Your Unseen Killer Debt

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Killer debt: some 43 million American — nearly one in five adults — have overdue medical bills tarnishing their credit reports. Unfortunately for some, these unpaid medical debts may be the result of errors and inconsistencies related to America’s confusing medical billing and insurance payment system.

According to a study conducted by the Consumer Financial Protection Bureau (CFPB), medical debt accounts for 52% of all debt on credit reports. In fact, roughly 38% of these individuals have no other black marks on their credit.

One of the primary reasons that so many people are unaware of medical bills going to collections is because debt collectors try to minimize costs by performing a debt collection practice known as “parking”. When a debt collector “parks” your medical bill, the action of parking can cause a ding on your credit score before you are even notified that your bill is overdue. Debt collectors do this because when they contact you for payment they know if the bill is already hurting your credit, you are more prone to pay the bill faster.

Another problem when it comes to medical billing is that hospitals notoriously overcharge for procedures, especially Medicare. Of all the hospitals audited in 2013 by the Office of the Inspector General for Medicare compliance, not one of the hospitals was fully compliant. Of the investigated claims, 49% displayed erroneous billing practices.

Here are a few things you can do to prevent medical debt from taking a bite out of your credit score:

  1. Prepare for higher deductibles: If you were unable to obtain healthcare but now can via Affordable Care Act (ACA), your premiums may be low but your out-of pocket deductible will be very high. A good solution for this is a Health Savings Account. An HSA is a tax-advantaged savings account for eligible medical expenses. You can open one through your health insurance company, or can get a separate account at many financial institutions.
  2. Shop around: If you decide to purchase a new flat screen TV, what is the first thing you do? Jump online and look for best product for the lowest price. Why not do the same for healthcare? Even with the ever increasing cost for medical procedures, most people do not shop around and call hospitals to find out how much procedures cost. For instance, there can be a huge difference in costs for a procedure, such as an MRI, at the hospital verses at an off-site testing center.
  3. Stay in network: Seeing out-of-network physicians can be significantly more expensive. Print out the document that states that the doctor you are going to see is in network to protect yourself later, in case that doctor switches networks. Also, don’t be afraid to ask a doctor that you don’t know who may be consulting on a procedure if they are in network. Some doctors, in departments such as the ER, are part of outside medical groups who bill patients separately.
  4. Ask for an itemized bill: You are entitled to it. Look for duplicate charges, incorrect insurance policy information, and inaccurate quantities.
  5. Fight denied claims: Because of a complicated medical billing code system, your insurance company may deny a claim because of an incorrect billing code the hospital used. If you know your procedure is covered under your plan, appeal the claim, ask your insurance company what is the appropriate code and then ask the hospital to rebill you with that correct code. Make sure to keep track of the person you talk to, the date and any conversations you have the patient accounts department, in order to track changes and corrections that you are told are being made to ensure they are being done.
  6. Sign up for credit score monitoring: There is an array of online credit score monitoring services available, some of which are free, that will notify you of changes with your credit score with the three major credit bureaus; Experian, Trans­Union, and Equifax.

Following these steps will allow you to be better prepared when it comes to your medical bills to ultimately help protect your credit score.