I was talking to a friend over the weekend and he told me that some states in the United States don't allow unpaid medical bills to be reported in the person's credit report. If that were true than suppose a situation in which a person makes a one-time visit to a clinic and it costs around $500. If they were to live in such a state and were uninsured (or had a high deductible), what incentive would they have to pay the clinic? Clinic would send the claim to collection agencies whose calls can always be ignored. Is there something I am missing when asserting the situation or is it mostly okay.

Also, before you downvote, I want to point out that I don't condone not paying for a service received and what is described is not a course of action I would like to take. I also want to point out that this is not a SE about ethics and morality so please keep that in mind.

  • That facility may withhold treatment or release of records until the bill is paid in full. – Pete B. Oct 31 '16 at 18:42
  • I strongly believe the title needs to be re-worded into What are the repercussions of not paying an unsecured or non-reportable debt? because my knee-jerk answer to your current title goes something like So that you are not the asshat responsible for rising medical costs and the fact that you should pay for services received; presuming that they met your expectations. – MonkeyZeus Nov 1 '16 at 20:46
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    I want to point out that ethics and morality are an important part of personal finance and are fair game in any answer. – Ben Miller - Remember Monica Nov 5 '16 at 11:58

Just because the bill can't be reported doesn't mean the debt doesn't exist and isn't owed. So apart from the obvious decade of collections calls, and withholding of your medical records from the clinic, you can still be sued.

While I haven't read a statute that lays out the non-reportability of medical collections, I'm sure an unpaid judgement can be reported. And if the judgement is also restricted from reporting, now you have a judgement against you and liens can be attached to your property.

Collections efforts don't end at phone calls from a collection agency.

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    Also wage garnishment is a real drag. Collections industry is a real thing too. – Xalorous Oct 31 '16 at 18:53
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    And watch what happens when you try to buy a house with a judgment against you. – David Schwartz Oct 31 '16 at 19:10
  • Hey quid, I know this is not the scope of the question but can you go more in depth about how the unpaid judgment works? Who files the case in court? What's the minimum amount of debt one can file for? Who pays other expenses? How is a judgment enforced etc. – mathemagician Oct 31 '16 at 22:30
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    Whoever owns the debt can file a case for it. Minimum amount will depend on the cost to file vs the debt owed and filing costs will vary by court; if the amount is small enough (like the example given of $500) it might be relegated to small claims, some jurisdictions require civil actions to involve a minimum as high as $50k or $100k. What other expenses? Enforcement will vary by jurisdiction, but can involve things like liens on property and wage garnishment. – quid Oct 31 '16 at 22:55

First off, I believe the premise of your question is incorrect. (Can you provide a reference for some states that don't allow medical bills to affect your credit?) In general, unpaid medical bills may be turned over to collection agencies who in turn often report to the credit bureaus. However, in 2015 there were some significant changes to the rules that credit bureaus use for medical bills, mainly:

  1. Medical bills cannot adversely affect your credit unless they remain unpaid for 180 days.
  2. Once paid, negative marks on your report due to unpaid medical bills are removed immediately from your report.

The second change actually provides more incentive to pay your unpaid medical bills once they've hit your credit report (in comparison to any other unpaid bills you may have).

All that being said, even if medical bills could not hit your report, I don't think you can simply discount ethics and morality. Here's a similar question: Suppose you go to a diner for breakfast and leave without paying. Assuming they won't call the police or report it to the credit bureaus, what incentive would you have to pay for your meal?


My question here has to be why it takes the threat of having something show up on your credit report in order for people to pay it.

This is one reason health care in America is so expensive. Hospitals get stuck with unpaid bills, which somebody (usually the people with health insurance) ends up having to pay. As a result, the insurance companies raise rates to cover their costs, so everyone else pays.

I am not defending the costs of American healthcare here, I am simply pointing out one of the drivers of costs, so please don't have fits on me about this! (chuckle) No doubt the insurance and drug companies carry a responsibility here too.

I don't know where your friend got his information about medical bills not being sent to collections or showing up on credit reports, but the number one source of bankruptcies in the United States is medical bills the debtor can't pay (read this article on Investopedia), so clearly people can't just walk away from what they owe and ignore the collection agencies.

The moral of the story (even though you wanted to avoid a discussion on morality!) is to pay what you owe. After all, if you render a service, you'd fully (and rightfully) expect to be paid for it, whether you could take it to collections or not. Imagine if it was that easy for your employer to just not pay you...

  • But if a large number of people is doing it [not paying health bills] then healthcare costs will rise regardless of what I do, in which case if my credit score is not impacted, best thing for me to do is also not pay. My curiosity in this matter is purely theoretical so I really don't find the morality behind it interesting. – mathemagician Oct 31 '16 at 22:41
  • Your credit score will be impacted eventually, even if not immediately. (And I don't know that it won't be reported immediately.) – keshlam Oct 31 '16 at 23:51
  • "usually the people with health insurance" No. Health insurers pay a discounted price. That discount is roughly equal (on average) to the proportion of non-insured bills that don't get paid. I.e. most unpaid bills are paid by the high prices charged other people without health insurance coverage. – Brythan Nov 1 '16 at 4:17
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    @Brythan that's totally flawed logic. You can't compartmentalize the economics of the industry. Clearly the people paying bills will ultimately shoulder the costs of nonpayment, whether a bill payer is paying cash, or had insurance which might be private insurance, Medicaid, Medicare, VA coverage etc. Additionally tax payers will also ultimately absorb the issue as these uncollectible bills are written off. – quid Nov 1 '16 at 15:03
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    Assuming they are uncollectible. I would use that tem only for cases where it is physically impossible for the patient to pay off their debt, not those where the patient is trying to avoid paying; the latter are certainly collectable and the only question is by who, when, and how much effort needs to be invested... all of said effort being billed to the patient if this does go to court. – keshlam Nov 5 '16 at 8:29

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