According to the Consumer Finance Protection Bureau (CFPB), medical debt is the most frequent kind of collection actions that appears on consumer credit reports. A whopping 57% of collections of this kind are related to medical debt. Yet, debt collection activity related to overdue medical bills declined by a truly significant 37% between 2018 and 2022.
The sense is that fewer debt collectors are reporting collections activity related to medical accounts to the major credit bureaus. But, it is also quite possible that fewer debt collection efforts are being made concerning overdue medical expenses. Given that collecting medical debt presents a unique set of challenges that distinguishes it from other forms of debt collection, this isn’t exactly surprising.
Why are medical debt collections unique?
Collection of medical debt is a sensitive undertaking, due partially to the complexities of healthcare billing, partially due to the emotional and physical vulnerabilities of patients and partially to the ethical and legal considerations unique to this type of debt.
Medical debt is often incurred unexpectedly. Unlike consumer debt, which might be associated with discretionary spending, medical debt is usually the result of unforeseen illness or injury. This means patients are often dealing with physical and emotional stress alongside their financial obligations, making the debt collection process more sensitive. Similarly, because this kind of debt is often unexpected and necessary, even the most financially responsible adults may not be in a position to cover these debts with any speed.
Additionally, because the healthcare system’s billing processes can be intricate, they can be confusing for patients. Bills from multiple providers, insurance adjustments and complicated payment structures can lead to genuine confusion about the amounts owed. Therefore, when collecting medical debt, there’s a need for clarity and understanding in explaining these charges to patients.
Finally, there’s an ethical dimension to collecting medical debt that doesn’t exist with other types of debt. Those who owe such debts may be terribly sick, injured or may have just lost ill or injured loved ones. Therefore, seeking a resolution to outstanding medical debt often requires greater compassion, diplomacy and attention to detail than other debt collection efforts.
Moving forward with medical debt collections
Understanding the patient’s financial situation can lead to more effective collection strategies. Offering payment plans demonstrates empathy and can result in more successful debt recovery. Similarly, clear dialogue that helps patients understand their bills and their options can alleviate stress and confusion can potentially lead to more fruitful outcomes.
With all of this being said, there are times when taking more aggressive action may become necessary. If so, seeking legal guidance can potentially help debt collectors more successfully navigate their particularly sensitive and challenging recovery needs.