Medical Bill Negotiation: How to Reduce and Settle Your Healthcare Debt

The State of Medical Debt in America

Medical debt is the leading cause of personal bankruptcy in the United States. Approximately 100 million Americans carry some form of medical debt, with the average medical debt balance exceeding $1,000. Medical debt affects people of all income levels, including those with health insurance.

The complexity of the American healthcare billing system contributes to the medical debt crisis. Patients often receive multiple bills from different providers for a single episode of care, including the hospital, the attending physician, the anesthesiologist, the radiologist, and the laboratory. Each of these bills may have different payment terms, insurance coverage, and negotiation opportunities.

Medical debt is different from other types of consumer debt in important ways. Medical bills are often unexpected, the amounts can be extremely large, and patients frequently have little ability to shop around for better prices before receiving care.

Negotiating Medical Bills: Before They Go to Collections

The best time to negotiate a medical bill is before it goes to collections. Start by requesting an itemized bill and reviewing it for errors. Common errors include duplicate charges, services not received, incorrect quantities, and charges for items that should be bundled.

Ask about the hospital financial assistance program. Nonprofit hospitals are required by law to offer financial assistance to qualifying patients. Income eligibility varies, but many hospitals offer assistance to households earning up to 300% to 400% of the federal poverty level.

Offer to pay a lump sum for less than the full amount. Hospitals prefer guaranteed payment over uncertain collection efforts. A reasonable starting offer is 30% to 50% of the total bill. Be prepared to negotiate, and always get any settlement agreement in writing.

Negotiating Medical Bills: After They Go to Collections

When a medical bill goes to collections, you have the same rights as with any other debt. Send a debt validation letter within 30 days to verify the debt and check for errors. Many medical collection accounts contain billing errors or involve debts that should have been covered by insurance.

Negotiate with the collection agency just as you would with the hospital. Collection agencies typically purchase medical debts for pennies on the dollar, so there is often significant room for settlement. Start with an offer of 30% to 40% of the total amount.

Request a pay-for-delete agreement. Many collection agencies will agree to remove the medical collection from your credit report in exchange for payment. Since medical debts under $500 are no longer reported on credit reports, pay-for-delete is most valuable for larger balances.

New Protections for Medical Debt

As of 2023, the three major credit bureaus have implemented significant changes to how medical debt is reported. Medical debts under $500 are no longer reported on credit reports. Paid medical collections are no longer reported. And medical debts cannot appear on your credit report until they have been in collections for at least one year, up from the previous 6-month waiting period.

The CFPB has proposed a rule that would remove medical debt entirely from credit reports. If finalized, this rule would eliminate the impact of medical collections on credit scores, providing significant relief to the 100 million Americans who carry medical debt.

The No Surprises Act, effective in 2022, protects consumers from unexpected out-of-network medical bills. If you receive emergency care at an out-of-network facility or are treated by an out-of-network provider at an in-network facility, you cannot be billed more than the in-network cost-sharing amount.