Almost all medical debt will be written off from consumer credit reports – Forbes Advisor

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Many American consumers will soon pay off their medical debt from their credit reports, the three credit bureaus was announced last month.

Medical debt is pervasive in the United States. The majority of people who filed for bankruptcy between 2013 and 2016 had at least some medical expenses that contributed to their financial distress, according to a report from the American Journal of Public Health.

But the way medical debt is reported in consumer credit reports is changing. And these changes can make it easier for people who have faced the burden of unexpected medical bills to rebuild their credit. Accounts in collections on your credit reports can dramatically reduce your credit score, which makes it more difficult to get new credit (consider car loans, personal loans and credit cards) at reasonable interest rates.

See how medical debt reporting is changing and how you can manage your medical bills to prevent permanent financial loss.

How the medical debt credit report changes

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

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

If you are in the process of negotiating or paying a medical debt, this may give you extra 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 companies will no longer include medical debt in collections under $ 500 in credit reports.

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

Medical debt is a huge component of consumer debt

You may think of consumer debt as a result of spending too much on credit cards or your life beyond your means. But nearly one in 10 adults – about 23 million Americans – owes at least $ 250 in medical debt, according to a Report of the Kaiser Family Foundation released in March.

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

The 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 “is not a true reflection of a person’s willingness or ability to repay a debt.”

About one-fifth of U.S. households could not afford to pay for medical care ahead in 2017, according to the latest figures from the Census Bureau.

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

Why medical debt is so difficult for consumers to manage

McCall explains that it is often difficult for consumers to know what their costs are and what insurance will ultimately pay if they have coverage.

Until you realize that yes, you will be responsible for a specific medical bill, it may already be overdue and on its way to collection.

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

Read more: How to remove collections from your credit report

Mistakes in medical pricing make things worse, McCall explains. Medical accounts often contain coding errors, which could result in the patient’s financial liability being much higher than expected.

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

The credit reporting system “forces patients and their families to pay bills for the accuracy of which they doubt,” said Rohit Chopra, director of the Office of Consumer Financial Protection (CFPB). a statement on March 1st. The announcement from the three credit bureaus came shortly after the CFPB announced that it would scrutinize the credit bureau’s medical debt practices and investigate possible improvements to the medical services billing and collection system.

How to deal with medical bills before going to the collections

McCall offers four tips for managing medical accounts.

1. Request a detailed account

If you did not expect a bill for medical services or if the total on your card is higher than you expected, ask for more information from the billing department.

Even if you can afford a medical bill, McCall says ask for a detailed statement showing all the billing codes for the care you received.

If something does not match your experience or explanation of the benefits you received from your insurance company, ask the billing department how you can challenge the charge.

2. Request a Cash Discount

Once you make sure your account is correct, ask the hospital if there is a cash discount for cash payments or if a payment plan is available, says McCall.

If you do not have enough in the emergency fund to pay your medical bill, a payment plan through your healthcare provider may be a better option than turning to a credit card or personal loan to cover the cost.

The healthcare provider can offer an interest-free or low-interest payment plan to distribute your payments over time without the extra cost of high interest rates.

3. Ask for financial help

Many hospitals employ lawyers to help patients with financial difficulties, McCall explains. Ask your healthcare provider if there is a financial assistance program for people who have difficulty paying their medical bills.

Some hospitals will completely write off your debt or dramatically reduce the amount you owe.

McCall says billing departments are accustomed to hearing patients say, “I do not have the money to pay” or “I do not think I was charged properly.” Do not be ashamed to ask for help.

4. Check accounts that have already gone to collections

If you have a medical debt that has already been collected, check to make sure that the collector has not added extra charges to the total amount owed. To find out the fee schedule for your original medical bill, you may need to consult documents you signed at the hospital or health center.

McCall explains that medical debt is often sold among debt collectors and this can happen many times during the life of the debt. Some collectors will try to add new charges to your account, he says, “in an effort to scare you into paying off debt quickly or paying more than you owe.”

Adding fees other than those specified in the original contract is a violation of federal law.

If you find out that a collector has added illegal charges, to mention it to the Federal Trade Commission, the CFPB, and your state attorney general. If you find the surcharge within one year of the collector breaking the law, you also have the option of suing the collector for waiver — but you will still be liable for the original debt.

Aaron Hurd also contributed to this article.

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