You may have heard that medical debt under $500 no longer hurts your credit. The change has benefited millions of Americans, but it’s left people wondering: If they don’t count against you, is there any reason to pay small medical bills?
The answer is complicated. If you owe $499 or less to a medical provider, you can do Just ignore the bill.
But what happens next depends on the actions the loan holder decides to take. In all likelihood, you will receive multiple requests for payment. Expect phone calls or letters in the mail. Finally, the provider will likely sell the debt to a collection agency.
In the past, the involvement of collectors caused major problems for patients. Prior to last year, a collection would likely appear on your credit report after a period of time, making it difficult to qualify for loans or apartments. And before July 2022, when the credit bureau reduced Reporting medical collections, even a paid medical debt could stay on your credit report for seven years.
But under pressure from lawmakers and President Joe Biden, the three credit bureaus — Equifax, Experian and TransUnion — Agreed willingly They will stop reporting medical debts under $500. These collection tradelines were removed from credit reports in April 2023.
(The Biden administration also Proposed a rule To completely eliminate the reporting of medical debt on credit reports, which would remove an estimated $49 billion in medical collections from the credit reports of 15 million people. However, the future of that rule is uncertain with Biden leaving office.)
This is not what policy development means the hospital has stopped selling medical debt under $500 to debt collectors. It is still common to do so when their attempts to obtain payment fail. If you have an overdue bill, you can go online and check that particular hospital’s billing and collection policy to understand the consequences of nonpayment, according to Erin Duffy, at the University of Southern California’s Shaffer Center for Health Policy. Director of Research Training. and economics.
But the good news for patients is that debt collectors have lost their leverage with medical debts under $500. While they may contact you repeatedly to demand payment, if you don’t mind blocking their calls, they may eventually give up or settle for a lower payment.
With this in mind, if you are experiencing financial hardship, letting a medical debt go into collection may be something you consider. In some situations, this may be your last resort.
The bottom line is to be careful and know the risks. Experts tell Money that if you can afford medical debt, there are still several reasons you might want to go ahead and pay it off.
What happens if you don’t pay off medical debt under $500
First, a provider may refuse to see you for non-emergency care in the future if you have money and are past due. If you live in an area with a limited number of doctors, burning bridges is an especially important consideration.
While you legally must Always Be able to get care in a hospital emergency room regardless of your financial circumstances, specialists can terminate the relationship if you don’t pay them.
Also keep in mind that if a hospital knows you have a poor payment record, you may not get the best possible care, says Ji Bai, professor of accounting and health policy at Johns Hopkins.
“Hospitals have questions about how they treat you or how they treat you,” Bai says. “They can do more, they can do less, and doing more will cost more money … hospitals have many ways to protect themselves financially.”
OK, but what if the risk of losing access to a particular hospital or healthcare provider doesn’t matter to you? Are there any real downsides to letting a small medical debt go into collection?
Dealing with debt collectors can be exhausting in itself, says Howard Dworkin, chairman of Debt.com, a consumer financial advice site. They can send letters, call you and threaten to sue: “Can they take money from you? Not really. Is it annoying? Yes,” says Dworkin.
Can a Debt Collector Sue You for Medical Bills?
More seriously, you can be sued for medical collections of less than $500, although this is rare. In most cases, collectors avoid small claims court for these debts because of the filing fees and time commitment.
“The cost to these companies won’t be worth it,” says Herman Thompson, Jr., a certified financial planner at Innovative Financial Group. “But, you know, you get them out on the phone the wrong way, make a huge enemy — they have a legal right. [sue you].”
Still, it’s a real risk, says Michael Karpman, principal research associate at the Urban Institute’s Health Policy Center.
Study on medical debt in maryland, new York, Virginia And Wisconsin Karpman has found that while most lawsuits are filed over $500, some litigants settle for less, Karpman says. For example, in Maryland, 23% of medical debt lawsuits between 2009 and 2018 were for less than $500. And this is important.
“They can obtain a judgment for a variety of actions to collect payment, including garnishment of wages, freezing or confiscation of bank account funds, liens on personal property — all of which are different legal actions. The options that are available to people who file a civil suit and get a judgment in their favor,” Karpman says.
Judgments are also public records that potential lenders can see even if a debt does not appear on your credit report.
Still, the odds of a debt collector suing you for a few hundred bucks are slim, experts say. In New York, these lawsuits have been largely banned: they can no longer be brought against anyone earning less than 400% of the federal poverty level ($58,320 for an individual).
“The risk of a lawsuit for loans under $500 is impossible because the cost of going after that money is far greater than the company is likely to actually collect,” says Dr. Carolyn McClanahan, a physician and certified financial planner at Life Planning Partners. writes in one. Email.
But it’s technically an option: “It’s just a gamble the borrower has to live with,” she adds.
Waiting to pay can be beneficial
Sometimes patients in difficult financial circumstances pay medical bills with credit cards, but this can be a mistake because if it is not paid, interest will start accruing on the debt.
And once you put medical bills on a credit card, credit reporting protections for medical debt don’t apply. This means that if the card goes delinquent, even debts of less than $500 can show up on your credit report and hurt your score.
Despite the potential consequences of ignoring medical debt, there are some benefits to letting the bill go unpaid.
If a debt collector has paid you money on the dollar to catch up on your debt, they are not always expecting to recover the full amount, and you may be able to negotiate a lower payment to the collector.
That’s why Jane Clark Sharl, a 34-year-old poet in Detroit who recently negotiated a $700 epidural anesthesia loan down to $60, says she favors additional credit protection around medical debt. . She incurred the bill during the birth of a child in 2020 when she did not have health insurance through an employer and relied on a religious cost-sharing group.
Sharle says that while she’s generally a fan of fiscal responsibility, health care is a difficult matter because the value of services received is so intimate. Paying too many bills is hard to rationalize, especially when there are no longer serious consequences.
“Obviously, you don’t want things to go into a collection, as that’s not your long-term solution,” she says. “But at the same time, if you can get 80% off by waiting, it’s worth it.”
More than money:
Dollar Scholar asks: How should I handle a large medical bill?
How do medical bills affect your credit?
The White House plans to ban all medical debt from credit reports
