Managing Debt

Surprise Medical Bill? Here’s How to Respond.

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What happens when you discover an unpaid medical bill after it’s already destroyed your credit rating? A reader of Credit.com using the screen name “Sarah” told us in a comment on our blog about her medical bill nightmare, wondering what she could to do fix such a problem.

Sarah and her husband were excited to finally get their financial lives back on track. Hospitalized after a motorcycle accident years ago, Sarah’s husband owed a medical bill of over $11,000. The couple couldn’t afford to pay it immediately, so the bill went to collections. Gradually, they managed to pay it off.

“We just sent in the final check to pay off this balance,” she writes. “We WERE so excited thinking we are finally debt free.”

Immediately after paying off the old debt, Sarah and her husband tried to get preapproved for a mortgage. They were denied. They discovered their credit score was too low, due partly to another medical bill for $21,000 from the same old motorcycle accident.

This bill was entirely new to her, Sarah insists.

“We have never seen the bill or have been contacted about it but it was sent to collections without any knowledge of the bill existing at all,” she wrote.

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Free Tool: Credit Report CardThey tried to confront the problem head-on, calling the collection company to say they never received the bill. But the employee they spoke to “didn’t believe us,” Sarah says.

The ramifications of this new, unexpected medical bill hit immediately. Not only could the couple not qualify for a mortgage, now they worry about Sarah’s husband’s wages being garnished to pay off the debt.

And the timing could not be worse.

“We have 1 baby and another due in 3 months,” Sarah writes. “What can we do? Anything?”

Perhaps surprisingly, many people find themselves in nearly the same situation, says Mark Rukavina, executive director of The Access Project, a nonprofit group that helps to improve health care access for low-income people in New England.

“This isn’t uncommon,” Rukavina sys. “It does happen that people discover these bills for the first time when they’re applying for a car or a house [loan].”

And yes, there are many steps that Sarah and people in her position can take. If she’s lucky, Rukavina says, some of these steps might make the bill disappear. More likely, however, is that the couple will have to pay the medical bill, or at least a portion of it.

The first thing Sarah should do, says Rukavina, is to track down documents of all her husband’s medical bills, including the one they already repaid and the one currently in collection. Request documents from the collections agency, the hospital and, if necessary, any medical providers involved in treatment (sometimes doctors may have privileges to work in a given hospital emergency room, but they may not be actual employees of the hospital or use the hospital’s billing system).

For more details on how to negotiate a medical bill, check out this story by Gerri Detweiler, Credit.com’s consumer credit expert.

[Related Article: Big Hospital Bill? Negotiate!]

“It’s a bit of sleuthing that’s involved here, especially if [the accident was] a few years back,” says Rukavina.

Once you have all these documents in hand, compare them. Maybe Sarah’s husband was double-billed for the same procedure. Or maybe the bill for the same procedure was sent to two different collections companies.

In that case, Sarah might have a chance of convincing the hospital to retract the new, larger bill.

“We’ve seen this kind of duplication,” Rukavina says.

In other cases, both bills really are legitimate. It’s possible the second one got lost in the mail, especially if the couple moved soon after the accident. Or perhaps the hospital never sent the bill to the couple. But those instances don’t happen very often, says Rukavina.

Far more likely, he thinks, is that the couple did receive the bill. But in the rush to respond to the accident, Sarah and her husband probably missed it. “I think in reality it’s pretty rare that it just goes straight to collections,” says Rukavina.

Even if the bill is completely legitimate, there may be steps Sarah can take to reduce it or lower its impact. First, they can ask the hospital for copies of its policies regarding charity care and medical hardship reimbursement for the indigent. Charity care is usually done for free, Rukavina says, whereas proving medical hardship for the indigent generally involves the hospital wiping away some — but not all — of the bill.

And depending on which state Sarah and her husband live in, their state government may offer programs that help people who earn below certain incomes to pay medical bills. Especially since the treatment happened years ago, people in Sarah’s situation should find out whether such state and hospital programs “can apply retroactively,” Rukavina says.

Finally, Sarah and her husband can appeal to the collections agency. The company may be willing to negotiate down the total amount that Sarah and her husband owe. And Sarah should use her bargaining power now, before she starts making payments, to get the company to agree in writing that it will remove the bill from the couple’s credit report as soon as it is repaid.

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That’s important, Rukavina says, because one of the things that’s hurting the couple’s credit score right now is the fact that their recently paid bill is still showing up on their credit reports. And it won’t go away for another seven years.

“If you can get the collection agencies to agree to delete if you pay, then by all means, that’s the way to go. But they aren’t going to readily agree,” says Gerri Detweiler, Credit.com’s consumer credit expert. “Still, if you have a good reason why these ended up in collections (you never received a bill and didn’t know they were unpaid, for example), I’d recommend you push hard for the deletion.”

Either way, consumers should save this step as the last resort.

“If they determine that it’s not a duplicate bill,” Rukavina says, “and they’ve exhausted all other options of getting this thing paid by the hospital, then yes they should try to negotiate with the collections agency.”

Nothing in this process is assured, Rukavina warns. The collections agency may still have the power to garnish the couple’s wages or, if they own their home, to put a lien on their house. But by following these steps in order, Sarah and her husband have a slim chance of making this old medical bill disappear, and a better chance of reducing its size.

Image: Liber the poet, via Flickr

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