Coming Changes in the Way Medical Debt is Reported

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The three major credit reporting agencies have announced major changes in the way medical debt is reported. STAT News reports that about half of all bad debt on credit reports is related to medical bills. Starting in mid-September, Experian, Equifax and TransUnion will all initiate a 180 day waiting period before reporting medical debt on consumers’ credit reports.  This will allow six months for hospitals, clinics and doctors to work out medical bill payment disputes with insurers and patients.

Hospitals and doctors have never been very adept at billing patients directly and collecting from them. Unpaid medical bills are often sent to collection agencies or purchased for pennies on the dollar by collections agencies who hope to profit from anything paid. For example, my wife found a medical-related bad debt on her credit report quite by accident. The lab had never billed her for the services — at least that she was aware of. After comparing the charges, the lab location and the time the services supposedly took place, she concluded the charges were probably legitimate. She diligently called up the agency and paid the ~ $100 outstanding laboratory bill.

We didn’t really know whether she was enriching a firm that invested in her bad debt or paid a collection agency working for the lab the debt was originally owned. What was most annoying was not the bill; it was the way she found out she had an outstanding medical debt. She discovered it two years later with a mysterious negative report on her credit.

My wife could have possibly negotiated a discounted payment if she had been so inclined. However, she did not want to argue over ~ $50 she actually owed.  Yet I am much, much less sympathetic about outstanding medical bad debts when disparate providers (many you never met ahead of time) all send separate bills with outrageous fees for things you were never give a choice about. Or were told the prices for in advance or told you could shop elsewhere or decline.

My idea for improving bad debt collection is greater transparency. The current establishment will only change their business practices when it is in their best interest to do so. My solution is to require a meeting of the minds – the standard for n enforceable contract — before a debt becomes collectable. Only then will all parties have an incentive to sign actual agreements disclosing the cost of services patients are expected to pay for.

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