Mired In Medical Debt? Federal Plan Would Update Overdue-Bill Collection Methods


Elham Mirshafiei was at the library cramming for final exams during her senior year at California State University-Long Beach when she grew nauseated and started vomiting. After the 10th episode within an hour, a buddy took her towards the nearest er. Diagnosis: an intestinal bug and severe dehydration. In a few hours, she was home again, with instructions to eat a bland diet and drink lots of fluids.

That was at 2010. However the $4,000 bill for the brief emergency department visit in an out-of-network hospital has trailed her ever since. Mirshafiei, 31, includes a good job now like a licensed insurance adviser in Palo Alto, Calif. But cash is still tight and her priority is paying down her $67,000 student loan debt instead of the old hospital bill.

Once or twice yearly she's a letter from a collection agency. She ignores them, and, so far, the consequences happen to be manageable. “It's not like electricity that will get cut off if you do not pay it,” she said.

Mirshafiei has lots of company. A minimum of 43 million other Americans have overdue medical bills on their credit history, a federal Consumer Financial Protection Bureau set of medical debt found in 2021. And 59% of people contacted with a collector the exchange was over medical bills, the most common type of contact stemming from an overdue bill, according to the CFPB.

This month, the CFPB proposed a guide to border what collectors are allowed to do when pursuing many types of overdue bills, including medical debt.

Federal law already prohibits collectors from harassing consumers or contacting them before 8 a.m. or after 9 p.m., among other things. But the law, that was passed in 1977, didn't anticipate emails and texts. The CFPB's proposal clarifies how debt collectors can use these communication tools. And it would allow consumers to opt from being contacted by doing this.

The rule also specifies that debt collectors could make a maximum of seven telephone calls weekly on the specific debt.

But some consumer advocates panned your time and effort. “This doesn't really go far enough to safeguard consumers and ensure that customers aren't abused or harassed or subject to unfair collection practices indebted collection,” said April Kuehnhoff, a lawyer at the National Consumer Law Center who specializes in business collection agencies.

For instance, the center wants a limit of just three telephone attempts each week on a debt. The seven-call limit could be particularly tough on people with medical debt, Kuehnhoff said. They may accumulate bills from the 3 providers for a single medical event – hospital, doctors, a lab and a nursing home, for example – and all sorts of could be in collections separately, potentially leading to dozens of calls each week.

Debt collectors aren't necessarily in support of the seven-call cap either, however for different reasons. They say that limiting the number of calls can lead to more litigation or adverse credit reporting rather than exercising a repayment plan. Overall, the proposed rule seemed to strike a great balance between collection industry and consumer concerns, said Leah Dempsey, vice president and senior counsel for federal affairs at ACA International, a trade group representing 2,500 collectors, asset buyers and related professions.

The general consensus is that people should pay their debts. But taking responsibility for medical debt isn't always as straightforward as paying down a large-screen TV that someone placed on a credit card. Did health insurance pay the correct quantity? Was the individual screened for eligibility for Medicaid, charity care or financial help?

“The actual collector problem is often concerning the lack of accountability that providers have for anyone that they pass their debt along to,” said Leonardo Cuello, director of health policy at the National Health Law Program.

When a collector calls, consumers who're unclear about the bill should ask, on paper and usually within 30 days, that the debt be validated. Debts are often bundled and sold many times to different collectors, meaning errors may be introduced along the way. “There aren't any magic words; you don't need to cite the statute,” said Justin J. Lowe, legal director at Health Law Advocates, a nonprofit law practice in Boston that helps people with low incomes who are having problems accessing or spending money on health care.

At that time, the gathering agency needs to stop activities until it proves exactly what the consumer owes. The proposed CFPB rule would spell out verification information that must definitely be provided along with instructions for consumers about how to dispute your debt.

The proposal would also address other practices, such as the assortment of so-called zombie debt. That refers to an invoice which has passed a period limit – or statute of limitations – for bringing legal action, often between three and 6 years, with respect to the state. In lots of states, if a collector sues someone for this type of time-barred debt, consumers can enhance the issue in court in their defense. If your judge agrees, the case might be dismissed.

Consumer advocates have long wanted debt collectors to become prohibited from trying to collect zombie debt. After several years, it can be hard for patients to keep in mind whether an invoice continues to be paid in order to locate records, they argue.

The proposed CFPB rule would prohibit collectors from suing or threatening to file a lawsuit consumers for zombie debt, as long as the collectors knew or must have known the statute of limitations had expired. That puts the onus around the consumer to prove that which was in the debt collector's mind instead of merely showing this too much time had passed to gather.

While a college student in 2010, Elham Mirshafiei went to a hospital that wasn't in her own insurance network for treatment of an intestinal bug and severe dehydration. She still carries the $4,000 debt from that visit.(Courtesy of Elham Mirshafiei)

It's unclear the way the proposed changes announced through the CFPB might affect Mirshafiei's situation. The time limit in California on written contracts is four years.

One thing someone in Mirshafiei's situation should know is the fact that creating a payment could reset the time limit, Lowe said. The debt collector could reason that by making a payment the individual is affirming that he or she owes your debt.

Because of her damaged credit, Mirshafiei needed a relative to co-sign for student education loans for graduate school. She worries that if she attempts to buy a house, she'll have trouble getting approved.

“I just hope that in the next chapter of my life I don't have to be denied things because of this stain on my small record,” she said.

As the us government moves ahead using the rule to deal with various debt collection activities, legislators in some states have introduced bills that specifically target medical debt. Their efforts often focus on improving use of financial help for medical care and limiting predatory debt collection tactics.

Last month, Washington Gov. Jay Inslee signed a law that reduces the maximum interest rate on medical debt prior to a court judgment from 12% to 9%. It also prohibits sending a medical debt to collections until 120 days after the patient is sent the first bill as well as debt collectors to provide itemized statements to patients for medical and hospital debts and also to notify them of the possible eligibility for charity care.

In Oregon, an invoice sponsored by Rep. Andrea Salinas would require nonprofit hospitals and affiliated clinics to provide care free to families with incomes as much as 200% of the federal poverty level (about $43,000 for any family of three) and charge a sliding scale for families earning as much as 400% of the poverty level (about $85,000 for a three-person family).

Like the Washington law, the Oregon bill places limits on the interest charged for medical debt. Additionally, it requires health care facilities to screen patients for eligibility for financial help and insurance.

The bill passed the home earlier this month.

Some hospitals curently have strong financial assistance policies, but the playing field needs leveling, said Salinas. “We actually need hospitals to become a part of the means to fix prevent consumers from entering bankruptcy over medical debt.”