How to Handle Medical Debt: Your Options and Rights

Medical debt is different from credit card or car loan debt in ways that matter. It’s often unexpected and not the result of a purchasing decision. It’s frequently inflated by billing errors and insurer disputes. And it carries more legal protections than most debtors realize, protections that have been strengthened significantly in recent years.

If you’re dealing with medical bills you can’t pay, or collection notices related to past medical care, here’s what you can actually do.

Start: Review the Bill Before Paying Anything

Medical billing errors are common. Studies suggest 40 to 80% of hospital bills contain some kind of error, ranging from duplicate charges to billing for services not received. Before sending a single dollar, request an itemized bill (not just a summary) and review each line item.

Look for: duplicate charges (the same service billed twice), charges for procedures the doctor ordered but didn’t perform, unbundled charges (billing separately for services that should be grouped into one charge), incorrect procedure codes, and balance billing errors (being billed for amounts that your insurance was supposed to cover).

If you find errors, dispute them in writing with the billing department. Note exactly which items you’re disputing and why. Hospitals have billing advocates whose job includes correcting these errors, but only when patients identify and flag them.

Apply for Financial Assistance (Charity Care)

Most nonprofit hospitals (which make up roughly 60% of U.S. hospitals) are required by the IRS to provide charity care (financial assistance) to qualifying patients as a condition of their tax-exempt status. This can mean free care or significantly reduced bills based on income.

You typically qualify based on your income as a percentage of the Federal Poverty Level (FPL). Many hospitals provide free care to patients under 200 to 250% of FPL and sliding-scale discounts up to 350 to 400% of FPL. These programs exist for any bill, you don’t need to apply before receiving care.

How to apply: Ask the hospital’s billing department or financial counseling office for a financial assistance application. You’ll typically need to provide income documentation (recent pay stubs, tax returns). Applications can often be filed even after you’ve received a collection notice, and some hospitals accept applications up to a year or more after service.

This is one of the most underused tools in personal finance. If your household income is under roughly $60,000 to $75,000 for a family of four, it’s worth applying before assuming you owe the full billed amount.

Negotiate the Balance

Even without qualifying for charity care, medical bills are highly negotiable. Hospitals routinely accept significantly less than the sticker price because:

• Uninsured patients are billed at the “chargemaster” price, a list price that insurance companies negotiate down to 30 to 60% of. You can ask for the same rate.
• Hospitals prefer partial payment to no payment. If you offer to pay $2,000 on a $5,000 bill, that may be accepted if the alternative is writing the debt off entirely.

Ask specifically for the “self-pay rate” or “uninsured discount.” Many billing departments will immediately apply a 20 to 40% discount without further negotiation. If you’re offering to pay in a lump sum (rather than installments), you can usually negotiate an additional reduction.

Script: “I want to resolve this balance, but I’m having difficulty paying the full amount. Can you tell me what you’d accept as a settlement in full, or if I paid X amount today?” Let them make a counter. You don’t need to reveal your exact maximum.

Medical Debt and Credit Scores

Significant rule changes have reduced the impact of medical debt on credit reports:

• As of 2023, paid medical debts are no longer included on credit reports from Equifax, Experian, and TransUnion
• Medical debts under $500 no longer appear on credit reports
• The CFPB finalized a rule in 2025 further limiting medical debt on credit reports

Additionally, the standard 180-day grace period (6 months) before a medical debt can be reported to collections means you have significant time to resolve bills before they affect your credit.

Setting Up a Payment Plan

If you can’t pay in full and don’t qualify for charity care, ask for an interest-free payment plan. Unlike a car loan or personal loan, hospital payment plans are almost always interest-free. Many hospitals are required to offer them, and some state laws mandate 0% financing for medical payment plans below certain income thresholds.

Even a $25/month payment plan on a $1,000 balance stops collections activity and shows good faith. Don’t ignore the bill, contact the billing department and ask what they can offer.

When Medical Debt Goes to Collections

Medical debt in collections is still negotiable. Collection agencies typically purchase medical debts for very low amounts (pennies on the dollar) and have room to settle for significantly less than the face amount. A settlement of 30 to 50% is often achievable on accounts that have been in collections for some time.

Always get any settlement offer in writing before paying. Once payment clears, confirm the debt has been marked as “settled” or “paid” on your credit report.

The Federal Trade Commission’s Fair Debt Collection Practices Act (FDCPA) gives you rights in dealing with collectors: they can’t call before 8am or after 9pm, can’t threaten actions they can’t legally take, and must provide written verification of the debt upon request. Know your rights before you engage.