Medical Bills and the Fair Debt Collection Practices Act
Dealing with Medical Debt
A study by the Federal Reserve Board found that nearly half of all collection actions appearing on consumer credit reports are for collection of unpaid medical bills. So if you are in the position of having unpaid medical bills you are not alone. This is a problem for many people.
Dealing with a debt collector can be scary and stressful. Debt collectors have an arsenal of techniques to drive you crazy such as harassing calls, threats, and use of obscene language
Debt collectors also try to get you to pay by exposing your secret by contacting your employer, family or neighbors.
Are debt collectors really allowed to do all these things? The Federal Fair Debt Collection Practices Act is designed to protect consumers from unscrupulous collection agencies.
The federal Fair Debt Collection Practices Act (FDCPA) sets the national standard for collection agencies. The FDCPA, enforced by the Federal Trade Commission (FTC), prohibits abusive collection tactics that harass you or invade your privacy. (15 USC §§1692-1695) The full text of the FDCPA is found at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
Doctors and hospitals are allowed to refer an overdue medical bill to a collection agency. HIPAA, the federal medical privacy rule, allows your doctor or hospital to give information to a collection agency and also allows them to report it to a credit reporting agency.
Collection of an unpaid bill is considered a payment activity under HIPAA. So the doctor or hospital is under no obligation to consult you before a medical bill is referred to a collection agency or before a negative entry is placed on your credit report.
If you have a dispute with the health care provider or a collection agency that also should go on your credit report.
If you choose to settle a medical debt with a collection agency the medical debt will be treated like any other debt and can remain on your credit report, even after you have paid off or settled the debt.
There is a bill in the works that would place certain limits on a credit reporting agency including paid or settled medical debt in your credit report but it has not been passed yet.
Here are some preventive tips to keep your medical bills from going into collection. Even if you don’t have the money to pay them there are things you can do.
1. Make sure the bill is right – Everyone makes mistakes and insurance companies handle a lot of detailed complicated information so the possibility for error is high. Checking your bills is a good habit to get into. Checking for errors could save you hundreds of dollars.
2. Be polite – We all get tense when we find out the insurance company didn’t pay or is not going to pay. Getting ugly though only makes the clerks dislike you and not want to help you out. If you are polite they are more willing to help you out and maybe they know a way to fix the problem that you are not aware of. The clerks know the billing system way better than you do so it is smart to get them on your side.
3. Apply for Medical Financial Aid
Yes, this is for real. There are certain guidelines that must be met (income levels, percentage of debt to income etc.). But many times even if they don’t pay 100% of the debt they may pay a large portion. Often, if your medical debt-to-income ratio is over 30%, the hospital will give medical financial aid.
Find out if the hospital has a financial aid department and give them a phone call or a visit to request an application. You’ll need to list all your assets and income so they can make a determination.
4. Call to Negotiate a Discount
This is something a lot of people don’t think of probably because it is not an area where we are used to negotiating. It is okay to ask for what you need in this situation. Give the insurance company, hospital or doctor a call, speak to the billing department and ask them for a discount on your medical debt.
When they send bill to collection, the doctors office or hospital does not wind up getting that much money. The collection agency has to take their fee remember. So they are motivated to negotiate with you.
If it’s a smaller bill and you can afford to pay it off – give them a call first to ask if they will give you a discount if you pay the bill off in full.
5. Ask For a Payment Plan
If you can’t pay your medical debt off in full, the last step is to ask for a payment plan. Many doctors and hospitals will agree to this because again they will get more money this way rather than sending you to a collection agency.
After you are on the payment plan for six months and have been paying your bills on time ask for a discount. You never know until you ask it is possible they will give it to you. When you they see you are paying on time they know you have good intentions and are honorable.
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It’s in the best interests of providers and patients alike to make sure that more of the routine medical bills sent out by a practice never reach the collection stage at all. This article is a good overview of what happens when medical bills go to collections but many financial experts understand that collection activity by a third party is often a last resort to try to scrape together available cash from long-overdue accounts. Patients can prevent collections by calling in and trying to negotiate with a provider, but providers can also decrease their third party collection activities by creating more transparency about bills up front, possibly even collecting more money from patients at the time of service. Expediting billing to health insurance carriers and government programs will also help the provider to get more money up front, so that they don’t have to impede their revenue stream by relying on collection agencies. Ron McLaughlin, CEO, enhancedmedicalbilling.com.