How Much Do Collection Agencies Pay for Medical Debt?

You just received a collection notice about your medical debt. Your original creditor sold your account to a professional debt collector. You’ll probably hear from them often in the coming months.

Debt collectors take their work seriously. Their entire business depends on collecting old debts and pursuing consumers for payment.

You can’t stop a creditor from selling your unpaid medical debt. But understanding how the process works gives you power. You can use that knowledge to your advantage.

How Collection Agencies Buy Medical Debt

Medical care in the U.S. costs a fortune. Health insurance through the Affordable Care Act averages $560 monthly. An in-patient hospital visit can cost thousands of dollars.

People without health insurance face the highest risk of large medical bills. Emergency surgery or extended hospital stays create massive debt quickly. But even good insurance doesn’t cover everything.

Most plans have deductibles and require co-pays for certain services. A $50,000 hospital visit could still cost you $5,000 or more.

Hospitals must treat emergency patients regardless of insurance status. Uninsured patients receive bills afterward and often can’t pay them.

When you don’t pay an outstanding medical bill, your creditor tries to arrange payment. If time passes without payment attempts, they charge off the debt. Then they sell it to a collection agency.

Collection agencies typically purchase debts from local providers and hospitals. Some larger medical facilities partner with specific collection agencies. They sell debts to these partners regularly.

Here’s the shocking truth about what collection agencies pay. They buy outstanding medical debts at a fraction of their original value. Debt buyers may pay as little as $0.04 to $0.14 per dollar owed.

Collection agencies might pay only 4% of your original medical debt. Then they try to collect the full amount from you. If they succeed, they make a huge profit.

The cost varies based on the debt’s age. Newer debts cost more than older ones. The likelihood of collecting also affects the price.

What Happens After a Collection Agency Buys Your Debt

Collection agencies must send you a written letter first. The first letter should state the amount you owe. It must also name your original creditor.

You have 30 days to dispute the debt. Use that time wisely.

Request debt validation immediately. A debt validation confirms the collection agency owns your debt. You can also ask about the debt’s age. Knowing this tells you when the statute of limitations expires.

If you’re facing a lawsuit from a debt collector, our partner Solo can help you respond and negotiate a settlement.

Collection Agencies Can Sue You

Ignoring your medical debt invites legal action. A medical debt lawsuit makes everything worse. If the collection agency wins, they get a judgment against you.

A judgment allows wage garnishment. They can also seize money from your bank account. Neither outcome helps your financial situation.

Consider this example. Ned gets attacked by a shark while surfing. His injuries require stitches at the local hospital. He doesn’t have health insurance.

The hospital bill totals $4,000. Ned can’t afford to pay it. He ignores the bill completely.

Six months later, a collection agency buys Ned’s account. They contact him immediately. Ned sets up a monthly payment plan. He’ll pay off the bill over several years. The arrangement prevents legal action.

Take Action When Collectors Buy Your Medical Bill

Collection agencies will contact you frequently after purchasing your debt. Expect persistent communication from them.

Verify the agency owns your debt before making any payments. Don’t send money to the wrong company. Demand proof of ownership first.

You have options for resolving medical debt. Setting up payment arrangements can work. You might settle the debt for less than the full amount.

Collection agencies paid pennies on the dollar for your debt. They’re often willing to accept partial payment. Settling makes financial sense for both parties.

Negotiation Strategies That Work

Addressing medical debt collection head-on beats ignoring it. Avoiding the situation makes everything worse. The debt won’t disappear on its own.

Start by requesting debt validation within 30 days. Confirm the debt amount and ownership. Check the statute of limitations for your state.

Propose a settlement offer if you can pay a lump sum. Collection agencies often accept 40-60% of the balance. They profit even at reduced amounts.

Can’t afford a lump sum? Request a payment plan instead. Monthly installments prevent lawsuits and judgments. Make sure you can afford the agreed payment amount.

Get everything in writing before sending money. Written agreements protect you from future disputes. Never trust verbal promises from debt collectors.

If a collector has already sued you, our partner Solo helps you respond to the summons and negotiate a settlement that works for your budget.

Your Rights When Dealing With Medical Debt Collectors

The Fair Debt Collection Practices Act protects you. Debt collectors must follow specific rules when contacting you. They can’t harass, threaten, or deceive you.

Collectors can’t call before 8 a.m. or after 9 p.m. They must stop calling your workplace if you request it. They can’t discuss your debt with others.

You control the communication method. Request that collectors contact you only by mail. Send your request in writing via certified mail.

Collectors can’t add unauthorized fees to your debt. They must accurately represent the amount owed. False statements about legal consequences are illegal.

Know your statute of limitations. Old debts become time-barred eventually. Collectors can’t sue you after this period expires.

Making a payment on old debt can restart the clock. Never acknowledge the debt or make payments without checking the statute first.