12/12/2013 11:15 PM ET|
How unpaid medical bills damage your credit
Do what you can to make sure your medical debt does not go to collections, as it can lay waste to your scores.
Don't use that post-surgery fog as an excuse to ignore medical bills, even if you're still contesting them with your doctor or health insurer. Otherwise, your credit score will need to heal, too.
Medical debt is the most common type of collection account, representing nearly half of all reported collections. Almost one in six credit reports contain a medical debt collection, according to the Federal Reserve. And about two in five Americans reported a lower credit rating last year due to unpaid medical bills.
The damage a medical collections account can do to your credit can be devastating, making it harder to get loans at low interest rates. A new proposed bill would give consumers more time to resolve medical bills before they show up as collection items. But many consumer advocates want these types of collections excluded altogether from credit reports, saying they don't reflect a person's credit risk.
"There's a lot of controversy, but it's not our role to tell lenders what should be considered," says Maxine Sweet, vice president of public education at credit reporting bureau Experian. "More than any other debt, it requires consumers to work harder to protect themselves."
Damage to credit
Any collections item, medical or not, can lower a person's FICO credit score by as much as 100 points, says Anthony Sprauve, spokesman for myFICO.com. Typically, if you have a higher credit score, a negative item will hurt more than if you had a lower credit score.
The injury to your credit score will lessen over time, but the item will stay on your credit report for seven years. Federal law requires negative items to drop off credit reports within that time. (The only exception is bankruptcy, which can stay on a report for 10 years.)
There is some good news: The latest version of the FICO credit score ignores all collection items less than $100, which accounts for more than a third of all medical debt reported to debt collectors.
The newest VantageScore model doesn't count collections accounts that have been paid. It also doesn't consider medical debt that is reported by a medical provider. It only takes into account medical debt reported by collection agencies.
Is it fair?
Whether medical collections should be included in credit reports is an ongoing debate. FICO stands behind the predictive power of large collections, even though the company has not tested medical collections by themselves. VantageScore also has not specifically tested how predictive medical collections are.
"We philosophically don't believe in throwing out data arbitrarily without knowing its value," says Sprauve. "We have spent time looking at collections in general, not specifically medical, and they are predictive."
But some consumer advocates say unpaid medical bills are an unreliable predictor of risk. Some credit evaluators surveyed by the Federal Reserve in 2004 said they remove medical debt collections when they consider an applicant because they often represent disputes with an insurer and aren't a good indicator of loan repayment.
"People are making calculated decisions when taking on a car loan or credit card," says Amy Traub, senior policy analyst at think tank Demos. "With medical debt, it's your life that's at risk or your child's life. It's a catastrophic event."
Medical billing mistakes
Then, there are the mistakes. Bill Bartmann, founder of debt collection agency CFS2, said about 20 percent of medical claims his firm receives from medical providers are inaccurate.
"Either they were overcharged or billed for things they didn't receive," he says. "Or there was insurance coverage that should have paid but didn't."
California Rep. Gary Miller introduced legislation in May that would help alleviate inaccurate medical claims. The bill prohibits debt collectors from reporting a medical collections for 120 days if the consumer is still negotiating with their insurer, disputes the amount or the debt entirely, or is applying for financial assistance. The bill is currently in committee.
What can you do?
In the meantime, stay vigilant after receiving medical care. Keep track of the services and items you receive in the hospital and the doctors who treat you, all of which could mean a separate bill. This will help you sort the bills when they come in, often months after a hospital stay.
Depending on the medical provider, your claim could get forwarded to a debt collector anywhere between 90 to 120 days after you are billed, says Bartmann. Call your provider or insurer if you have questions about a particular bill or item. Keep each party in the loop. For example, if you're filing an appeal with your insurer, let your doctor know so they don't send the claim to collections.
When in doubt, pay the bill before the claim hits your credit report, says John Ulzheimer, president of consumer education at SmartCredit.com. Then, go after your insurer for reimbursement.
"It's easier to keep something from going into the collections. It's a lot harder to get a collections off your credit report," he says. "Choose to lose the battle and continue to win the war."
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What isn't fair is when you get stuck with the medical bills you can't afford and have your credit ruined because some under insured idiot made a stupid move that was completely avoidable!
My son was hit by a car when riding home from work on his bicycle (no, he's not an irresponsible biker. He obeys the rules of the road and is very careful and observant, wears lots of reflective things so he can be seen, has headlight and tail lights and wears a helmet-always.) This woman passed him and made an immediate right turn in front of him. He was unable to stop and broadsided her. He hit her mirror so hard it was sent down the road 150 feet, cut his face, cracked his helmet, broke his tooth, had numerous abrasions head to toe and a huge hematoma on his leg from his knee to his thigh and did over $2k of damage to his bike. She was late picking up her kids, saw him and turned in front of him anyway. She didn't even have the decency to check on him. Fortunately, there were two witnesses who stopped to help. She first tried to claim she didn't see him before finally admitting she had seen him. He had to have two surgeries on his shoulder and just finished physical therapy for his shoulder and leg a week after the 2nd anniversary of the accident. This woman had the minimum insurance required in CA which didn't begin to cover his medical bills beyond what our car insurance and medical insurance would cover-no deductibles or things insurance wouldn't cover. There are THOUSANDS of dollars of uncovered medical/dental bills that he has been unable to pay, and shouldn't have to, that have gone to collections and have now ruined his good credit. To make matters worse he lost his job 6 months after the accident. And of course she had no assets to go after. I personally think her wages should be garnished until SHE pays off all the bills. And to add insult to injury, when a case is settled, you as the injured party have to sign away all your rights but they don't have to admit guilt AND they retain the right to come after you at a later date and sue YOU if they want. What a crappy system!!!
Health care costs need to be contained. If the costs were reasonable, people could afford to pay the
bills and could afford health insurance.
Why should a hospital charge $12.00 for an aspirin pill? The whole industry is overpriced and needs to be overhauled.
Also, debt collections should be more transparent. The collection agency frequently buys the hospital debt for cents on the dollar and then goes after the patient for the entire bill. They file credit reports without any court oversight. Disputed charges are included in the reports. These abuses should be stopped.
I have excellent insurance and supplementals and they paid all except a bill for $92 which they said the billing department knew they would not pay it the way it was filed. The billing department refused to refile it. I refused to pay it out of my pocket and they sent the bill to collections. Collections put it on my credit report, but not as a medical dispute. It doesn't mention the name of the medical doctor who charged the $92 nor the medical center's address.
It looks just like I didn't pay a bill.
I don't have to have credit, but if I ever do, this vindictive billing lady has ruined me getting a good rate.
It is all about revenge on her part, she is connected to the owner and is in the billing department is furious that my husband's place of employment dropped me while I was on cobra, so when I had an emergency hospitalization, they had to come up with the money to pay for it. I had paid my part of the insurance, but they dropped my coverage at work. It was neglect or ignorance on the part of the business department.
I didn't realize they had turned it over to the credit bureau.
There must be a better way to dispute medical bills. Most of us can't afford to hire lawyers.
Now she is threatening me with law suits and has spread lies about me.
I have to see 3 doctors a lot. I don't want to, but I guess my life depends on it, because I can't get medicine without a prescription.
It makes me sick to see how much they charge for a simple office visit and simple tests.
I think they are trying to bankrupt Medicare. I recently went on Medicare and they are a lot better run than the private paid companies. I know they are the same companies, but Medicare sees that they do people right.
So in the end, they are forced to use their useless BARE BONE Medicare plan for prescription drugs and sign an INDIGENT FORM so they won't get billed for everything else. A bill that otherwise, they could in no way, shape or form ever pay off. In the end, most all unpaid medical bills become tax write-offs for the hospitals and any and all monetary losses as a consequence, is passed on to the more affluent consumers. Hence, the never ending cost increases in medical coverage. Take the illegals out of the equation and you still have a big problem to solve.
What's the solution? Have a go at it!
one of the reasons why it is soooo expensive is because some people don't pay there bills at all , and the illegal's can go to a charity base med. care . i would bet the people you least expect don't pay there bills.
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