or collectors to find a mutually acceptable payment solution.

Finally, starting in the first half of 2023, the three consumer credit reporting agencies will no longer include medical debt in collections under $500 on credit reports.

Read more: How to get your free credit report every week

Medical debt is an important component of consumer debt

You may think consumer debt is the result of overspending on credit cards or living beyond your means. But nearly one in 10 adults, or about 23 million Americans, owe at least $250 in medical debt, according to a Kaiser Family Foundation Report released in March.

“Medical collection debt often arises from unforeseen medical circumstances,” the credit bureaus said in a joint statement announcing the report updates. “These changes are another step we are taking together to help people across the United States focus on their financial and personal well-being.”

Changes are long overdue, says Jasmine “Jazzy Mac” McCall, a credit expert who shares strategies for dealing with medical debt on her YouTube channel.

McCall says medical debt is an unexpected financial burden and “does not accurately reflect a person’s willingness or ability to repay a debt.”

About one-fifth of U.S. households could not afford medical care in 2017, according to the most recent data from the Census Bureau.

Although most people with medical debt owe less than $500 per medical bill, these amounts add up. According to the Consumer Financial Protection Bureau, consumer credit reports reflect $88 billion in medical debt from June 2021.

Why medical debt is so difficult for consumers to manage

McCall says it’s often difficult for consumers to know what expenses they have to pay and what will eventually be paid for by insurance, if they have coverage.

By the time you realize that yes, you will be responsible for a particular medical bill, it may already be overdue and in collection.

An account that went to collections but has since been paid remains on your credit reports for about seven years after being sent to collections. “We’re punishing consumers for something that happened unexpectedly seven and a half years ago, which they paid for,” McCall says. “They are still being punished for it.”

Read more: How to remove collections from your credit file

Errors in medical billing make matters worse, McCall says. Medical bills frequently have coding errors, which can lead to much greater patient financial liability than expected.

McCall shared an example of this: When she was in the hospital giving birth, she was given aspirin. But the bill she later received said that instead of being charged for one aspirin (about $4 per pill), she was being charged for the entire bottle (about $500).

The credit reporting system “forces patients and their families to pay bills that they doubt are correct,” said Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB). A declaration on March 1. The announcement from the three credit bureaus came shortly after the CFPB announced it would review credit bureau practices regarding medical debt and investigate potential improvements to the medical billing and collections system.

How to process medical bills before they are sent to collections

McCall offers four tips for managing medical bills.

1. Request an itemized invoice

If you weren’t expecting a bill for medical services or if your bill total is higher than expected, ask the billing department for more information.

Although you can pay a medical bill, McCall advises asking for an itemized statement showing all billing codes for care you received.

If something doesn’t match your experience or the explanation of benefits you received from your insurance company, ask the billing department how you can dispute the charges.

2. Ask for cash back

Once you’re sure your bill is correct, ask the hospital if there’s a discount for paying cash, or if there’s a payment plan available, McCall says.

If you don’t have enough money in your emergency fund to pay your medical bill, a payment plan through your healthcare provider may be a better option than using a credit card. or a personal loan to cover the costs.

Your healthcare provider may offer an interest-free or low-interest payment plan to spread your payments over time without the added cost of high interest rates.

3. Apply for financial assistance

Many hospitals employ advocates who help patients in financial difficulty, McCall says. Ask the medical provider’s billing department if there is a financial assistance program for people who have difficulty paying their medical bills.

Some hospitals will completely cancel your debt or significantly reduce the amount you owe.

McCall says billing departments are used to hearing patients say, “I don’t have the funds to pay for this” or “I don’t think I was billed correctly.” Don’t be ashamed to ask for help.

4. Check invoices that have already been retrieved

If you have a medical debt that has already been collected, check that the debt collector has not added any additional charges to the total owed. To find the fee schedule from your original medical bill, you may need to look at the documents you signed at the hospital or health care facility.

McCall explains that medical debt is often sold among debt collectors, and it can be done multiple times over the life of the debt. Some debt collectors will try to add new charges to your bill, she says, “in an effort to scare you into paying off the debt quickly or paying off more debt.”

Adding fees beyond those stated in the original contract is a violation of federal law.

If you discover that a debt collector has added an illegal charge, report it to the Federal Trade Commission, CFPB, and your state attorney general. If you find the additional charge within one year of the collector’s violation of the law, you also have the option of suing the debt collector to have the charge removed, but you will still be liable for the original debt in collections.

Aaron Hurd also contributed to this article.


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