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Medical bills can wreck credit, even when paid off
“We’re not talking about somebody buying a big screen television and not having the ability to pay. This is debt incurred because of a health condition. That makes medical debt unique,” said bill co-sponsor U.S. Rep. Don Manzullo, an Illinois Republican.
The bill has bipartisan support in the House, said co-sponsor U.S. Rep. Heath Shuler, a North Carolina Democrat. Shuler said the health care industry sends delinquent bills to debt collectors quicker than any other industry.
“If it wasn’t an industry that sent it straight to collections, we wouldn’t be having this conversation,” Shuler said. A Senate version was introduced last week.
For Illinois breast cancer survivor Lisa Lindsay, a $280 medical bill led to state troopers showing up at her home and taking her to jail in handcuffs.
Like the Parks in Texas, she, too, said it started as a billing mistake. Her hospital told her the radiology bill would be covered because she qualified for a charity care program. But the radiology doctors’ office sent the bill to a collection agency and, despite Lindsay’s protests and the paperwork she kept sending, the matter ended up in court.
Lindsay believed that eventually the documentation would catch up with the bill and be settled. She went to court and told a judge her story. Later, she missed a court date _ she said she was never informed of it _ and that’s when the state troopers showed up. Lindsay, a 46-year-old teaching assistant from Herrin, Ill., ended up paying more than $600 because legal fees had been added to the original amount.
“I paid it in full so they couldn’t do it to me again,” Lindsay said. She recently testified at a hearing on aggressive debt collection practices in Illinois.
Refinancing a home loan can be affected too by unpaid medical bills _ or the appearance of unpaid medical bills.
Iraq veteran Steve Barnes and his wife, Tara, were refinancing their home through a VA program when they found out from their mortgage banker that nearly $600 in unpaid medical bills had brought down their credit scores. It means they’ll have to pay an extra $1,700 in additional fees to the lender to get the lowest interest rate.
Bills for treatment last fall related to his wife’s cancer had been turned over to a collection agency while Barnes was still talking with his insurance company about what would be covered, he said.
“We pay our bills,” said Barnes, 33, the postmaster in Nocona, Texas. “As soon as they were brought to our attention, we paid them.” But the collection could stay on their credit reports for seven years, even though it’s now paid.
Debt collectors support the legislation in the House, according to ACA International, a trade association. A key foe of an earlier bill was another group representing the nation’s credit bureaus. The Consumer Data Industry Association, which hasn’t taken a position on the revised bill, said that lenders need to see a consumer’s patterns of behavior over time and even paid-off medical debt is relevant to whether the consumer is a good risk.
Most hospitals and physician groups use collection agencies to go after late bills after 60 or 90 days, rather than hiring more staff. It makes financial sense to share the amounts collected with an agency. “If you don’t collect anything, it’s worth zero,” said Richard Gundling of the Healthcare Financial Management Association.
Hospitals started relying on debt collectors in the 1980s, said Chicago-based health care consultant Jim Unland.
“When the numbers of uninsured started to grow significantly, hospital financial staffs had the perception they were getting overloaded” with delinquent bills, Unland said. “It became easier to turn these bills over to collection agencies.”
By Tom Fitton
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