If you’ve never found yourself on the receiving end of a letter from a collection agency, consider yourself lucky. There’s a confusion that you’ll feel when receiving a letter from some “last name, last name, & last name” debt collection firm, and an anxiety induced when you see the number of zeros next to “PAYMENT DUE.” You’ll also feel the outrage accompanying an unexpected bill that you might not owe–especially when you are unclear about what it’s for and who it’s from. It’s a roller-coaster of emotion.
And it sucks.
But, this actually isn’t the worst way to find out that your doctor has sent you to collections. There’s one way that is much, much worse.
Jim Halpert's Big Surprise
If you’ve seen NBC’s The Office, you know about the love story between Jim Halpert and Pam Beesly. You also probably remember that in Season 5 Pam was in New York for art school and Jim was saving up to buy his childhood home. As he’s saving money, Jim is counting on receiving a large bonus, based on his historically strong customer performance ratings. When it’s finally time for Jim’s performance review with his boss, Michael Scott, he strolls into his office with all the optimism and excitement of a person ready to take their next big step in life.
In anticipation of good news, Jim is wholly unprepared for what Michael is about to tell him. After opening Jim’s file, Michael gives Jim the verdict in a way that only Michael could:
“Jim, they are poopy.”
Jim is noticeably flustered. He asks Michael to verify that the scores are, in fact, his. After a quick verification that the scores are correct, they discuss the report, and Jim leaves, stunned to have received such bad news.
Maria's Jim Halpert Moment
Unfortunately, a very similar scene happens in bank branches all across America when an excited prospective homebuyer applies for a mortgage. Walking in, the homebuyer, who we’ll call Maria, is elated. She’s spent years saving up the down payment and building her credit, and now Maria has finally found her dream home. She sits down with the mortgage broker and enthusiastically explains her financial situation. The broker is impressed with her preparedness and tells her that he’s confident that the bank can help her out, but he just needs to run a quick credit check. No worries, Maria has paid off her credit card bills, made all of her car payments on time, and never missed a student loan payment. But, as she watches the broker run her score, Maria’s stomach drops. The broker explains that the credit report revealed a medical bill sent to collections a few years ago.
Maria’s response mirrors Jim’s, asking, “are you sure that’s my report?” After a quick verification that the scores are correct, they discuss the report, and, just like Jim, Maria leaves, stunned to have received such bad news.
At this point, you might be thinking, “that sucks, but that will never happen to me! I always pay my bills on time.” You might be right, but you’d be wise to take a less confident view on the topic.
The Reality of the Situation
While we like to believe that we live in a world where bad things only happen to other people and where we can avoid unfortunate situations by doing “the right thing,” that often simply isn’t true. It’s currently reported that 18% of US adults have medical debt in collections, and past studies have revealed that medical debt accounts for more than half of the total collection actions found on credit reports.
To put it simply, this isn’t one of those “it’ll never happen to me” situations. The ugly truth is that this is a situation where if it doesn’t happen to you, it’ll probably happen to somebody close to you.
But the problem doesn’t stop there… Even if you’re working on paying off a bill, you can still get sent to collections. In many states, all it takes is one late payment or one underpayment, and your doctor could send you to collections. Or even more frustrating, if your insurance provider refuses to pay a bill, you could be sent to collections!
The whole process is maddening, especially when you realize that an insurance provider paying a medical bill that’s gone to collections will remove it from your report, but if YOU pay for it yourself, in most circumstances, it won’t be removed from your credit report. That means your insurance provider can be the reason you are sent to collections and simultaneously be the only one with the power to remove the bill from your credit report! The whole system feels like a scale tipped irreversibly in favor of healthcare and insurance providers, at the expense of ordinary folks just trying to stay healthy.
And then it gets much, much worse. People often complain of seeing medical bills appear on their credit report without ever being contacted about the bill being sent to collections, only to learn about it as Maria did. Often called “passive debt collection” by debt collectors, this tactic, which the FTC calls “debt parking,” is intentionally used by debt collectors to coerce desperate consumers into payment. It’s also likely illegal.
In November of 2020, a company called Midwest Recovery Systems settled with the Federal Trade Commission for an action the FTC brought against Midwest for allegedly placing bogus or highly questionable debts onto consumers’ credit reports to coerce them to pay the debts. Under a settlement agreement, Midwest is prohibited from debt parking and must delete the debts it previously reported to credit reporting agencies. It is alleged that Midwest Recovery collected more than $24 million from these tactics.
So while the FTC is taking an offensive approach against debt parking, it doesn’t mean that it still won’t happen to you–and it also doesn’t mean that it hasn’t already happened.
Avoiding That “Poopy” Feeling
With this newfound understanding, what can you do to make sure that you don’t end up feeling like Jim Halpert after being told his customer performance ratings were “poopy”?
First, take a proactive approach to medical bill payment.
It might sound a little silly, but calling your healthcare provider after your appointment to ask about your bill is a good idea. Knowing you owe money is much better than not knowing. Keeping communication open between you and your healthcare provider can help you avoid dealing with a debt collection agency.
Second, keep your address current.
What does your address have to do with your medical bills? Well, the bills have to get to you! If you move, you should inform your healthcare providers and your insurance, and be sure to forward your mail. You can’t expect your local family physician’s office to hunt you down to deliver your bill. Take the initiative to update them, and help yourself avoid missing out on a $20 bill that could ruin your credit.
Third, keep your insurance provider in check.
It’s important to read the explanation of benefits forms that they send you. Don’t just assume that they did their job right. Double check their work, and don’t assume that they paid anything you don’t have proof of. Then, if they don’t pay something they’re supposed to, it is critical that you get them to clear up the mistake. Remember, an insurance provider paying a medical bill in collections removes the debt from your credit report, but if you pay the bill, it doesn’t! So if you can get your insurance provider to pay for it, that is the best option.
Fourth, make sure that you're only billed for services you actually received.
If your explanation of benefits says that you had your blood tested, but the nurse never stuck a needle in your arm, you should probably give your doctor’s billing specialist a call. Mistakes happen, but when they do, it’s the patient’s credit score that can suffer, not the doctor’s. Don’t be afraid to ask for clarification about items on your bill, as it could be the difference between buying your dream home and spending another year perpetually scrolling Zillow.
Finally, if you’re having trouble paying, ask your doctor about a payment plan.
A $1,000 bill due next week might be too much to afford, but five $200 payments over the next five months could be doable. They might say no, but they definitely won’t say yes if you don’t ask!
A Better Future For Bill Payment
The fact that this article even exists is a major bummer, but don’t fret! Now is a time to be hopeful! Change is on the horizon. The FTC is cracking down on bad actors, and keeping an eye on your credit score is easier than ever. More and more companies, like Peachy, are also rising up to help consumers more easily pay their medical bills. There are sunny skies ahead of us.
And if you want to help usher in a future where your doctor offers simple payment plan set-up, mobile bill payment, and proactive credit reporting, you can refer your physician to Peachy here.
In the meantime, stay vigilant, friends.
