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Medical Debt and How to Avoid Aggressive Collection

In Virginia, too many people are being hit with lawsuits because they can’t pay their medical bills.

University of Virginia Medical Center after sunset | Bob Mical / (CC BY-NC 2.0) | modified crop

We all know that healthcare costs are high, and paying medical bills can be a challenge for many families. Across the country, one of the biggest reasons people fall into personal debt, or even bankruptcy, is because of medical debt.

Virginia’s #1-ranked hospital, UVA Medical Center, is particularly aggressive when it comes to filing lawsuits to collect medical debt. According to an in-depth investigation by Kaiser Health News, over a recent six-year period the UVA health system sought more than $106 million from patients through lawsuits. That’s about 6,000 lawsuits a year, and the repercussions have pushed many families to the breaking point financially, because of seized bank accounts, garnished wages, and liens on homes.

While the practice of suing patients over medical debt is widespread in the Commonwealth — 20,000 such lawsuits were filed by Virginia hospitals in 2017 alone — different hospitals have different policies when it comes to debt collection. The less aggressive institutions do things like setting a relatively high threshold for the dollar amount they will sue over, and avoiding controversial techniques like garnishing wages or placing liens on property. But if you are sick and need medical care, chances are the first thing on your mind won’t be investigating your hospital’s debt-collection policies.

Your best defense is a good offense.

Buying the best health insurance you can afford is your first line of defense against unmanageable medical bills. There are many plans out there — ranging from pricey top-of-the-line, low-deductible plans, to lower-cost catastrophic coverage plans, which by definition come with a high deductible. However, there’s no sugar-coating it, finding the right plan isn’t easy. It takes time to wade through and weigh all of the options and costs, and figure out which combination of benefits best suits your needs and your budget. It’s still far better to tackle this big job when you are healthy, instead of waiting until you are sick and not sure if you can afford to see a doctor, at which time you might not have the luxury of being choosy. Medical emergencies happen at the most inconvenient moments and many people are caught off-guard.

Ricardo Reitmeyer / Shutterstock.com

It follows that well-intentioned folks get into medical debt mostly because of their lack of, or inadequate, insurance. This is almost certain to happen for those without coverage, either from simply being uninsured or from a temporary lapse in coverage, but it’s also common to become saddled with debt when you actually have insurance, and discover, too late, that it’s not the right type of policy or coverage. In these situations, a patient may not be able to pay the deductible, or may have inadvertently used a doctor, hospital, therapy, or service that was out-of-network, and therefore not covered by the fine print of the policy.

Some coverage is better than no coverage.

One thing to keep in mind is that hospitals often invoice patients who don’t have health insurance at far higher rates than patients who do. This is because large health insurance companies negotiate lower rates with hospitals. UVA, for example, gives insurers an average 70% discount on its services. Just by virtue of having health coverage, you are likely to be charged less for the same care. So even when paying out-of-pocket under a high-deductible plan, you’ll likely benefit from your insurance company’s negotiated price and pay less than if you were simply uninsured.

Historic Albemarle County Courthouse Charlottesville VA | JHB 10S / Wikimedia Public Domain

What if you’re being sued?

For those who are being sued over medical debt. It is important to note that assets are never taken out-of-the-blue, and it’s often a multi-step process, with ample time to recognize and prepare for what’s happening. First, you’ll receive bills from the hospital (or another medical treatment provider). Then you’ll see that bill again – perhaps several times – likely with a notice that it is overdue. Next, you may see letters from a collection agency which, by itself, has no legal power to sue in court. Their job is to harass you with letters and phone calls in an attempt to collect the debt. When those methods fail, a lawyer is retained by the hospital to file a lawsuit. Finally, in order to garnish wages or bank accounts, or place a lien on your home, the lawyer must obtain a judgment against you in court, and even then, further legal filings are required to access wages or bank accounts.

Importantly, you will nearly always have the ability to negotiate. Throughout all of these steps in the “collections process” – from the first bill to the date of judgment in court (and even after that) – most medical creditors will consider payment plans, and sometimes will accept a total amount lower than the original bill. The rationale is that if a person is evidently unable to pay a large medical bill, a lawsuit is truly not going to be worth the hospital’s time and money (bringing cases to court is expensive for hospitals). In addition to providing a way for payers to participate in defining acceptable payment terms, negotiating high medical bills, and meeting the terms, can help avoid the related pitfalls of medical debt, such as ruined credit over unpaid bills.

Even when you are covered by health insurance, navigating the world of hospital billing statements and insurance claims can be challenging. It’s a good idea to familiarize yourself with the details of your policy before you need to go to the doctor, so that you’ll know what is covered and what is not. Insurance companies have customer-support representatives to answer these questions, and it’s a patient’s prerogative to call. If you’re surprised by a bill, don’t hesitate to contact the hospital billing department and be ready to negotiate. As always, if you’ve been injured and have medical bills that you are struggling to pay, we at Burnett & Williams are here to help. For a free case consultation, contact us here, or call (703) 777-1650.