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What is Medical Debt Forgiveness and Is it Possible?

Medical Debt Forgiveness

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Peter Warden
UpdatedMay 28, 2024
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    5 min read
Key Takeaways:
  • Tens of millions of Americans have unpaid medical bills. There's no reason to be embarrassed if you're one of them.
  • Hospital and government programs are the most common ways to get medical debt forgiveness.
  • Charities also can help you pay off your medical debt.
  • A debt resolution program is an alternative to consider to deal with your medical and credit card debt.

When medical emergencies pop up out of the blue, the first thing to do is to get proper care—not worry about being able to afford it. But for many of us, that's not always the case. 

There are a lot of reasons for medical debt. Sometimes it is due to unexpected events, such as a broken limb or swelling appendicitis. Other times, medical debt is due to long-term medical treatment and everyday life-saving medication, which can be very costly. 

If you built up medical debt, learn how to deal with it. Even if you can’t afford the payments, there are various medical debt forgiveness programs.

What is medical debt?

Medical debt is any unpaid medical bills. It occurs between patients receiving the bills and when they pay them. Sometimes, patients cannot settle their bills, and the debt hangs around for years. 

Medical debt still exists after the hospital or clinician gets paid if the patient borrows to settle their medical bills. For example, many people use credit cards or personal loans to settle those bills. 

Sometimes medical debt is money you owe to non-medical providers. Suppose you used credit cards to pay for medical expenses. In that case, credit card companies or third-party collection agencies might be chasing you for the money.

Medical debt forgiveness act - does it exist?

It's important to note that the "Medical Debt Forgiveness Act" isn't an official term or act. It is a general term that refers to the Medical Debt Relief Acts.

The Medical Debt Relief Acts are laws being proposed to help people with medical debt. Here are some of the things the various Medical Debt Relief Acts want to do:

  • Let people have their medical debt forgiven or reduced
  • Make it easier to pay back medical debt
  • Give financial help to people struggling with medical debt
  • Protect people's credit scores from being hurt by medical debt
  • Regulate how medical debt is collected and reported

It's worth noting that different Medical Debt Relief Acts may propose different changes, and the specific changes can vary depending on the legislation. Some of the Medical Debt Relief Acts that have been proposed in recent years include:

  • The COVID-19 and Health Care Disaster Relief Act of 2021
  • The Protecting Consumers from Medical Debt Act of 2021
  • The Medical Debt Relief Act of 2019 and 2021
  • The Comprehensive Consumer Credit Reporting Reform Act of 2019

Recently, credit bureaus also made changes to help people manage both medical debt and credit card debt. The goal is to help people pay back their debts and not have their credit scores hurt. A few of the issues addressed are:

  1. Increasing the time before a medical debt collection item appears on your credit report from six months to one year.
  2. Reducing the number of medical collections that appear on your report. Items less than $500 will not remain on credit reports.

How medical debt forgiveness works

Medical debt forgiveness is more common than many realize. 

Medical debt forgiveness is when your healthcare provider agrees to collect less money than you owe.

Two ways to save: 

  1. Ask for free treatment. If you're living on a low income, you might be able to avoid a large hospital bill by asking for free treatment.  
  2. Request financial assistance. If you are already dealing with bills, ask your medical provider for assistance. They can look at your income, household size, and other financial factors to consider your eligibility. 

Your first line of defense: Health insurance and medical debt

Having health insurance provides a high level of protection against unmanageable bills. But health insurers' deductibles mean that protection is far from perfect. 

Even having medical coverage doesn't guarantee that you won't have medical debt. In fact, it is common that people with health insurance still cannot afford their medical bills.

Research by the Kaiser Family Foundation showed that "about a third (32%) of single-person households with private insurance in 2019 could not pay a $2,000 bill, and a half (51%) could not pay a $6,000 bill."

 Medical debt forgiveness programs

 Three ways to get debt resolved or forgiven are:

  1. Hospital programs
  2. Charities and nonprofit organizations
  3. Government programs

Remember that any benefit you receive from the forgiveness of medical debt may be considered taxable. Take a look at the IRS's rules on this. 

 Here are details about each of the programs.

Hospital programs

Your first step is to call your hospital's billing department. Ask if you're eligible for charity care or financial help under its programs. 

Not all hospitals have either program, but all nonprofits must have them, and many for-profits run them.

Before making that call, prepare by gathering relevant documents, such as your last tax return and bank, debt, and asset statements. You'll have to show that your income is so low that you qualify for charitable care. 

 Or, maybe you can prove that paying the bill will cause significant financial hardship.

 The National Consumer Law Center has an excellent article on this and other tactics for reducing hospital bills. It goes into more detail than we can cover here. 

One early tactic is to request an itemized bill from the hospital and go through it line by line. According to Becker's Hospital Review, up to 80% of such bills contain errors. And, with luck, you might find some savings.

Charities and nonprofit organizations

There are many charities and nonprofits that can help you resolve medical bills. These include local ones that may serve your state or local area. Even a local church might assist you.

So, put in some time researching your options. And, if one organization can't help you, ask it for details of others that might.

Here is a sample of 12 charity organizations to help resolve medical bills::

  1. National Jewish Health Financial Assistance
  2. The Access Project
  3. Aunt Bertha
  4. The PAN Foundation (Patient Access Network)
  5. American Cancer Society (ACS)
  6. Clinic Sliding Fee Scale
  7. The National Association of Free and Charitable Clinics (NAFCC)
  8. Free Medicine for Hepatitis C (genotype 1)
  9. The HealthWell Foundation
  10. Bridges to Access
  11. The RX Advocate
  12. Partnership for Prescription Assistance

Some help people treated for certain conditions or have specific needs. And not all may be open to everyone. But you may find that list a helpful starting point.

Government programs

Common federal government programs are:

  1. Medicare – For those aged 65 years or older, and younger disabled people and dialysis patients
  2. Medicaid – For low-income people of every age
  3. CHIP (Children's Health Insurance Program):  CHIP provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid. In some states, CHIP covers pregnant women. Each state offers CHIP coverage and works closely with its state Medicaid program."

Generally, you need to enroll in these programs before you incur any medical expenses they may cover. But, Medicaid may allow "retrospective" claims, meaning you can claim within a set period for costs incurred soon before you enroll. 

Note that some states have been reining in these retrospective claims. And you'll have to check your state's policy.

Debt settlement and medical debt forgiveness

When debt becomes unmanageable, it's natural to feel helpless and hopeless. That may be the time to bring in professionals.  

Debt settlement is a proven program where a team of experts works with creditors on your behalf to reduce the amount you owe. This allows you to pay off debts faster than minimum monthly payments and keeps more money in your pocket.

You can get help with credit cards, medical bills, personal loans, and other unsecured debts.

It begins with a free debt assessment, which looks at your income. The outcome is a personalized plan that works for you. That will include a debt payment plan that you can afford.

Evaluate your options, and remember that medical debt forgiveness is a real possibility when in financial hardship.

Frequently Asked Questions

Can medical debt affect your credit score?

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Medical debt appears on your credit report and can seriously harm your credit score.

The big three credit reporting agencies, Experian, Equifax, and TransUnion, announced in 2022 that they would change how some medical debt is treated. The changes are expected to go into effect in 2023.

When the federal regulator, the Consumer Financial Protection Bureau (CFPB), analyzed the credit reporting agencies' initiative, it found some real benefits nationwide:

The two significant changes are:

  1. The time between a medical bill being put into collections and appearing on a credit report doubles to one year from six months.

  2. Two-thirds of medical collections on credit reports will no longer be reported – But only those of less than $500. Larger collection accounts will remain on reports.

These changes can help to protect your credit score which wll make it easier to qualify for loans.

Can debt collectors contact me for medical debt?

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Sometimes after a medical bill is past-due, a hospital or other healthcare provider will put the account into collections. That's when you get calls from the provider's in-house team or a third-party collections agency.

Some people, under stress, pay hospital bills with credit cards. If you are delinquent, then a collection agency may try to collect.

Debt collectors will often negotiate and allow you to pay off part of the debt.

Dealing with debt

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Auto loan debt was $1.62 trillion and credit card was $1.12 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

The amount of debt and debt in collections vary by state. For example, in Wyoming, 24% have any kind of debt in collections and the median debt in collections is $2680. Medical debt is common and 17% have that in collections. The median medical debt in collections is $1515.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.

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