How Long Do Medical Bills Stay on Your Credit Report?

First of All, Let’s Explore How Medical Bills Might Get Onto Your Credit Report.

Let’s take an ER visit and use it as a typical example of how a medical bill starts. On Saturday, we experience extreme pain in our stomach and decide we need emergency medical care. We rush to the nearest hospital and visit the ER room. The first thing that should happen is that a triage nurse will examine us to determine the severity of the medical condition causing our ailment.

If our need is critical, we are taken immediately to an ER bed. The treatment begins, and so do the medical bills; they can get our insurance company information later. Their priority is to stabilize the patient. An ER room can’t refuse to treat a patient with a life-threatening condition once that patient comes through the door. Ambulances in transit are another matter. They have been known to be turned away or diverted to another hospital for various reasons. These can be due to lack of medical insurance, inability to care for the patient’s condition, and overcrowding, to name a few. Most people even refuse to go to the hospital altogether since they fear that they won’t be able to pay their medical bills. These costs have the ability to seriously hurt your credit!

A Doctor Examines, Diagnoses, and Treats You

This includes x-rays, blood-work, and any other diagnostic work that needs to be done to discover the true nature of your medical condition. Normally a doctor will avoid prescribing any medicine until a diagnosis has been given. However, after the cause has been determined, the doc may give you a one-time-dose of whatever is needed along with a prescription for 2-3 days of medicine, enough to get you through until you can see the health care provider assigned to you by you medical provider.

Alternatively, if your condition is serious enough, the doctor might admit you to the hospital. In either case, the next step is the billing desk. We will explain what happens there in the following scenario because it’s the same, and the only difference is the order in which the steps occur.

Suppose the triage nurse determines that our condition isn’t critical.

Let’s say they decide that we have what’s commonly called food poisoning. So the first stop before seeing a doctor is the billing desk. Here they find out if you have health care insurance, your employment status, address, etc. It can be done by someone who accompanies the person to the hospital, but it’s better if the patient does it. 

If one has health care insurance, pays all co-pays within a reasonable time – great! The hospital does not need to inform the credit reporting agencies at all. Even if the bill isn’t paid on time, there is usually a grace period and some wiggle room to negotiate in good faith. As long as one talks to the billing department and makes an honest effort to keep paying off the bill, the debt doesn’t go to collections. The trouble begins when money stop and you have bad credit.

When the Bill Goes Unpaid

When the bill is past due for 3-6 months, that’s normally the threshold where the trouble begins. One might receive monthly reminders during the first three months, with messages becoming more and more critical as that time approaches. However, at this point, your credit score is still untouched.

Things can go in all sorts of unpredictable directions, but I’m going to try to stay with the common mainstream events that usually take place. The hospital can go in several different ways at this point. They may choose to handle it in-house, at least for some extended period. They may decide to sell the debt to a collection agency or hire one and pay them on a contingency or percentage basis. In either case, it’s another 180 days before they report the delinquency to one of the big three, and it has the ability to affect your credit score. This is because it can take that long for some insurance company issues to be worked out and medical collections.

So Here’s the Vague Part

When does the credit reporting agency first receive a report of default of some unpaid medical debt? That’s when it begins to affect your credit score and gets sent to collections. According to the three major credit bureaus, unpaid medical bills can be on your credit report for seven years, starting from the date it was first reported. That’s the official rule, but several things can make it affect your credit for 6.5 years. Here’s a more detailed breakdown: The delinquency occurs 30 days after the hospital, the doctor or dentist mails out the first bill. The clock starts ticking. It will take 150 days or longer to appear on your consumer report for the first time.

Possible Repercussions

Some of the legal steps that can be taken against an outstanding debt require a court judgment against the debtor. It can be done by the hospital, bill collector, debt collector, or any 3rd party to which the debt has been sold. One of the delay tactics used is to question the debt, but it’s getting more difficult to find a legal basis for doing so in recent years.

Once a judgment has been received, the holder of the debt can garnishee a debtor’s wages. This is what happens: The debt holder’s agent delivers papers to the debtor’s employer’s accounting department. These papers specify that they must, from that day forward, deduct 30% (up to 50% in child support cases) of the employee’s wages. Also, the employer can charge a reasonable fee for the extra work involved. This garnishment is to continue until the debt has been fully satisfied. Many times this results in a series of job-hops by the debtors, changing jobs every few months when the debt holder’s agents catch up with them.

Another legal instrument used to collect huge debts is when the debtor has significant real-estate. It is called a Lien on real-estate. Again, with special papers from the court, the agent files these papers with the county auditors. The debt isn’t relieved immediately, however. If the debtor sells their real-estate, the money for the debt is deducted off the top when it goes into escrow. All this happens before the seller gets his portion.

Possible Remedies 

The best way to stay out of legal jeopardy is to avoid going into default. Communication with the medical establishment is essential. Normally such an organization will take no legal action as long as a payment agreement has been proposed and adhered to, even if the payments are only a fraction of the original debt.

Another way to go is to get a consolidation loan. Please include all of your outstanding debts and pay them all off at once. Make sure that you can afford to meet the terms of the new payment agreement. This is usually a respected way of getting out of debt.

Consumer Credit Counseling Services is a non-profit group devoted to helping resolve debt and settle financial disputes. Ask the medical establishment to write it off as uncollectible debt. Depending on what sort of business they are and who sponsors them, they may be willing to do it. Bankruptcy should be the absolute last resort, and only if the debt is substantial. 

Some Surprising Statistics About Medical Bill Debt and Credit Reports

A survey by the Kaiser Family Foundation and the New York Times showed that 31% said the total amount of the bills they had problems paying reached at least $5,000.  Thirteen percent said their medical bills totaled at least $10,000, and 24% said it was less than $1,000. A $400 emergency bill is a hardship for many people, according to a 2015 Federal Reserve report.  The report found that 46% said that an unexpected $400 expense would leave them unable to pay it, or they’d have to borrow or sell something to do so. Among people who wouldn’t pay the bill in full with cash, 38% would use a credit card and pay it off over time, and 31% couldn’t cover the expense.

• 75% of patients look up the cost of medical procedures online and medical bills. 
• 62% of patients said knowing their out-of-pocket expenses in advance of service impacts the likelihood of pursuing care. 
• 49% of patients said having clear information on expected out-of-pocket costs before receiving treatment impacts their decision to use a healthcare provider.

Source: News Reports about a Weakening Economy Impacting How Some Patients Seek Medical Treatment 

That’s Not All; Medical Debt Pose a Huge Issue to Working Class Folks

The administrative costs associated with billing and insurance-related activities as estimated to be up to 25.2% for emergency department visits. 

Source: Administrative Costs Associated With Physician Billing and Insurance-Related Activities at an Academic Health Care System 

Patient healthcare costs – including deductibles and maximum out-of-pocket payments – have increased by almost 30% percent since 2015. The average deductible is $1,820, and the average out-of-pocket maximum cost is $4,400. 83% of Physician Practices with fewer than five practitioners said the slow payment of high-deductible plan patients is their top collection challenge. 

Source: Black Book™ 2017 Revenue Cycle Management Survey

2018 Deductible Breakdown For Single Coverage Employer Health Insurance:

• 7% have no deductible
• 16% have a deductible under $500
• 19% have a deductible between $500 and $999
• 46% have a deductible between $1,000 and $2,999
• 6% have a deductible between $3,000 and $3,999
• 6% have a deductible that is $4,000 or higher.

Even if you have health insurance coverage, it doesn’t mean that you won’t fall into medical debt. In this 2018 Deductible Breakdown For Family Coverage Employer Health Insurance, they found that:

• 7% have no deductible 
• 3% have a deductible under $500
• 11% have a deductible between $500 and $999
• 29% have a deductible between $1,000 and $2,999
• 26% have a deductible between $3,000 and $4,999
• 23% have a deductible of $5,000 or higher.

Source: Average Health Care Deductible Nearly $1,500 for Individual Coverage Through an Employer Plan, International Foundation of Employee Benefit Plans; September 11, 2018 

Health Insurance Doesn’t Help Most People Cover Their Medical Bills.

That’s not all, though! At least 68% of patients failed to fully pay off medical bill balances in 2016, up from 53 percent in 2015 and 49 percent in 2014. This number is expected to climb to 95% by 2020, making medical debt ad medical collections an even bigger issue

Source: TransUnion Healthcare, June 26, 2017 Patients Might be the New Payers, But Two in Three Do Not Pay Their Hospital Bills in Full.

67% of Americans are either very worried or somewhat worried about unexpected medical bills (compared to 41% who are very or somewhat worried about paying their rent or mortgage) 

• Source: Data Note: Americans’ Challenges with Health Care Costs, Kaiser Family Foundation; June 11, 2019 
• 73% of providers report that it takes one month or longer to collect from patients 
• Source: InstaMed, 2016 Trends in Healthcare Payments Annual Report, June 13, 2017 
• “It costs four times more to collect from a patient than it does from an insurance company.”
• Source: The Rise of Self-Pay Accounts, The Association of Credit and Collection Professionals, Collector Magazine, February 2015
• “US hospitals provided $45.9 billion in uncompensated care in 2012, representing 6.1 percent of annual hospital expenses.”
• Source: American Hospital Association, “Uncompensated Hospital Care Cost Fact Sheet,” January 2014