Can a Disputed Medical Bill Stop Your Mortgage?
…Mounting evidence shows that chaos in medical billing is not just affecting our health care but dinging the financial reputation of many Americans: While the bills themselves frequently take months to sort out, medical debts can be reported rapidly to credit agencies, and often without notification. And even small unpaid bills can severely damage credit ratings.
A mortgage initiator in Texas, Rodney Anderson of Supreme Lending, recently looked at the credit records of 5,000 applicants and found that 40 percent had medical debt in collection, with the average around $400; even worse, most applicants were unaware of their debt. Richard Cordray, director of the federal Consumer Financial Protection Bureau, has noted that half of all accounts reported by collection agencies now come from medical bills, and the credit record of one in five Americans is affected. (NYT)
The positive side is that, once your credit has been dinged, you can ignore all future ridiculous medical bills, since you have little to lose.
Or everything to lose, just because your credit is bad doesn’t mean you should disregard and give up
That’s a Dem way of thinking Jimbino
Information Asymmetry
That sounds logical. The problem is that most people unaware of the troubles.
Having had supposed medical debt of less than $400 “in collection” due to a hospital billing system that couldn’t get its act together in the face of a cash payment, I find it had to understand how people who provide accurate contact information didn’t know about it.
The phone rang off the hook, and the mailman must have lost a few ounces, during the 6 weeks it took to sort it out.
Medical debt is an especially problematic area to collect.
First off, people often don’t fully understand why they owe a given medical bill. A visit to the doctor can generate multiple medical bills from multiple providers — many of which a patient never met in person and didn’t personally authorize (i.e. a visit can result in a lab fee, doctor bill, anesthesia bill, a facility bill, etc.).
Second, medical bills are often very costly. If you don’t know why you owe something — and the charges are costly — you are less likely to pay it.
Finally, it is very difficult to ascertain the price in advance of receiving treatment. Patients are more likely to have a sense of unfairness towards medical bills they were unable to inquire about prior to treatment.
I talked to someone a while back who told me she refused to pay for an X-ray and a lab test she received. She had visited a hospital outpatient facility — unaware that hospitals are very expensive places to receive ambulatory care. When she inquired about the cost she was assured her insurer would cover the bill. But she had not met her deductible; and the charges were about three times the amount that it would have cost at a different location. Despite having the money, she decided she wasn’t going to pay the charges because she felt the charges were unfair. She would gladly have paid a reasonable amount, however.
the charges were about three times the amount that it would have cost at a different location”
So in a word, Information Asymmetry. How to solve this problem?
“A mortgage initiator in Texas, Rodney Anderson of Supreme Lending, recently looked at the credit records of 5,000 applicants and found that 40 percent had medical debt in collection, with the average around $400; even worse, most applicants were unaware of their debt.”
How are they unaware?
That’s what I want to know!
They do not know the rules played by the insurance companies.
Insurance companies play by no rules
A medical debt is not owed to an insurance company. It is owed to a doctor or hospital. The insurance company may have negotiated the fees, but patients don’t often even know what the fees are. The insurance company won’t tell them because that information is considered a trade secret. The doctor’s office often says it doesn’t know how much the fees are either — it has to bill the insurance company to find out. But that is still a copout. A doctor’s office or hospital could easily disclose that the fees are between, say, $100 to $150 for procedures that have negotiated rates that vary from $100 to $150.
“When various providers asked him to pay the remaining $40,000, he requested itemized bills and balked at some of the “ridiculously inflated prices,” such as $85 for tweezers and $20 for a box of tissues. He argued the bills point by point, and ultimately agreed to pay $25,000.”
What a price to pay for tweezers
“…half of all accounts reported by collection agencies now come from medical bills, and the credit record of one in five Americans is affected” – That’s way too many people being affected for this to continue.
“So, it informed him, “You saved 96 percent.” Huh?”
Um, what? First, that math makes no sense. Second, What is this, Kohl’s?
Because insurance companies sometimes take a long to pay, or even deny some claims arbitrarily, more and more medical providers are sending out bills right away.
I have counseled people with medical bills. It often makes sense not to pay a bill right away while the insurance company mulls over the claim.
There is no easy solution.
One positive step would be simply to remove all medical debt from credit histories.
I cannot imagine any one who would be hurt by this.
A person who is bad at paying their bills will be bad at paying all their bills, not just the medical ones.
While the person who does pay all the bills they can understand will be spared a needless bad credit rating.