Managing Debt

Time for a Fair Medical Billing Act

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This is the first article in a series devoted to consumer issues for National Consumer Protection Week, March 3-8.

Time for a Fair Medical Billing ActImagine receiving a credit card bill riddled with charges you don’t recognize or duplicate charges for the same item. The total is far larger than what you thought you spent. When you call your credit card company to complain, you don’t get a clear explanation. Instead, you are told that you need to pay it right away or your account will be sent to collections.

Or picture this scenario: You receive a collection letter in the mail. When you call to inquire what the bill is for, you are given the name of a company you don’t recognize, or a bill you thought was already paid long ago. When you ask why you were never sent a bill, you don’t get a clear answer. Instead you’re just pressed for payment. In the meantime, your credit scores plummet when the collection account appears on your credit reports.

While these scenarios sound completely far-fetched, just substitute “medical bill” for “credit card” and they’ll suddenly make sense.

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One of the reasons you don’t hear these kinds of outrageous billing problems with credit card charges is that we have a strong consumer protection law that gives consumers clear rights when disputing credit card bills. It’s called the Fair Credit Billing Act, and it’s part of the Truth In Lending Act. As the Federal Trade Commission points out in one of its online publications:

Have you ever been billed for merchandise you either returned or never received? Has your credit card company ever charged you twice for the same item or failed to credit a payment to your account? While frustrating, these errors can be corrected. It takes a little patience and knowledge of the dispute settlement procedures provided by the Fair Credit Billing Act (FCBA).

What consumers need is a Fair Medical Billing Act that applies similar protections to medical bills.

Free Credit Check ToolThe medical industry will no doubt say that’s impossible: medical bills are too complex and there may be several parties involved, including the patient, (sometimes multiple) providers, an insurance company and perhaps Medicare. Yet it is precisely that complexity that leaves patients vulnerable to abusive billing practices.

When we talk about National Consumer Protection Week we often focus on what consumers can do to protect themselves. But in the crazy, convoluted world of medical billing there is sometimes nothing they can do to protect themselves. Consider these stories from our readers:

  • Heather incurred a medical bill for a visit for which she shouldn’t have been charged. The problem? It was improperly coded. But even though she knew her way around the system (she worked in medical billing for 14 years), she ended up paying it rather than risk damage to her credit.
  • Brett Goldstein incurred $30,000 in medical bills after his daughter spent less than 24 hours in the hospital. When he delved into the charges (not an easy task) he discovered double billing, and charges for services not received.
  • Sarah and her husband were delighted to finally pay off $11,000 in medical bills incurred when he had a motorcycle accident. But when they tried to get a mortgage they discovered another $21,000 in medical bills for which they had never received any kind of bill.

Steven Brill’s recent piece in Time magazine, Bitter Pill: Why Medical Bills are Killing Us, delves into medical pricing and profits. He identifies “the core problem” as “lopsided pricing and outsize profits in a market that doesn’t work.”  Whether there is political will to change such a deeply entrenched and highly profitable system remains to be seen.

But in the meantime, why should a consumer have significantly more rights when they buy a $5 pair of socks with their credit card than when they incur a $5,000 bill after a few hours in the ER?

[Related Article: The Ultimate Guide to Solving Your Medical Bill Problems]

I propose adapting some elements of the Fair Credit Billing Act and applying them to medical bills. Look at some of the reasons consumers can dispute charges under that law:

  • charges that list the wrong date or amount;
  • charges for goods and services you didn’t accept or that weren’t delivered as agreed;
  • math errors;
  • failure to post payments and other credits, like returns;
  • failure to send bills to your current address — assuming the creditor has your change of address, in writing, at least 20 days before the billing period ends; and
  • charges for which you ask for an explanation or written proof of purchase, along with a claimed error or request for clarification.

Consumers have 60 days from the date they received the first credit card statement on which a charge appeared to dispute it. When they do, the creditor must acknowledge the complaint, in writing, within 30 days after receiving it, and then has up to two billing cycles (but not more than 90 days) to resolve it.

It is time to give patients, who can receive thousands of dollars in medical bills after an accident or illness, similar rights. The Affordable Care Act does provide some protection: nonprofit hospitals may not engage in extraordinary collection efforts until they have provided patients with a written financial assistance policy and given them the chance to apply. Yet that just barely scratches the surface.

There are other billing problems that don’t apply in the context of credit card bills, but do occur with medical bills. An example is when a provider fails to submit a bill to the patient’s insurance in a timely manner and the patient ends up with a bill that should have been covered but isn’t as a result.

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The Other Problem: Medical Collections on Credit Reports

One of the many problems with our current medical billing system is that a patient’s bills may be sent to collections while they are waiting for their insurance company to process them, or before they have even had the chance to pay them. One study found that over half of all collection accounts on credit reports are due to medical bills.

“It’s an injustice that small medical bills which are often confusing and inaccurate can prevent an otherwise creditworthy consumer from qualifying for a mortgage refinancing their home or buying a car,” says Rodney Anderson, executive director of Supreme Lending.  Anderson has helped spearhead an effort to change that.

The answer is The Medical Debt Responsibility Act, which would protect consumers’ credit reports from the severe damage that can result when a medical bill is sent to collections. A simple one-page bill with bipartisan support, it has been reintroduced this year by Oregon’s U.S. Senator Jeff Merkley who says:

The Medical Debt Responsibility Act fixes this problem (of medical collection accounts on credit reports) by prohibiting consumer credit agencies from using paid off or settled medical debt collections in assessing a consumer’s credit worthiness.  In addition, the bill will require the creditor or credit rating agency to expunge the medical debt from the consumer’s record within 45 days from the day it is paid off or settled.

It’s an important step in helping protect patients from abusive medical billing practices and Congress should pass it this year. Then, once that legislation is law, perhaps someone can spearhead an effort to give patients clear and specific rights when they get a medical bill.

Image: Hemera

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • john russ

    My wife was assigned to hospice care for 3 months and then was released from hospice. She got sick again a couple of weeks later and spent 28 days during four stays in the hospital over the course of the next 45 days. We are getting dozens of bills from doctors and companies that we don’t recognize. Even her insurance company cannot decipher who owes what. We have spent countless hours trying to sort through what is owed and who should pay.
    Before this happened, she had excellant credit. So many of the bills have gone to collection agencies now that it is impossible to reverse, considering that noone can tell us who is responsible for payment, and the amout is too large for us to absorb into our budget. The collection companies demand more than she makes; it is an impossible scenario.
    After many years of care protecting her credit rating, this bout with the healthcare system has ruined her credit. She has good insurance, but noone is willing to spend the time to get to the bottom of who should pay. The providers want their money and don’t care who they get it from, and the insurance company wants to pay the least that they can get away with. This leaves an ill woman to do the impossible-sort out medical bills and collections.
    Many of the bills come from out-of-state medical companies that are not cooperative and hard to communicate with. They harrass her literally to tears, call her every day threatening and treating her as if she were some deadbeat.
    I am convinced that there is no humanity left in the industry; it’s all about the money, and if you don’t jump when they bark, you are ruined for the rest of your life. As far as I can tell, there is no remedy-only further distress to a person who is over stressed by her medical condition.
    As a final note, she just spent 4 days in the hospital again, and the day she got home the hospital called about her bill. SHE HAS GOOD INSURANCE.

    • Gerri Detweiler

      John – I am so sorry to hear what you and your wife have been through. Thank you so much for sharing your story. It’s a good example of how broken the system is.

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  • Donna

    I had a doctor’s appointment for a check-up in November 2011 and my doctor sent me for routine lab work to check my blood sugar and cholesterol. But, my heath insurance provider had recently talked my employer into a plan with a $1000 deductible for “lab work.” Shortly after my appointment, I was sent a $657 bill for these 2 tests. I only earn $30,000 per year and I am a mother of a teenager. I pay all my bills, including a mortgage and a student loan. I have no debt other than that and I do not live beyond my means. We clip coupons and budget my salary to the penny. It would take a few years worth of my savings to pay this bill. The hospital sent it to a collection agency, but I don’t know how I am going to pay for it. I have asked the hospital to explain how these 2 tests could cost $657 when I pay for health insurance coverage. This is a huge percentage of my annual income. I could have taken a course in phlebotomy and done the blood test myself for less than $657. I am so angry when I think about this because I had a perfect credit score and I have worked so hard to not have debt or owe anyone anything. We don’t spend money that we don’t have. We go without Christmas presents and birthday gifts because I can’t afford it. $657 is two months of mortgage payments for me, or two months of groceries, or a year of electricity. We don’t own cellphones. I heat my house with wood because it’s free and I can’t afford propane. It just makes me sick to think that it would cost that much to have my blood sugar and cholesterol checked. And they didn’t even find anything wrong! There must be some way to help people like me. I asked about financial aid, but they said I make too much money to qualify for it. It is so frustrating.

    • Gerri Detweiler

      Donna – I really feel for you. Had your insurance company paid for those tests it probably would have paid around $50 – maybe less. And my guess is that if you had tried to find out how much they cost before you had them done it would have been impossible to get a straight answer. You’ll probably appreciate the interview I did with Dr. Belk, a practicing physician who is speaking out about these issues: An Insider’s Guide to the Insane World of Medical Bills

  • http://healthcaredecoder.com Cindy McFarland, MBA, CPC

    In response to this statement, “An example is when a provider fails to submit a bill to the patient’s insurance in a timely manner and the patient ends up with a bill that should have been covered but isn’t as a result.”
    When a provider agrees to submit an insurance claim for a patient, it becomes the provider’s responsibility to submit that claim within the timely filing limits of that patient’s policy; when a provider fails to get a clean claim in within filing limits, the patient should not be held responsible.

    • Gerri Detweiler

      Yes, you are correct. Under many insurance companies agreements with participating medical providers that’s the case. But you wouldn’t believe the stories we hear where this happens and then the provider simply turns the balance over to collections! Sometimes these bills are several years old and it’s very difficult for the patient to get to the bottom of it – or they don’t know their rights in the first place. (And the insurance companies aren’t always helpful either.)

      • Cindy McFarland, MBA, CPC

        Thanks Gerri, unfortunately I would believe your stories on the issue of consumers being billed wrongfully for claim filing limit denials. Somehow, consumers must change their thinking and become knowledgeable of their insurance benefits and rights… Healthcare consumers pay expensive insurance premiums, know what you are paying for. Claim filing limits are outlined in the insurance policy for both the consumer and the provider.

  • Price

    While I was fighting to get my Social Security disability I was on public assistance. All medicals bills incured during this time were paid, Yeay… Right. When i got my Disability back pay it was only two years worth and they took payment to pay back public assistance right off the top.
    After being approved for SSI I lost public assistance, then I was told No Medicare for 2 years. In that time time I have racked up close to 10,000$ worth of medical bills I cannot afford to pay without becoming homeless again. My house is 5 1/2 years behind on mortage payments and burned down in 2011. Its crazy! No forclosure if though i have been requesting them to since 2008. Anyway, I was talking about med bills. I cannot pay them and I seem to be one of those that prescribed to pop. myths such as, 1. You cannot sell a debt to a third party for profit, ie; collection agency.
    2. Med. bills do not effect your credit if you are making payments even $1.00 a month.
    3. It is against a law that they cannot harrass you for payment especially if you just cannot pay.

    Thankfully enough my medicare will kick in next month. I have no clue how I am going to take care of the 10,000 that I owe. Any suggestions would be most helpfull. I seriously don’t relish the idea of being completely broke depending on food banks again.

    • Gerri Detweiler

      Thanks for sharing your story – can’t be easy. Have you thought about talking with a bankruptcy attorney about the medical bills and/or foreclosure? You may not even have to file because you may be what is sometimes referred to as “collection proof” or “judgment proof,” which means that even if they sued you there wouldn’t really be anything to take. In that case the attorney may be able to negotiate an affordable settlement.

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  • Jay

    This gets more and more confusing. Just spoke today with an insurance agent, who assured me that an old, old past due medical bill balance of under $200, or less than half the original bill for an ER visit, could NOT be applied against my credit score. I am tired of having to think and re-think this issue over and over. My visit was in 2008, and my last payment was in 2011, so I suppose I am still in the mix for a few more years, before my credit score is affected, or am I? I have no idea at this time.

    • Deanna Templeton

      Jay – The insurance agent you spoke to is mistaken. It really boils down to whether or not the hospital (or the collection company they hired to collect) reports the account to the credit reporting agencies. If they do, it’ll end up on your credit report. And if it was a past due bill that became a collection, it will have an impact on your credit score.

      And to make matters even more confusing, how the collection will impact your score really depends on the credit score model being used. In the large majority of cases, the collection is going to hurt your score. However, there are two caveats to this collection rule.

      1. FICO8
      For the latest version of the FICO score model (FICO8), collection accounts less than $100 are excluded from the score calculation and wouldn’t impact your score at all. FICO8 was released in 2009 and lender adoption is growing but there are still a large number of lenders using older versions of the model. In your case, the collection amount is more than $100 so it would count regardless of the FICO model being used. For more on the FICO8 model, click here and here.

      2. VantageScore 3.0
      And if that weren’t confusing enough, there’s also a new change in the latest version of the VantageScore model that was released in the last month or so. While not as widely adopted as the FICO score, some lenders do use the VantageScore model. In the latest iteration — VantageScore 3.0 — the model only factors in collection accounts that have NOT been paid. Paid or settled collections are excluded from this model. For all earlier versions, however, collections count — regardless of whether they are paid, unpaid or settled. For more on the VantageScore 3.0 model – click here, hereand here.

      To learn about the major differences between FICO8 and VantageScore 3.0, click here.

      It’s as clear as mud, I know, but I wanted to at least explain the caveats.

  • Bailey

    I have had surgery every year for the past 5 years and it has ruined my credit. How can I have this removed if possible? We would like to sell and buy a home

    • http://www.Credit.com/ Gerri Detweiler

      What’s on your credit right now? Collection accounts? Paid or unpaid?

  • http://www.Credit.com/ Gerri Detweiler

    Eva, I would suggest you dispute it with the credit reporting agencies reporting it. Do it by certified mail. Explain the debt was already paid to the hospital. Let us know if you run into any snags.

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