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Medical Debt
Daniel Cohen
UpdatedApr 3, 2024
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    8 min read

Medical debt is scary, because it can hit you no matter how financially savvy and responsible you are. Few people, especially those who are younger, expect to be saddled with catastrophic medical expenses. A short hospital stay can be enough to saddle you with a medical debt so large that repayment can seem impossible. This page explains the different options available to you if you have medical debt and what your rights are if you owe medical providers.

Medical Debt vs “Regular” Debt

The laws governing medical debt can be different from the laws for other debts, because medical debt is different in many ways. Medical costs are difficult to plan for when you don’t know in advance what they will be, and how much will be covered by insurance -- Of insured debtors with problems paying medical bills, says Becker’s Hospital CFO, 26 percent had their claims unexpectedly denied by their insurance companies. If you have a medical emergency, you’re not in a position to shop for the lowest-cost provider or procedure – Becker’s said that 32 percent of troubled debtors received care from an out-of-network provider, and their insurer refused to cover treatment. Your surgeon could be in-network and covered and your anesthesiologist out of network and cost you ton.

You often won’t even know you owe medical debt until you get a notice from a collection agency. For these reasons, the government has passed laws designed to protect consumers, and you may have more options for dealing with medical collections than for other types of debt.

Credit Reporting for Medical Debt

Because of the involuntary nature of most medical debt, and because it often doesn’t surface until the account is in collections, credit bureaus now treat it more leniently, in the most recently released scoring models. The newest models wait at least 180 days from the time the debt is incurred before adding it to your credit history. In addition, medical collections that appear on your report will be deleted from your history once they’re repaid – unlike ordinary collections, which affect your history and score for years after resolution.

Some Credit Models Count Your Medical Debt, Some Don't

Depending on the credit or loan you apply for, your creditor or lender may be using a model that isn’t consumer friendly and hits your score for medical debts that are reported right away.

Dodgy Collection Tactics

There are strict laws governing medical debt collection. Unfortunately, some hospitals and / or the collection agencies they hire resort to high-pressure and illegal tactics, says legal site Watch out for these aggressive behaviors:

  1. Collectors accosting you in the hospital or pretending to be hospital employees
  2. Demands for payment of outstanding accounts before allowing you to be treated
  3. Pressure to not use emergency room facilities
  4. Pushing you to hand over a credit card while you’re ill or injured

It is illegal for your medical privacy to be violated or for your treatment to be interfered with by third party collectors. There are different requirements for private, for-profit hospitals and non-profits. Non-profit hospitals are required by law to determine if you’re eligible for assistance with your bill before referring you to collection agencies. In addition, they can’t charge uninsured patients who qualify for assistance more than the rate for insured patients. Private facilities have more leeway in collection efforts than non-profits.

The last thing you want to do with medical debt is to ignore it. Medical providers and collectors have plenty of resources and options to get money from you.

Medical bill collectors can report your delinquency to credit bureaus, lowering your FICO score and potentially affecting your ability to get credit, insurance or even a job. They can sue you, and if they win they may obtain a court order to garnish your wages or even seize your bank accounts or other assets, depending on the collection laws in your state.

When the Bill Arrives

Many financial advisors recommend that you don't immediately borrow or drain your savings to pay off large medical debt. That’s because hospitals are often willing to work out an affordable option with you, and often don’t charge interest as long as you’re making timely payments.

Call your provider’s billing department if you can’t immediately pay what’s owed. Medical debt is notoriously hard to collect, and that can work in your favor. Bargain for lower pricing from your provider, especially if you’re not insured – insured patients are often charged less than uninsured people, so there’s room for negotiation. In addition, express your willingness to make payments if the amount is affordable.

Some advisors recommend simply sending in a payment that you can afford, and if the provider accepts it, continue paying each month – normally, you won’t incur interest charges, which is another reason not to put medical debt on a credit card or withdraw from your retirement account.

If you can send in at least two percent of the balance or $15 a month, whichever is greater, you have a decent chance of approval for your plan. However, don’t send in more than you can afford, even if it’s less than two percent. If the provider returns your payment, saying that it’s insufficient, you may need to explain your hardship or document your income to get an exception.

Medical Debt Statutes of Limitation

All 50 states have statutes of limitation for debt collection. After the SOL is reached you can use it as a legal defense if you are sued by a creditor. Medical debt is classified as a written contract and the SOL ranges between three and 15 years, and six is the median. As with all debts in collection be careful about taking an action that can restart the clock on the statute of limitation.

Help with Medical Debt

If you’re unable to negotiate a satisfactory arrangement with your provider, you have options. Here are a few.

Ombudsman or Advocate

A medical ombudsman is a patient advocate who can help resolve billing, care and other issues. Many states have an ombudsman office to mediate problems between patients and providers, and individual hospitals may also have them on staff. At the federal level, there is a Medicare Beneficiary Ombudsman for Medicare patients.


If your income is low and your medical bills are high, apply for Medicaid now. You may be allowed retroactive benefits for up to three months before applying, if you were eligible during that time.

Non-profit Credit Counselors

Non-profit credit counselors are trained to help consumers and creditors find debt solutions together. They may be able to help you negotiate affordable repayment, reduced balances and other concessions from medical providers.

Charities and Support Groups

If you have a medical condition with a support group, it may be a valuable source of help dealing with the debt caused by your condition. Other potential help might come from churches and other local charities in your area.


Medical debt can sometimes be settled by offering a smaller sum as payment in full. According to the VP of Negotiations at the largest debt settlement firm in the US, medical debt settles at a slightly higher rate than credit card debts. This is because it typically involves several bills rolled up into one. Meaning the x-ray technician, the anesthesiologist, the surgeon, etc., each have a bill and each of them may not want to take a cut.

Settling a Medical Debt

If medical debt is part of the reason you are struggling with debt, get a free consultation with a Certified Debt Specialist.


Medical debt is unsecured and can be discharged in a Chapter 7 or included in a Chapter 13 proceeding. If your medical bills are too overwhelming for other solutions, you’re not eligible for income-based aid, or you have a lot of other debt you can’t pay, bankruptcy may be your best choice. According to a study by the NPR / Robert Woods Foundation, seven percent of those experiencing hardship from medical bills file bankruptcy.

Avoiding Medical Debt

The classic advice, “Hope for the best and prepare for the worst,” is especially true for medical debt. Insurance is your best defense from high medical bills.

Catastrophic Care Puts Ceiling on Out-of-Pocket Costs

Catastrophic care coverage is the cheapest plan that meets the minimum requirements of the Affordable Care Act, aka Obama Care. It offers very low premiums but comes with a very high deductible. You’ll need to qualify for a hardship exemption or be under 30 to choose a catastrophic health plan.

Under the ACA, all plans, including catastrophic coverage, have a maximum out-of-pocket cost no more than $6,600 for an individual and $13,200 for a family and must provide certain minimum benefits.

Health Savings Accounts

It’s smart to open a health savings account, or HSA – especially if you have a high-deductible plan. HSAs allow you to set aside tax-free dollars to pay out-of-pocket health expenses. This can lower your tax bill and also make sure you have money for unexpected medical costs.

Audit Your Bills

One action everyone should take to reduce their medical costs is to audit medical bills, especially hospital statements. Medical bills are notoriously inaccurate (one study found that half of all bills submitted to Medicare contained errors), and yours may be much higher than necessary. Auditing is a pain, because you have to get an itemized bill and your medical records and then compare them – but if you’re staring at thousands in charges, it’s probably worth it. You may be able to get help from a medical billing advocate service – many charge a percentage of whatever savings they can ferret out – or your hospital may already have advocates on staff.

Medical bills are the #1 cause of bankruptcy in the US according to several studies. It pays to be cautious upfront. If saddled with a large medical debt, be active in pursuing damage control, to limit the costs and harm to your credit.

Dealing with debt

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2023 was $17.503 trillion. Housing debt totaled $12.612 trillion and non-housing debt was $4.891 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 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.

Each state has its rate of delinquency and share of debts in collections. For example, in Hawaii credit card delinquency rate was 2%, and the median credit card debt was $472.

While many households can comfortably pay off their debt, it is clear that many people are struggling with debt. Make sure that you analyze your situation and find the best debt payoff solutions to match your situation.