Dealing with Unpaid Medical Debts

What Are Some of the Ways Consumers Can Handle Unpaid Medical Debts?

Consumers can handle paying medical debt like any other collection debt or past due bill, they can attempt to work a deal out with the collection company and settle for less. You can either do this of your own accord or enlist the help of a debt relief company. However, paying down medical debt should be a lower priority than paying down other types of debts. Medical debt should be paid after higher priority accounts like mortgages, auto loans, credit card debts, etc. You should also try to avoid paying medical debt by incurring other kinds of debt. Many medical debts can go unpaid for a long period of time without any significant adverse consequences to credit worthiness. In some states, you can also apply for Medicaid. If you are approved, Medicaid could retroactively cover medical bills in the last few months. In this scenario your past due medical debts could potentially be eligible to be covered by Medicaid and you might not have to pay anything back.

How Long Does Unpaid Medical Debt Stay on a Credit Report? Has This Changed Over the Last Few Years?

Health care providers will not report your debt to a credit bureau, however it could eventually get reported on your credit report via a collection agency. Many Americans have medical debt with somewhat nominal balances (a few hundred dollars), since this is the case for a majority of Americans, FICO and the credit bureaus have recently changed the reported requirements of these accounts. FICO implemented this change with FICO 9.0, however since many lenders still use older reports, there have been more changes in recent years. All three credit bureaus will no longer report a medical debt with a balance of $500 or less. This has gone into effect since the second half of 2023. Finally, hospitals and health care providers are unlikely to sue consumers for smaller medical debts. If the account does actually get litigated, there is also more of a defense on the consumer's side, since most people who have medical debt never actually agreed to a set price for the medical treatment they've received.

Best Approach

So, what actually is the best approach to handling medical debt? After you understand what you owe and don’t owe the best approach is to reach out directly to the collection agency and attempt to settle the account for less. This should be after you’ve exhausted other options, like seeing if Medicaid can retroactively cover your medical bills, etc. Otherwise you will at least be settling out your debts and still getting a discount on the balance you owe. However, with this being said this is all a matter of personal preference. Many consumers with medical debt have had success with the 80/20 budget. What might be the best approach for you might not be the best approach for someone else.