Consumer medical debt hurts unprepared providers as well as unaware patients

Somewhere in the neighborhood of 43 million Americans show overdue medical debt on their credit reports. And a lot of them don’t even know about it until a collector starts calling and their credit score has already been damaged.

That’s according to the Consumer Financial Protection Bureau, which published a report last week showing that an eye-popping 52 percent of all collection accounts on credit reports are medical—and that medical debt tops the list of all collection types for which consumers file complaints.

Complaints filed with the CFPB show that many consumers who have medical debts in collection would have been able and willing to pay before being marked for collections if only that had known that they owed. Of consumers with only medical collections accounts, half have otherwise “clean” credit reports, stated CFPB.

The CFPB report shows that medical collections accounts are smaller, on average, than many other types of debt. In fact, half of medical debts are under $207.

“Some consumers may just be confused about what they owe, believe the debt has already been paid, or that they simply do not owe it,” the report states, adding that a single treatment at a hospital can result in a confusing pile of bills from multiple entities. “A health insurance policy may cover some providers and some procedures, but not others. And it may cover all or part of a bill. Some consumers may find it difficult to know what they owe, to whom or for what.”

All of this comes at a time when payers are pushing patients toward higher-deductible plans demanding greater out-of-pocket payments.

As a result, providers are seeing a rise in unpaid invoices that they must recover with collections activities of their own.

Mark Isenberg, a partner with the Indiana-based medical billing firm Zotec Partners, told imagingBiz that these can be tricky waters for radiology groups to navigate.

“By being more aggressive in trying to get those payments from patients, it could increase the stress on a group’s relationship with the hospital facility or system it serves,” he said. “And self-pay after insurance, due to high deductibles, definitely has the potential of moving into bad debt more often.”

“Payers will tell you they are allowing 100% but tell you to get it from the patient,” said Isenberg. “And what payers readily paid at 100% in the past, they’re now paying at 60 to 70 percent, so practices are spending more on collection efforts including sending out more statements, texts and phone call reminders.”

Meanwhile the CFPB pointed out that the IRS is proposing a policy that would require non-profit hospitals to wait at least 120 days before engaging a third-party collector and reporting debt to a credit agency.

The consumer watchdog is all for it. “More consistent and more accurate reporting may have its biggest impact among consumers who are struggling to understand their medical bills and keep up with health care costs,” write the report’s authors. “In addition, it will lead to greater credit predictability and a stronger credit system.”

To read or download the CFPB report, click here (PDF file).