Do you still need to pay off medical debt?

Most medical debt will soon be coming off credit reports

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Brian ActonContributing WriterBrian Acton is a contributing writer at Policygenius, where he covers insurance and finance. His work has also appeared in The Wall Street Journal, TIME, USA Today, MarketWatch, Inc. Magazine, and HuffPost. 

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Nearly 70% of medical debts will soon be erased from credit reports, potentially boosting credit scores for millions of Americans. This sweeping adjustment takes place July 1 as credit bureaus change the way medical debts are reported. 

But if you have medical debt on your credit report, this doesn’t automatically mean you’re in the clear. For one thing, only certain types of debt will be removed. And even if your medical debt comes off your credit report, you still might need to pay it off to avoid other consequences. 

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What medical debts will be removed from your credit report?

On July 1, medical debts that went to collections, but were since paid, will no longer appear on credit reports. Previously, paid medical collection debt could stay on your credit report for up to seven years. Starting in the first half of 2023, medical debts under $500 will no longer be reported regardless of payment status. 

The credit bureaus also extended the grace period for reporting medical collection debt to a full year, giving patients more time to settle bills before they get reported. Previously, patients only got six months leeway before medical debts could land on their credit reports. 

“This is an important step forward, particularly for people who are struggling with smaller amounts of medical debt,” says Eva Stahl, vice president of public policy at RIP Medical Debt, a nonprofit that uses donations to eliminate medical debt for people in need. “Younger people often hold these types of debts and removing them from their credit will be important in supporting their economic trajectory and financial stability.”

Why you can’t throw out your medical bills

People with paid medical debts lingering on their credit reports should welcome this change, but it doesn’t mean you get to start ignoring your medical bills. For one thing, unpaid medical collection debts over $500 will still get reported.

For another, there are consequences for ignoring your medical bills beyond your credit. If a bill goes to collections, collectors will reach out to you to collect on that debt. The medical provider or debt collector may even try to sue you for the debt, and ignoring a lawsuit could result in a judgment against you that gives the debt collector greater power to collect. For these reasons, it’s usually in your best interest to settle the debt unless it’s illegitimate (in which case you can try to dispute it).

“Debt collectors will continue to pursue payment regardless of the credit agency decision — and that means that people should still expect to receive calls and letters for them to pay their medical bills,” says Stahl. “Collection agencies can take legal actions and garnish a person’s wages.”

Remember there are ways to reduce your medical bill before you pay it. Finding mistakes on your bill could help you eliminate erroneous charges. You could negotiate your bill down by getting a discount for paying all at once, establishing a payment plan, or getting some or all of your debt forgiven based on financial need. Don’t forget to use any funds you have in a flexible spending account or health savings account to reduce your out-of-pocket costs. Finally, don’t hesitate to reach out to a medical billing advocate or other professional organization that can help you navigate the complex field of healthcare billing. 

“While the change by credit reporting agencies is helpful, it does not address the underlying causes of medical debt and does not help people who hold medical debt over $500,” says Stahl. “First, people do not have the savings needed to buffer an unexpected expense. Second, too many people lack equitable access to affordable health coverage. Solutions to medical debt require addressing both challenges.” Image: Maskot / Getty Images