What is medical debt and how do you deal with it?

What is medical debt?

Medical debt in America is one of the biggest financial issues that is turning the lives of common people into a living hell. Medical bill debt is commonly called the debts which are incurred by people while getting health care and related services.

Medical debt is different from other types of debts because medical services are needed when people become ill or experience an accident or any other health-related emergencies. People do not plan to fall ill or hurt themselves, and they can’t also avoid health care remedies as they need to be cured asap.

People usually avoid talking about their medical debt, as they feel guilty about it. They think that failing to pay off medical debts is a serious matter of one’s life. That’s why they also feel shy to get help with medical debt from others.

Medical debt is a notable factor of the national debt number in the United States. As per a poll from the Pew Research center, medical debt in the US is a top public matter and concern as Americans are truly worried about their health care issues. Research also revealed that in 2020, about 137.1 million Americans experienced financial difficulties or debt due to medical bills.

Check out some important statistics about medical debt:

  • The average age of people who go through a medical bankruptcy is 44.9 years. (American Journal of Medicine, 2009)
  • Among people who experience medical bankruptcy, 46.3% are married. (American Journal of Medicine, 2009)
  • Among people who experienced medical bankruptcy, 60.3% attended college. (American Journal of Medicine, 2009)
  • The average monthly household income of medical bankruptcy filers is $2,586/month. (American Journal of Medicine, 2009)
  • Among families who experience medical bankruptcy, 20.1% are military families. (American Journal of Medicine, 2009)
  • The average debt for households that experience medical bankruptcy is $44,622. (American Journal of Medicine, 2009)
  • About 19.5% of consumer credit reports include one or more medical collections. (Consumer Financial Protection Bureau, 2014)
  • The average unpaid medical debt recorded on credit reports is $579. (Consumer Financial Protection Bureau, 2014)
  • 22% of consumers with debts in the collection have only medical debts. (Consumer Financial Protection Bureau, 2014)
  • 54% of consumers with medical debt have no other debts listed on their credit reports. (Consumer Financial Protection Bureau, 2014)

Data courtesy – singlecare.com

What type of debt is a medical bill?

An unpaid medical bill normally becomes a medical debt. It is another form of unsecured debt, like credit card bills, utility bills, phone bills, etc.

Debt due to medical bills is considered an unsecured debt as it does not have any collateral engaged with it.

It is difficult to avoid medical debt in the first place as it is connected to health-related issues. Health issues can’t be controlled by humans, so they have to opt for medical services if they need to. As a result, medical bills will occur normally. The cost of treating a sudden illness or unexpected operation may create issues to maintain the family budget.

There are few stages through which medical bills become medical debts.

a) Unpaid medical bills

If an individual can’t pay his/her medical bill, the health care provider will try to recover the money directly by contacting the debtor via emails or calls. If the debtor does not respond to the creditor, then the creditor may hire a bill collector.

Nonprofit hospitals and most federally-qualified health centers may need to take a few steps before determining a patient’s eligibility for financial assistance. So, most of the medical debt cases are seen in private hospitals and medical service providers.

b) Bill past due

The healthcare company or hospitals will assume a bill past-due if the patient does not pay the bills entirely or sort out an alternate payment plan with the creditor. On average, hospitals and health care providers may want to recover their medical bills within 90-180 days of billing a patient. To be on the safer side, consumers or patients may opt for multiple solutions to handle medical bill problems.

  • 53% said they worked out a payment plan with their provider.
  • 37% said they borrowed money from friends or family.
  • 34% said they increased their credit card debt.
  • 70% said they would cut back spending on food, clothing, or other basic household items.
  • 41% said they took an extra job or worked more hours.
  • 59% said they used up most or all of their savings.
  • 35% said they have been unable to pay for necessities like food, heat, or housing.

Source: Kaiser Family Foundation / The New York Times, 2016

d) Medical debt in collections

Healthcare providers may hand over unpaid bills to in-house or third-party debt collectors or sell those debts to a debt buyer. Debt buyers normally purchase those medical bill debts with lesser amounts. Debt collectors and debt buyers may contact patients or debtors via phone calls and may charge penalties and interest.

If the patient does not pay the debts at all, the debt collectors or debt buyers may file a lawsuit against them. As a result, the patient or debtor may have to face multiple consequences, such as wage garnishment or personal property seizure.

What happens when you can’t pay medical debts?

“Should I pay a medical debt?”

You might be thinking about this if you have a big load of medical bills on your head. But apparently, the answer should be big…yes! If you can arrange money to pay off medical debt, then you should actively pay it off as soon as possible.

But if you are seriously suffering from a low funding issue or facing financial hardship, it can impact your ability to pay off medical debt. If you have received a bill and are thinking about skipping the payment, here’s what you can expect:

a) Late fees will be charged

If you skip your medical bill debt payment, you’ll make it more costly for you. Missing the due date of your debts can be expensive as it will add late fees or interest with the original debt. As a result, your debt will be bigger. Most of the medical debt in America is increasing due to this particular reason…missing the due date!

Depending on your state’s law, you might avoid penalty fees. In a few states, medical service providers can’t charge late fees if you skip the due date. Minnesota, California, New York, and Illinois are states where late fees on medical bills are banned.

b) You’ll encounter a hired collection agency

If you do not make payments on medical bills for a long time, the service provider might hire a professional debt collector for medical debt collection. In the case of debts like credit cards, the creditor sends the account to collections after six to nine months.

But healthcare service providers normally send unpaid medical bills to the collection department asap.

In most cases, a debt collection agency will contact you if you’re more than three months past the payment due date.

It is quite difficult to handle debt collectors than the original creditor. The creditor will easily agree to negotiate with you regarding the medical debt settlement. You may even get a great offer from the original creditor. But once the medical debt collection process is initiated, the collection agency won’t be so soft on you. They might try to harass you, scare you, make your life awful, even in your workplace.

You shouldn’t avoid their calls and ignore your debt if it is genuinely yours. If you do, it will make you fall into legal traps and the situation may become worse for you.

c) Legal action can be taken against you

The longer you take to pay off medical debt or arrange a settlement option, the more difficult your situation will be. The debt collection agency may take legal action against you if you do not pay the debt.

Initially, your medical service provider can sue you for unpaid medical debt. The court may give you a severe punishment called wage garnishment.

The court will issue an order to your employer (if you do a job) that a certain amount of money from your income will be garnished and given to the creditor regularly until the debt is settled. In the case of medical debt in the US, Americans who are earning between $25,000 to $45,000, on average 5% of them are affected by wage garnishment. If you want to get help with medical debt, then you should act fast and contact the creditor before they file a legal action against you.

You must remember that a collection agency won’t be so generous to you, and they probably can sue you if you do not entertain their collection efforts.

Since medical debt is considered a civil debt, you cannot be sent to jail for it. However, if a wage garnishment is ordered against you and you ignore the court order, then you can be put behind bars for sure.

d) Your credit score will be affected

Does medical debt affect your credit? Of course, it does!

The three credit bureaus – Experian, Equifax, and TransUnion have amended their rules on medical debt collection. In 2016, they released the National Consumer Assistance Plan, which is targeted to help consumers against unfair credit reporting practices.

If you are facing medical debt collection, you have 180 days before the credit bureaus report it as past due. It also gives you time to repay the debt within that allotted time before the account will appear on your credit report.

If you can’t pay off the bill, be sure to see the addition of medical debt on the credit report. As a result, it will immediately affect your credit score. But even if a medical debt collection does get reported, it won’t harm your credit score too badly.

According to the newer credit scoring models, both FICO 9 and VantageScore 4.0 consider medical debt as a less “weight” debt, compared to other debts such as credit card bills or payday loans. So, medical debt won’t negatively affect your score as badly as other collection accounts.

Will medical debt go away?

Once added to your credit report, it will take 7 long years to dissolve.

Medical debts will be removed naturally once you pay them off or are being paid for by your insurance coverage. Unpaid medical debt in collections will still affect your credit report for those 7 years from the original delinquency date.

But is it that simple to get out of medical debts after 7 years? No.

Your unpaid medical bills will be removed from the credit report after 7 years. So, you won’t face a problem while applying for a new credit card, a loan, a job, or buying a home.

But you’ll still be responsible for the medical bill debt.

To get out of this situation, you should pay off all the medical debts, or arrange an alternate repayment plan. You can enroll in a medical debt consolidation program or settle the debt through a medical debt settlement option.

How can you deal with medical debt?

Like any other debt issue, you also might be thinking about how to get rid of medical debt easily. But practically, the thing is not so difficult if you follow some simple ways.

If you are being contacted by a collection agency, you have the right to ask for a written confirmation of the debt (debt validation) as well you can dispute it.

Under the federal Fair Debt Collection Practices Act and the federal Fair Credit Reporting Act, you own the right to dispute inaccurate information on your credit reports.

Check out some best ways to deal with medical debt:

    • Do not ignore the debts if you owe them – Do not avoid paying off medical debt if you can afford it. Ask your provider for all the details about healthcare service costs before you opt for one. Once you receive the service, you should communicate with your insurance provider. You must check whether or not you are eligible for coverage of that medical service.

    • Always ask for debt validation – Whether it is a medical service provider or a collection agency, once you get a billing statement, you should always ask for debt validation from that party. You have the right to get that information. If you are your creditor, request a written, detailed bill to ensure that they are charging you for the services you receive. If it is a collection agency, make sure the debt is yours.

    • Compare medical bills to insurance EOBs – Your insurance explanation of benefits or EOB will break down each medical charge for you. An EOB is a statement included in your health insurance plan explaining the details about the costs covered for the medical services you received. The EOB will be generated when your medical service provider submits a bill for the services you received. An EOB should inform you about how much the provider charged you in total, how much the insurance will cover/disallow, and how much you owe to the creditor.

    • Don’t use credit cards to make payments – You might be interested to pay off medical debt by using your credit cards and get your medical service provider off your back. But beware! You should never choose credit cards as an option as by doing so you will be converting your medical debts into high-interest credit card debts. If you can’t pay the credit card bills somehow, then it will hurt your credit score much more.

    • Negotiate for an interest-free payment option – Don’t wait to negotiate your bill until it is delinquent or in collections. If you do so, at that point your credit score will be seriously damaged. So, negotiate as soon as possible. You can have interest-free payment plan benefits if you can find it written in the fine print on the medical bill statement. Don’t be afraid to negotiate with the service provider and initiate the monthly payment option. Make sure you have written documents as proof of this. That way, if they report a negative item on your credit report, you can dispute it by showing the agreement and prove that you are doing everything lawfully. If you are paying through a lump sum amount, don’t forget to ask for a prompt pay discount.

    • Ask others to provide help with medical debt – If you have financial hardships and can’t afford to pay medical bills, you may ask for financial help from your family, friends, or any other person who is close to you. But make sure you return their money whenever you have the funds available to you.

    • Seeking professional help – The medical service provider or collection agency may ignore your negotiation request and may not cooperate with you. But you have to get a suitable alternate payment plan, considering your budget. For this reason, you may hire a professional medical billing advocate or claims assistance specialist to get help with this issue.

      Apart from legal support, you may also seek medical debt relief from non-profit organizations. But before that, you should try to get out of this issue all by yourself. You may try some DIY methods such as budgeting, money-saving tips, doing side hustles, and withdrawing funds from investments or from retirement accounts, etc. Make sure you refill all the money taken from your investments whenever possible.

      Next, pay off your medical debt with ease, and also keep your credit score intact by opting for a medical debt consolidation option. This way you may consolidate all of your medical bills into one single monthly payment. By doing so, you will pay off your debts entirely and your credit score will be safe and untouched.

      In most cases when people face a medical debt collection process, professionals would recommend them to settle that debt asap. If you want to keep yourself away from debt collectors and also want to settle your medical bill debt into a lower value, choose the medical debt settlement option. But remember, settling your debts will have a negative impact on your credit score.

    • Seek federal help– Get help from the government with medical bills and insurance options. As per usa.gov, some programs may help you get support in medical debt:

      Medicaid and the Children’s Health Insurance Program (CHIP) provide help with paying medical costs for children of families who cannot afford health insurance or don’t get it through their work.

      Local Social Security Administration (SSA) offices help those on Social Security and Medicare find help. People over 65, people with disabilities under 65, and people with end-stage kidney disease are eligible for Medicare.

      You may qualify for Medicaid, a joint federal and state program that helps with medical costs for some people with limited income from the Centers for Medicare and Medicaid Services (CMS). Each state has different rules about eligibility and applying for Medicaid for adults. Each state has different application requirements for Medicaid for adults. Call your state’s Medicaid program to see if you qualify and learn how to apply.

      HealthCare.gov helps you find insurance options, compare care, learn about preventive services, and more. If your employer does not offer insurance, you are self-employed, or you prefer to purchase your insurance, you and your family can get health, dental, and vision insurance through the Health Insurance Marketplace. Everyone is eligible for health insurance through the Marketplace. You may also qualify for subsidies to help pay your premiums. 2019 Open Enrollment runs from November 1, 2018, to December 15, 2018. If you’ve experienced certain life changes, like the loss of a job or childbirth, you may be eligible to make changes to your health insurance during a Special Enrollment Period. How you apply for a plan in the Health Insurance Marketplace depends on what plan you choose. Visit the Health Insurance Marketplace’s top questions section for additional help with finding or applying for health care. To file a complaint, call 1-800-318-2596 (TTY: 1-855-889-4325).

      Data courtesy – usa.gov

  • File bankruptcy of your medical bills if needed, any of the above-mentioned options do not work for you, and you may choose to file for bankruptcy as the final medical debt relief option.
    Medical debts might be discharged in bankruptcy, but professionals would suggest not to choose a medical bankruptcy in the first place. Bankruptcy will damage your credit and make it difficult to qualify for any consumer debt in the future.Bankruptcies will stay on your credit report for 3 more years than a medical debt on the credit report. So, it is better to talk to an attorney and get help with medical debt, if you are thinking of bankruptcy as a way to get rid of old medical bills.

Can medical debt be forgiven?

Many people like you are also looking for an answer to this question. As per a 2016 Kaiser Family Foundation survey, nearly 26% of American citizens are having critical issues paying their medical bills.

The perfect and safe way to get medical bill debt forgiveness is to contact your medical health provider or the hospital’s billing department. Talk to them and get information on how to qualify for any medical debt relief programs such as “financial aids” or get discounts on your medical bills.

Medical health providers often communicate with patients who can’t afford high medical bills. So, they also sometimes offer a variety of options to reduce medical costs for the patients and also provide information on how to apply for medical debt help. The eligibility criteria of these programs are solely determined by the hospitals or medical service providers.

Some programs they offer are:

  • Provide financial assistance to patients who do not have sufficient insurance coverage or any medical insurance at all.
  • Offer discounts to pay upfront medical bills.
  • Initiate interest-free payment plans for patients who can afford monthly payments.

As per the federal laws, governed by the National Consumer Law Center, half of all states have strict rules regarding what kind of financial assistance a hospital needs to offer to their patients. The rules may vary according to the state, but most of them indicate that hospitals should give financial support such as free or reduced-cost medical care, or an interest-free payment plan. Patients with income below the federal poverty level (FPL) or those who are uninsured will receive such medical support at a low cost.

6 states which provide lower-cost medical care based on a four-person household under the medical bill’s debt forgiveness program:

Washington New York California Connecticut Colorado Maryland
Free care for uninsured patients at or below 100% FPL.
Discounted care for patients between 100% and 200% FPL.
No more than a nominal fee charged to patients who are at or below 100% FPL.
Discounted care for patients between 100% and 300% FPL.
Free or discounted care for patients at or below 350% FPL (now $91,700). Free or discounted care for uninsured patients who do not qualify for Medicaid, Medicare, or other coverage, and who are at or below 250% FPL. Discounted care for uninsured patients at or below 250% FPL ($65,500). Free care for patients at or below 200% FPL ($52,400).
Discounted care for patients between 200% and 300% FPL ($78,600).


I hope all of your queries on debt due to medical bills are answered above. Medical bills might look less expensive than other high-interest debts such as credit card bills or payday loans, but it can harm your finances and credit a serious level of damage, which may take several years to restore. So, be prepared and well informed. Best of luck!