Many consumers with medical bills, often confused about who owes what, allow the debt to go unpaid and end up in collections. The impact on credit report can last for years, even when consumers later pay or settle up. Medical debt is treated like any other consumer debt when it comes to credit. Some healthcare providers sell past-due bills to debt collectors, which claim a chunk of what they recover; and that is when information can go to credit rating agencies. A debt of more than $100 referred for collection can lower an otherwise perfect credit profile by more than 80 points, says Frederic Huynh, senior principal scientist for FICO in San Rafael, Calif.
Some industry groups and consumer advocates, however, argue that medical debt does not necessarily predict creditworthiness and that damaged credit from such debts can constrain economic activity. The Medical Debt Responsibility Act, introduced last year, would require credit firms to remove fully paid or settled medical debt from credit reports within 45 days. This may improve the accuracy of credit reports and expand the rights of consumers.
A set of voluntary best practices released in January by the Healthcare Financial Management Association suggests that medical providers and their business partners make bills clear and patient-friendly. Providers also should be consistent, track all consumer complaints, and report back to credit reporting companies when an account is resolved. Many physicians would consider working out a payment plan with patients to avoid collections. Consumers dealing with medical-debt problems should communicate that to providers and insurers, rather than ignore the bill. They can also ask for an itemized bill and dispute any errors, preferably before they pay for services. Consumers also can ask if they qualify for discounted or charity care.