What Happens If You Don’t Pay Medical Bills?

If you have medical debt, you may be wondering what happens if you choose not to pay it. The consequences of not paying certain types of debt are obvious — if you don’t pay a mortgage or auto loan, the bank can repossess your home or car. But what happens if you don’t pay medical bills?

This article explores the consequences associated with not paying your medical bills. Specifically, we’ll outline what medical debt is, what happens if you don’t pay medical bills, what happens once you do pay your bills and some of the things you can do to help pay off your debt.

What is medical debt?

Medical debt is an overdue, unpaid bill related to a medical expense, and roughly 79 million Americans are dealing with medical bills or debt. 

After you receive medical care or have a medical procedure, you’ll receive a bill from the doctor or healthcare provider. You are required to pay this bill within a certain number of days. The timeframe can vary from one institution to another and will be spelled out on the bill.

If you do not pay the bill within this time, you’ll have medical debt. Medical debt is difficult because it is often unplanned. You don’t necessarily plan to have to go to the emergency room and receive a large hospital bill. 

A medical expense is likely not something you’ve built into your budget. (Though, this is one reason why having an emergency fund can be so beneficial.)

What happens if you don’t pay medical bills?

As your bill becomes past due, penalties such as late fees may be added to the balance by the healthcare institution that is charging you. Eventually, if you do not pay this bill, the healthcare institution may sell the debt to a debt collection agency. Once it is sold to a debt collection agency, you will likely receive phone calls from debtors seeking repayment. This added burden can add stress to your life and have a significant impact on your financial situation.

Once the account is in collections, it may show up on your credit report. The debt collection agency will report to the credit bureaus that you have an account in collections and that you have made late payments. This information is added to your credit report. Standard practice is that it will show up on your credit report 180 days after the account goes to collections.

Having said that, there are changes coming on July 1, 2022. The three major credit bureaus — Equifax™, Experian™ and TransUnion® — recently announced an update to how they will handle medical debt.

The companies said in a joint statement, “Medical collections debt often arises from unforeseen medical circumstances. These changes are another step we're taking together to help people across the United States focus on their financial and personal wellbeing.“

When these changes take effect, the credit bureaus will:

• Drop all medical collection debt under $500 from credit reports. 

• Drop all paid medical debt from that person’s credit reports (previously it remained there for up to seven years). 

• Not report unpaid medical bills on a credit report until they’ve been in collections for one year.

Since the information on your credit report is used to compile your credit score, medical debt that appears on your report will likely affect your credit score. A lower credit score may impact your ability to secure future lending. Even if you are able to open a new credit card or loan, you may have higher interest rates. 

However, there is some good news. Both credit scoring agencies — FICO® Score  and VantageScore — have multiple credit scoring models. With the FICO Score 9 and VantageScore 3.0 and 4.0 scoring models, medical collection accounts are given less weight than other types of collections.

Despite the possible effects on your credit report and credit score, you may be tempted to ignore medical debt. But the debt collector could eventually sue you for repayment, and the judge could order you to repay the funds or grant other measures of repayment, like wage garnishment. Before things get this far, there are options to help you pay down your medical debt.

What can you do to help pay down medical debt?

If you have debt, there are numerous medical bill options available. First and foremost, you should try to prevent the bill from going to collections. Typically, the medical debt will only show up on your credit report once it’s been sent to collections and — based on the new criteria discussed above — has been in collections for a year.

If you’d like to keep the bill out of collections, you’ll need to negotiate with your medical provider. Reach out to the provider’s billing department and ask about establishing a payment arrangement. The provider may be willing to let you make a lump-sum payment that’s less than the total amount and waive the remaining balance. For instance, if you owe $10,000, the provider may waive the bill as long as you’re able to pay $8,000.

You may also be able to ask for a hold on your account, especially if you think the medical costs should have been covered under your health insurance plan. Don’t be afraid to ask your medical provider to put a hold on the account for 30 days as you review the charges. If you’re disputing coverage with your health insurance company, be sure to share this information with the medical provider.

Your provider may also be willing to establish a payment plan. A payment plan allows you to make monthly payments until you pay your health care bill in full or an agreed-upon portion of it.

If you can’t secure any financial assistance from your healthcare provider, they may send the debt to collections. As mentioned, starting on July 1, 2022, you have one year to pay the balance in full before it appears on your credit report. You should make efforts to pay down the debt by then. You can try negotiating with the debt collection agency for a payment arrangement, much like you previously attempted with your medical provider. 

Should the debt collector not accept your proposal, you may need to consider other options. A debt consolidation loan is one such example. You can take out a loan with a financial institution. When you receive the debt consolidation loan, you’ll be given a lump sum of funds that you can use to pay off your medical bills in full. You will then need to repay the loan.

There are a few benefits to using a loan to pay off your medical debt that’s in collections:

• The terms of the debt consolidation loan may be more favorable than those the debt collector has set forth. 

• You won’t have to deal with harassing phone calls from a debt collector. 

• The payments required for the debt consolidation loan may be easier to work into your personal finances.

• Because you have paid the debt collector, the medical bill will be removed from your credit report.

Paying your medical bills can be difficult but doable

If you unexpectedly require medical services, you may have difficulty paying off the bills that come with it. What happens if you don’t pay medical bills? Depending on how long it’s been since you received the bill, the bill may end up going to debt collectors and harming your credit score.

Fortunately, the credit bureaus recently announced that they will remove medical debt from consumer credit reports once it has been paid. There are different options available to help you pay down your medical debts, including negotiating with your doctor’s office, negotiating with your debt collector or using a tool like a debt consolidation loan.

One other tool to help manage your personal finances is Tally†. Tally is a debt payoff app designed to help you pay down credit card debt quickly and efficiently with a lower-interest line of credit. By paying off your credit card debt and managing due dates, you may be able to improve credit scoring factors.

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.