Medical Bill Debt Collections Laws: What You Need to Know

According to the Kaiser Family Foundation, 65% of Americans say their biggest financial fear is dealing with unexpected medical expenses, whether deductibles, prescription costs or monthly premiums.

These fears are well-founded. In 2019, why did most Americans file for bankruptcy? Medical debt. If you’re struggling to pay your medical bills, here’s what you need to know.

_{Disclaimer: Credit Summit may be affiliated with some of the companies mentioned in this article. Credit Summit may make money from advertisements or when you contact a company through our platform.}

Key Points

• Medical bills can go to collections — sending them to debt collectors or listing them on your credit report is not a HIPAA violation
• Once your debt is sent to collections, you still have a year to pay it before it will appear on your credit report
• Debt collectors are usually willing to settle debts for less than you owe, so make an offer
• Medical bill debt collectors must follow the rules established by the Fair Debt Collection Practices Act
• You can tell a debt collector — in writing — to stop calling you and the law requires that they stop calling you
• Newer credit scoring algorithms (like FICO 9 and VantageScore 4.0) give less weight to medical debts than other debts when calculating your score
• Even once the debt falls off your credit report — in seven years — you still owe the money

Medical Bills Can Be Sent to Collections

Just like other types of unsecured debt, medical debts can be sent to collections. However, you’ll have a year before that happens. This is to give patients time to negotiate with insurers, medical facilities and treatment centers and to set up a payment plan if needed.

If you can’t afford your medical bills, the best first step is to contact your provider and tell them what kind of payment you can afford.

Pro tip: Negotiating truly works when it comes to medical bills, particularly if you face serious illness while uninsured. One cancer patient, now in remission, owed almost $500,000 in medical bills. She contacted the hospital and told them exactly how much she could afford to pay, and they accepted the offer of $100 a month, even though it was significantly lower than the minimum monthly payment. As her income increased, she also increased her monthly payments.

There are laws about how and how often a debt collector can contact you, and if you send them a written request telling them to stop calling you, the calls have to stop. However, they could still take you to court.

Is Sending Medical Bills to Collections a HIPAA Violation?

As long as your private medical information is not disclosed, this is not a HIPAA violation.

While there are rumors on Reddit that it’s safe to default on your medical bills because sending them to a debt collector violates HIPAA (The Health Insurance Portability and Accountability Act of 1996), that is false.

The Department of Health and Human Services website (hhs.gov) clearly states that simply sending medical bills to collections is not a HIPAA violation.

Selling your information to debt collectors or listing it on your credit reports is acceptable as long as only the following information is provided:

• Name and address
• Birth date
• Social Security number
• Payment history
• Account number

Pro tip: One popular medical debt loophole involves contacting the credit bureaus in writing and telling them that listing the debt on your credit reports is a HIPAA violation. Though this is not technically true unless treatment details are included in the report, sometimes the credit bureau will remove the debt anyway. If it works, you could boost your credit score by up to 200 points. That won’t stop the debt collectors, though.

Here’s the good news: Medical debts are treated differently than other collections accounts.

READ MORE: Can’t repay your medical bills? Here’s what happens next

You Have a Grace Period To Repay Medical Debt

Health care in the U.S. is expensive. And debt collectors are going to do whatever it takes to collect debt. Their behavior is governed only by their willingness to follow the rules set up by the FTC.

However, credit bureaus treat medical debt collection differently than other types of debt and collections accounts.

The major credit bureaus give medical debts a grace period. Once an unpaid medical bill is sent to a debt collection agency, the borrower has a full year before the unpaid debt will appear on their credit reports.

And as of July 2022, the three major credit bureaus deleted all medical debts on your credit report that were sent to collections before repayment.

Pro tip: This means that if your credit score has been hurt by medical debt that was eventually paid, you no longer have to wait seven years for that negative mark to fall off your credit report. As of 2023, the agencies stopped reporting medical debts below $500.

Medical debts “weigh” less. The newer scoring algorithms used by the credit bureaus (like FICO 9 and VantageScore 4.0) give less consideration to medical debts than other debts when calculating your overall score. 

Pro tip: If the debt is paid by insurance (some insurance policies will still pay on a bill sent to collections), it is removed from your credit report. It won’t stay on there for seven years the way other debts will. 

READ MORE: How to get medical debt relief

More Medical Bill Collections Laws

Aside from the differences already mentioned, legally speaking, medical bill collectors must follow the same laws and rules as every other type of debt collector. 

What Debt Collectors Can and Can’t Do

There are federal laws limiting collection actions by debt collectors. Those rules are clearly stated in the Fair Debt Collection Practices Act (FDCPA). For example: 

• They must identify themselves as debt collectors in all communications with you.
• Debt collectors cannot threaten you or use abusive language.
• They are not allowed to harass or stalk you. 
• They cannot call you before 8 a.m. or after 9 p.m. your time.
• They cannot notify your employer or contact you at your place of employment.
• At your request, they must provide a debt validation letter to you within 30 days of their first contact.

What should you say when the debt collector calls about your medical bills? Get some advice from former debt collectors:

Does Medical Debt Expire?

Medical debts do not magically disappear entirely after seven years. They only fall off your credit report. You are still responsible for that debt. What happens after a debt falls off your credit report will depend on the statute of limitations laws in your local area. But you have a few options for medical debt relief.

What Happens When Medical Bills Go to Collections

When medical debt is sent to collections, the collection agency cannot report that debt to the credit bureaus as past due until after the grace period has expired. If you’ve resolved the debt or set up a payment arrangement for the medical services (and kept up with the monthly payments) they might not report it at all. This varies by lender or collector, though.

Should I Pay Medical Bills in Collections?

If you have verified that the debt is yours and the amount is accurate, then paying any off debt in collections is a good idea. Doing so will help raise your credit score and help you build a solid credit history. That solid history will be helpful if you ever want to apply for a loan or a line of credit. 

How to Get a Medical Bill Out of Collections

Once your medical debt has been sold to a collections company, they are unlikely to sell it back to your provider. If the debt is still within the grace period or is being paid by insurance, you should notify the credit bureaus about the error and have it removed. 

The dispute/reporting process is simple. You can even do it online. Each of the credit reporting bureaus has instructions to walk you through it. 

Here’s a link to the Experian dispute instructions.

Here’s a link to the Equifax dispute instructions.

Here’s a link to the TransUnion dispute instructions.

Set Up a Payment Plan

Medical providers would rather get payment from you directly than sell your account to a debt collector. Talk to your provider about setting up a payment plan to keep your account from being sold. Believe it or not, most will want to work with you.

Whatever plan you set up, get it in writing. Have your provider draw up a payment plan contract that you can both sign. It’s a good idea to keep both a digital and a physical copy of your contract.

If you can’t afford to pay your whole bill, talk to your provider about their financial assistance policy. If the practice is nonprofit, they likely have some form of charity care available to help you cover costs. Even if they are a for-profit practice, they might have some sort of program in place that can help you.

Should I Pay Medical Debt with a Credit Card?

Can you pay off medical debt with a credit card? You sure can. Should you, though? Absolutely not.

Credit card companies do not care where the debt comes from. It is treated the same as every other purchase you make. It is subject to the same interest rates. Worse, that grace period goes away. 

You will pay less and have much more flexibility and protection if you set up a payment plan directly with your provider.

Even if You’re Paying, Your Bill Could Go to Collections

There is a long-standing myth that they can’t be sent to collections as long as you are paying something on your medical bills. Even as little as $5 can keep your account in-house.

Again: THIS IS A MYTH.

It is also why you need to set up a definite payment plan with your provider and have that plan in writing. That way, if you’re making your agreed-upon payment amounts within the agreed-upon time frame, you shouldn’t have to worry about dealing with collections.

This is true unless you live in Maryland, which has a new state law limiting how medical debts can be collected.

Another important bit of information you should keep handy is this: If you are having trouble paying your bill and your hospital is a nonprofit, the Affordable Care Act gives you time to apply for financial aid before the hospital can send you to collections. 

Learn the Statute of Limitations

In this case, a “statute of limitations” is the amount of time a creditor or collection agent has to sue you to force you to pay your debts. Each state has its own statute of limitations laws. For example, in Texas, the limit is four years. In Oregon, the limit is six years.

Unfortunately, these laws only apply to legal proceedings. Once the time limit is up, the collector can no longer take you to court. 

They can, however, continue to call you, send you mail, etc. And if you do make a payment, the time limit is reset.

They can also reset the time limit by selling your account to another debt collection company.

Unpaid Medical Bills Can Affect Your Credit Score

Most medical providers don’t report patient accounts to credit reporting agencies. This means that if you can keep your account in-house, it probably won’t show up on your credit report. Work hard to keep your account in-house. Apply for financial aid. Set up a payment plan and stick to it. Ask about charity care.

Pro tip: Once the medical debt is sold to a collector, it will get reported to the credit bureaus. This is legal because the only thing your medical provider sells to the collector is your debt. Because all of your private medical information is not reported to the credit bureaus or provided to the debt collector, HIPAA laws are not violated.

Once a debt collector owns your debt, your financial responsibility is no longer to your medical providers. It will be to the debt collection agency.

And, as soon as your grace period is over, it will show up on your credit report, along with any progress you’ve made to pay down that debt. It will stay on your credit report for up to seven years. This can do some significant damage to your score. 

One study done by the Consumer Financial Protection Bureau (CFPB) shows that, though people whose debts are mostly medical are more likely to stay current with their payments, their scores aren’t that much higher than people whose debts are mostly non-medical in nature. 

So, even though medical debts are weighed slightly less by the scoring algorithm, it doesn’t seem to have a meaningful impact on your score. Collections are collections, and collections are bad. 

How Can I Prevent Medical Bills from Ending Up on My Credit Report?

Unfortunately, this is not as simple as you might think. More work is involved than the usual “just make your payments on time!” advice you probably anticipated. With medical debt, there are extra steps you need to take. 

• Consult your insurance company: Try to negotiate any unpaid parts of your bill. Some insurance companies will retroactively approve coverage if you can prove that your treatment was a medical necessity (ask your doctor to help with this). Insurance companies can also cover costs after a medical bill has been sent to collections. 
• Try to negotiate payments for unmanageable bills: Medical practices would much rather work with you than with a collection agent or debt buyer.
• Hire a billing advocate to negotiate on your behalf: Many hospitals and medical clinics have someone on staff for this, but you could also hire one of your own.
• Try crowdfunding: Even if you can’t raise the full amount due, you might be able to raise a significant chunk. Use that to help make your case for a payment plan for the remainder due. 

Your Health Insurance Won’t Cover Everything

Unless you have a lot of money or an incredibly generous employer, your insurance will not cover all your medical expenses. You must understand this before you see your doctor. Make sure to read the Explanation of Benefits with your insurance documentation.

The Explanation of Benefits will tell you exactly what types of medical costs will be covered and by how much. This is where you will learn, for example, if you will have to pay a co-pay before seeing your doctor, whether you have to use an in-network doctor or medical facility, which treatments your plan will pay for (and how much), what your deductible is, etc. 

If you have questions about whether something is covered or want to know why you’re expected to pay out of pocket for a procedure, you’ll need to ask your insurance company before you see a health-care provider. Being proactive can save you a lot of money.

READ MORE: How much does it cost to have a baby?

Are You Eligible for Charity Care?

Charity care is healthcare provided either for free or for very little cost to low-income households who otherwise could not afford treatment. The treatment must be medically necessary and can even be added to an existing insurance plan to cover anything that insurance doesn’t cover.

The Affordable Care Act requires nonprofit hospitals to offer charity care if they want to be able to keep their nonprofit status with the IRS.

Pro tip: Charity care is not limited to uninsured individuals. Eligibility extends to people with health insurance or those who are on Medicare or Medicaid.

READ MORE: What’s the average cost of a hospital stay in the U.S.?

How Do I Qualify for Charity Care? 

This is going to vary from hospital to hospital. It is typically based on your income, which the hospital will verify via:

• W-2s
• Paystubs
• Tax returns
• Unemployment statements
• Social Security statements
• Bank records
• Documentation provided by the state’s social services department 

The Bottom Line

PWC’s Health Research Institute reports that the cost of treating a patient will rise by 6.5% in 2022. That’s pretty scary for many people who are already afraid of their medical bills. 

Even so, your health is important. Don’t put off your medical care. Preventative care, in particular, is the best way to reduce your chances of dealing with hefty hospital bills. Take care of your health now. It could save you a bundle down the road by preventing a major problem — or catching it early.

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