The Consumer Financial Protection Bureau (CFPB) released a report in December that found medical debt has a significant impact on consumer credit with 43 M Americans with overdue medical debt on their credit reports.
The medical debt study can be found here.
Medical debt is often incurred differently than other unpaid bills, such as unpaid phone or utility bills. Medical debt can result from an event that is often unpredictable and costly, such as an accident or sudden illness. In addition, consumers are often temporarily responsible for the whole bill until insurance works it out. Consumers can also become responsible for medical debt because of billing issues between medical providers and insurers.
Some findings from the report:
- A staggering 52% of all debt on credit reports is from medical expenses.
- One out of five credit reports contains overdue medical debt: The study found that one out of five credit reports contain medical debt in collections. This means that 43 million Americans have unpaid medical debt adversely affecting their credit report.
- 15 million consumers have only medical debt on their credit reports
- Average reported medical debt is $579: The average unpaid, non-medical collections item on a credit report is $1,000; the median is $366. Unpaid medical collections are smaller, with an average of $579 and a median of $207.
There are many reasons that consumers have so much in unpaid medical claims on their credit reports. First of all, the medical billing process can be confusing for consumers. From one medical treatment or incident – a trip to the hospital, a treatment for an illness – there can be multiple bills from multiple providers. The costs can depend on whether the consumer has insurance, what insurance covers, and whether the provider is within the insurer’s network. The consumer’s obligation also can vary based upon whether the consumer has reached an annual cap on the amount required to pay out-of-pocket. As a result, consumers might not know how much medical debt they are responsible for paying.
Secondly, unlike many other industries, there is often no standard revenue cycle processes for patient responsibility. Consumers may have little insight into how a medical debt might wind up on their credit report. The time between when a provider sends the first bill to a patient and when it ultimately ends up on a credit report can differ dramatically. Some providers send the unpaid bill to a collections agency as soon as 30 days after billing, while other providers may wait up to 180 days.
To increase the likelihood of successful payment from patients, managing patient payments is a critical part of a medical practice's revenue cycle operation. Clear revenue cycle policies and procedures that are made available to patients; clear, easy-to-navigate patient statements and multiple options for patients to supply payment will all help ensure that a physician practice gets paid what it is due while helping patients navigate the increasingly complex medical billing requirements.