Tens of millions of Americans owe medical debt, and it's not uncommon for collections agencies to pursue aggressive tactics to recoup the balance, Olga Khazan reports for The Atlantic.

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Millions owe medical debt

According to a Consumer Financial Protection Bureau study from 2014, 43 million Americans have unpaid medical debt on their credit reports, and half of all U.S. credit report debt comes from medical expenses.

The source of medical debt is often out-of-network doctors whom patients believed were in-network, hospital stays, or ambulance rides, Khazan reports. According to Kaiser Health News, one-sixth of Americans received a so-called "surprise bill" for treatment at an in-network hospital in 2018.

A heart transplant—and a surprise bill

One patient who incurred that kind of debt is Joclyn Krevat, who underwent a heart transplant in 2010. At age 32, Krevat was admitted to the hospital for what she thought was the flu but turned out to be severe heart disease that required a transplant. She spent seven weeks on life support and then received a transplant.

During her stay, Krevat was treated by out-of-network doctors. According to Khazan, the situation was out of Krevat's control, as she couldn't determine when a heart would become available.

Even though Krevat had "good insurance," she ended up receiving roughly $50,000 in medical bills for her care, Khazan writes. The bills started coming while she still undergoing treatment, and debt collectors pursued her thereafter.

After many calls with her insurer and interactions with collectors, Krevat was able to negotiate her debt with a collections agency down to $4,500. She also paid a specific debt collector a few hundred dollars, Khazan reports.

But the road to a more affordable payment wasn't simple. At one point, Krevat even stopped checking her mail due to the volume of notices from collectors.

And, in what Khazan calls an "extreme example" of debt collections, one collector sent Krevat a request to connect on LinkedIn. "It was just more evidence that I was in this bizarro world of receiving bills I shouldn't be responsible for," Krevat said. The collector said the request was sent in error.

'Debt never dies'

While the LinkedIn request may have been "extreme," Khazan reports that it's not uncommon for medical debt collectors to go to great lengths to collect payment. In fact, companies can try to collect on medical debt indefinitely in most cases, Khazan writes. Just three states—Mississippi, North Carolina, and Wisconsin—have statute of limitation laws that eliminate certain debts, according to Khazan.

Craig Antico, a former medical-debt collector and a co-founder of RIP Medical Debt, an organization that buys and eliminates medical debt, said that in most states, "[d]ebt never dies."

According to Antico, hospitals typically deploy a "waterfall" method of collecting unpaid medical bills. Initially, hospitals or the collections agencies they hire will try a "soft" collection, asking patients if they lost their bill or suggesting they might qualify for charity care. "But then if people aren't responding, it will get more stressful," Antico explained. For instance, a collection agency might report the debt to a credit bureau, or the account might be sent to an attorney to enforce collection, Khazan writes.

In extreme cases, collectors may choose to sue the patient and garnish their wages or put a lien on their property. Citing an ADP report, Antico estimates that 1.5% of American workers have a medical debt-related wage garnishment.

When debt changes hands, errors are more common

While hospitals may initially try to collect the debt themselves, some doctors and hospitals sell their debts to debt buyers for "pennies for each dollar," Khazan writes. By doing that, hospitals get paid a small amount rather than having to wait for a full payment that may never come. Plus, it saves them from being associated with aggressive collections tactics, according to Khazan.

But when debt changes hands, the risk for errors increases, Khazan reports. In fact, Consumer Financial Protection Bureau's database contains 267 complaints about Pendrick Capital Partners, a prominent medical debt buyer, according to Khazan. One complaint from a person in Florida in 2018 reads, "Pendrick Capital has been attempting to collect on an erroneous medical debt for at least a year now, despite multiple disputes to various bureaus and collection companies." The complaint continues, "Each time I dispute the debt, the account is deleted by the collection company only to be replaced by another. … The collection merry-go-round continues and my credit suffer."

In another case, a debt collector Pendrick hired allegedly called a woman more than 30 times despite her having filed bankruptcy. Pendrick and its lawyers did not return requests for comment, Khazan reports.

Jan Stieger, of the Receivables Management Association International, a trade group of debt buyers, said these were "one-off" examples. She added, "The credit ecosystem works on the principle that legitimate debt should be repaid" (Khazan, The Atlantic, 8/28).