Medical bills can sometimes take patients by surprise. In early 2022, almost half of the adults in the US reported difficulty affording medical costs. Because insurance coverage differs, providers and practices cannot always produce accurate estimates of medical bills upfront. Patients may struggle to pay when medical bills arrive, leaving them wondering—do medical bills affect your credit?
How Do Medical Bills Affect Your Credit Score?
Credit scores are used to determine eligibility for credit cards, loans, mortgages, and other financial products. There are three main credit bureaus: Experian, TransUnion, and Equifax. Each calculates a credit score using its own methodology. But all three bureaus consider whether you paid past bills, like credit cards, loans, and car payments on time.
Patients facing large medical bills may wonder if these bills will be added to their credit reports. Providers and practices generally do not report medical bills to credit agencies. Instead, many hospitals and practices offer payment plans to help struggling patients. But, when patients are unable or unwilling to keep up with medical bill payments, practices may sell the medical debt to collection agencies. These agencies will then report the debt to credit bureaus and attempt to get repayment from patients.
Medical debt is common, affecting one-in-three adults in the United States. And medical debt can lower your credit score even if you are making payments. Therefore, in early 2022, the Biden Administration announced executive orders to reduce the effects of medical debt on applications for government-backed mortgages and small business loans.
Are Medical Debts Being Cleared from Credit Reports?
As of July 2022, the three main credit bureaus are clearing paid medical debts from credit reports. This means fully paid medical debts will no longer appear on your credit report or affect your credit score, even if they were previously in collections. Additionally, collection agencies cannot report medical debts to credit bureaus until they are at least one year old.
In January 2023, unpaid medical debts of less than $500 will also be removed from credit reports. This includes larger medical debts with remaining balances below $500. However, outstanding medical debts of more than $500 will remain on credit reports until they are paid in full.
These changes to medical debts only affect credit score calculations. The Biden Administration's executive orders and actions by the credit bureaus do not include any debt forgiveness or repayment.
How Can You Stop Medical Bills from Affecting Your Credit Score?
If you are facing a medical bill you can not afford to pay, there are several options to help you avoid debt collectors. First, check your bill carefully to ensure it is error-free. Mistakes happen. If your health insurance isn't paying as much of your bill as you expected, reach out to them. If you see items or services on your bill you don't think you received, you can also contact your medical provider's office.
If the medical bill looks correct, but you can not afford to pay it, many providers, practices, and hospitals can negotiate a lower bill or offer a payment plan. Many providers will be willing to negotiate with you. Payment plans do not appear on your credit report and are the best option for paying your medical bills if you need to spread them out over time. Make sure you get any negotiated payment amount or payment plan in writing for your records.
If you are struggling with multiple medical bills, a medical billing advocate may be able to help. These professionals can help you understand your bills, negotiate with providers, and get your medical debt under control.
How Can Your Practice Help Patients with Medical Bills?
Your practice can help patients pay off bills and avoid medical debt using your practice management system. Tools like NextGen's Patient Portal can help patients estimate their copays and costs when they schedule a visit, so they know what to expect. You can also configure your practice management software to automatically check claims for errors, preventing insurance denials and inaccurate patient medical bills.
Keeping patient information up-to-date in your system also helps prevent surprise bills. Patients' insurance and contact information can change frequently. By asking for updates during check-in, you can keep information up-to-date and avoid insurance errors, missed bills, and other misunderstandings that can lead to medical debt.
Putting debt into collections harms your relationship with patients and nets your practice only pennies on the dollar. Your practice can improve revenue by developing policies and procedures for medical bill negotiation and payment plans. Your medical billing staff can also help identify patients with outstanding bills for proactive outreach.
How TempDev Can Help with Medical Bills
TempDev can help you configure NextGen Practice Management to help prevent unpaid medical debt. TempDev's developers and consultants can help you implement cost estimator tools, automate claims scrubbing processes, and develop workflows to ensure accurate and timely billing.
Call us at 1888.TEMPDEV or contact us here for help with your medical billing practices.
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