Fairness in Collecting Medical Bills

[AFTP]

I realize this isn’t a tax matter and it may be moved but I’d like to start here.

Many on the board are in law and I need your advice.
I needed a medical procedure and my insurance didn’t pay it all. The Doctor’s office wants payment in full. I can’t so I called to make arrangements. They said it was their policy to demand the bill be paid in 6 months at 35% interest or they’d report me to the credit companies as delinquent.

I contacted my State Rep. and the Banking Com. But they said the Doctor wasn’t regulated and I most likely signed a payment agreement before the procedure in all the small print.

I’m willing to pay but feel 35% is ridicules and potentially unlawful.
Your suggestions are appreciated.

[Judge Roy Bean]

It depends primarily on what you signed and what state you live in. Usury laws are a patchwork with lots of giant holes.

[Imalawman]

A good place to start is the consumer protection division of your state's attorney general's office. They would have the best answers for you, better than probably any here will be able to provide. Most states have usury laws against unjust interest. If your doctor is within those limits, you're probably out of luck. If they are truly unwilling to work with you on the medical bills that is really ashame. Best case option is getting loan from your bank to pay it off or a credit card with lower than 35% interest. Worst case scenario is Bankruptcy.

Best of luck to you in your health and financial matters.

[webhick]

If the doctor is affiliated with a hospital, the hospital might have a program where they'll help take care of the remaining bill or at least negotiate a payment plan where the finance charges only accrue if you don't make good on the plan.

Also, I'd be questioning the insurance company right now to see if the doctor miscoded the procedure. That's what happened when I had some skin cancer removed. The doctor's office coded it as an elective surgery. Ah...the joys of insurance. How I miss it so.

[Weathervane]

I realize this isn’t a tax matter and it may be moved but I’d like to start here.

Many on the board are in law and I need your advice.
I needed a medical procedure and my insurance didn’t pay it all. The Doctor’s office wants payment in full. I can’t so I called to make arrangements. They said it was their policy to demand the bill be paid in 6 months at 35% interest or they’d report me to the credit companies as delinquent.

Right up my alley, AFTP. I would inform them of your policy of officially reporting them to the Attorney General's Office/Consumer Protection Division as well as the Medical Licensing Board of your state government for usury practices. While there may or may not be any "violations" on their part, they would still have to answer to the complaint and believe me, NO ONE wants to be dragged in front of the board.

I contacted my State Rep. and the Banking Com. But they said the Doctor wasn’t regulated and I most likely signed a payment agreement before the procedure in all the small print.

While the fine print of your contract may state an interest penalty, late charge, returned-check fee, etc., most reputable places of business will post this in plain view. Especially something as outrageous as a 35% APR. I would suggest you kindly request a face-to-face meeting with the office manager to discuss the matter further.


I’m willing to pay but feel 35% is ridicules and potentially unlawful.
Your suggestions are appreciated.

I would call them back and ask for another appointment with the doctor. Don't tell him its about money until you see him. Since most pysicians don't like to get in the trenches and actually talk about the dirty subject of money with their patients, you can really put him in a bind. Drop a hint that also you're not pleased at all with the results of the proceedure and you're thinking about a second opinion on how the surgery went and could they please provide you with a complete copy of your file?

[LPC]

They said it was their policy to demand the bill be paid in 6 months at 35% interest or they’d report me to the credit companies as delinquent.

The fact that they state this as a "policy" sounds like they have no legal right to 35% but are demanding that amount as hush money not to report you to credit agencies. That in itself might violate consumer protection laws. (Or it should.)

And is the 35% an annual percentage rate (APR) or the rate to be applied to the six month period? If $100 has to be repaid as $135 in six months, that's an APR of 82.25%.

If they don't actually have a right to 35% but are just trying to extort money from you, one strategy would be to pay them on your terms, such as 12 monthly payments plus interest at the "legal rate" for unpaid debts. If they report you to credit agencies, you can demand that the credit agencies include your explanation of your payment schedule, which might not hurt your credit rating much (or at all) if you make the payments and pay a reasonable interest rate.

See http://www.lectlaw.com/files/ban02.htm for a list of "legal rates" and usurious rates in various states.

[Demosthenes]

Also, even if you find out that your state laws don't prohibit such ugliness, put in a call to the consumer advocate reporter at your local tv station, and get the stinky practice stopped.

Abusive medical loans are a hot topic right now. See story below from last week from the NY Times.

August 30, 2007

Doctors Offering No-Interest Loans to Patients
By MILT FREUDENHEIM

Zero-interest financing, a familiar sales incentive at car dealerships and furniture stores, has found its way to another big-ticket consumer market: doctors’ and dentists’ offices.

For $3,500 laser eye surgery, $6,000 ceramic tooth implants or other procedures not typically covered by insurance, millions of consumers have arranged financing through more than 100,000 doctors and dentists that offer a year or more of interest-free monthly payments.

Of course, going into debt to pay for medical procedures is nothing new for many people. And this type of financing is still only a fraction of the nation’s $900 billion market for consumer revolving credit.

But as the price of health care continues to rise and big lenders pursue new areas for growth, this type of medical financing has become one of the fastest-growing parts of consumer credit, led by lending giants like Capital One and Citigroup and the CareCredit unit of General Electric.

Big insurers, too, are devising new financing plans with various payback options. Upstart players have also aggressively cut deals with doctors.

The room for expansion looks ample, as rising deductibles, co-payments and other costs may force more of the nation’s 250 million people with health insurance to finance out-of-pocket expenses for even basic medical care.

“As more and more of the costs of care are shifted to consumers, people are going to need more credit,” said Red Gillen, a senior analyst at Celent, an insurance and banking research firm. “They are still going to need health care.”

The zero-interest plans are not for everyone. In fact, they are available only to the creditworthy — meaning they offer no help to those among the nation’s 47 million uninsured who are in difficult financial situations.

And creditworthiness is starting to be judged even more stringently, in light of the subprime mortgage crisis’s impact on the debt markets, according to David Robertson, publisher of The Nilson Report, a newsletter for the credit card industry.

Even for those who can get credit approval, the plans make sense only if users are able to make payments on time and close the loan on schedule, typically within 12 months. Otherwise, the loans after defaults can carry interest rates of 20 percent or more — similar to the default penalty on a typical credit card.

“We are very careful to tell patients upfront, ‘Be sure you can make your payments,’ ” said Dr. Richard J. Mercurio, a dentist in Lincroft, N.J. He arranges patient financing through the CareCredit unit of G.E., the leader in consumer medical financing.

Dr. Mercurio says he knows of at least two patients who missed payments and received monthly bills charging high interest rates. “They were not happy,” he said.

For those who are able to make their payments, though, the plans can make it possible to receive treatments that otherwise might be out of reach.

“There was no way I had $6,000 right out of my pocket,” said Nancy Schlachter, 40, who has dental insurance through her job as an accounts payable manager for a national construction company. She went to Dr. Mercurio for a series of dental procedures including a new crown, fillings and a tooth implant.

“The implant was very expensive, and it was not covered,” Ms. Schlachter said. But the dentist’s office arranged 12-month zero-interest financing. “It was the only way I could do it,” she said.

Some consumer debt experts warn that as more people try to bridge widening gaps in their health insurance, paying for medical care on credit could plunge the unwary into a financial crisis. In recent years, the use of high-interest credit cards to pay big medical bills has become a leading cause of consumer bankruptcy.

“Unless they are at risk of losing life or limb, people should be very cautious about putting medical bills on credit cards,” said Mark Rukavina, executive director of the Access Project, a research and consumer advocacy organization that helps people with their medical debts.

Still, consumer credit companies and some insurers are now experimenting with financing plans meant specifically for medical costs.

For people who think they could not pay off a zero-interest loan within a year, most credit companies also offer longer-term medical financing deals with 12 percent to 13 percent interest payable over several years. Those plans, though, must be arranged at the outset of the medical expense; a zero-interest plan typically cannot be converted to the longer-term program if consumers find themselves unable to pay off the one-year loans.

Some insurers, including UnitedHealthcare, also have special credit plans available for insured members whose policies are linked to health savings accounts. Such policies combine high-deductible insurance with tax-sheltered savings accounts where money can roll over year to year until needed for medical expenses. But typically, the amounts of money being set aside do not go very far toward meeting even routine health expenses.

So far, among the 1.76 million health savings accounts in this country, the average balance is $1,327, according to a recent survey by Inside Consumer-Directed Care, a trade publication. To help people with health savings accounts meet the shortfall, the Exante Bank unit of UnitedHealth Group is trying out a card that extends credit at rates currently averaging about 10 percent to 13 percent, depending on the applicant’s credit history.

UnitedHealthcare is also testing a medical credit card that would offer reduced rates.

“There’s a place for credit solutions that are integrated within traditional health insurance programs, when an individual hits that out-of-pocket expense,” said Tom Beauregard, a senior vice president at UnitedHealthcare. “The key is to make it voluntary, to make it simple and to offer favorable credit terms.”

As for the zero-interest deals, the credit providers say that most of them end up being just that — interest-free. About 80 percent of the medical loans that CareCredit provides are paid off on schedule and incur no finance charges, according to the company’s president, Michael J. Testa.

That, the companies say, justifies the high default interest rates for late payments, since that is the way they recoup the costs of doing business. In fact, though, the credit companies make money even on the interest-free deals, because they are typically keeping 10 percent of the fee the doctor charges the patient. On a $5,000 cosmetic nose operation, for instance, the plastic surgeon might receive only $4,500.

Another of the medical finance companies, HELPcard, says that for dentists whose customers are good credit risks, the lender’s commission might be only 4 percent to 5 percent. But for patients with low credit ratings, a dentist eager to build a clientele might have to accept as little as 75 percent of the bill, said Pat McGee, HELPcard’s senior vice president for sales and marketing.

The CareCredit unit of G.E., too, has special deals for patients whose credit is not well established. Stephanie Waterman, a coordinator for Dello Russo Laser Vision, a laser-surgery practice with offices in New York and Bergenfield, N.J., said patients deemed less creditworthy were required to pay $600 in cash and to agree to have 12 months of zero-interest payments taken directly from their bank accounts.

One Dello Russo patient, Senior Airman Derrick Fields, 31, stationed at Dover Air Force Base in Delaware, said that in June he paid $600 down on a $3,500 surgery bill for both eyes — a reduced charge the practice offers to members of the military.

“They take about $250 a month from my bank account,” said Mr. Fields, who said he soon expected to not wear eyeglasses for the first time since the second grade. “I owe $2,900.”

[ErsatzAnatchist]

Unless you were given a Truth In Lending Disclosure with your paperwork, this is just a scam.

The Dr's office does not want to be the "Bank" and wait for payments from you. This is why they are bing a jerk to you about paying off the bill immediately. However, there is very little that they will do to push this matter.

(1) They cannot legally charge you interest without a truth in lending disclosure, and complying with any state laws on the charging of interest. Without even seeing the paperwork, I will bet you 10 Quatloos that there is not a Truth in Lending Disclosure in the paperwork (and probably not even an interest rate disclosure). Make sure that the billing department is aware that they cannot charge you interest.

(2) Do not let this go to collections if you value your credit. However, if it goes to collections, send a FDCPA letter instructing the collection agency to not contact you. The collection agency MUST honor that request. Once you do that a couple of times, the Dr's office will have a new found respect for accepting monthly payments.
See: http://www.ihatedebt.com/DealingWithYou ... ectors.php

(3) Start sending in monthly payments that you can afford. While it will not insulate you from a lawsuit, most creditors will not sue on debt if regular payments are being made. Don't bother to make a deal with the billing department. Just keep making payments.

(4) Contact your insurance company and find out why the procedure was not paid for. There may have been a mistake in the billing, that once fixed, will solve this problem.

Good Luck.

[AFTP]

Thank you everyone for the great suggestions.

I spoke to the Attorney Gen. and the office that regulates Doctors in my State.

Turns out we have no laws placing a cap on interest.
We do have a law in the Medical Practice Act that states it unlawful to “charge a grossly exorbitant fee for professional or occupational services rendered.”

However, a lawyer at the Attorney Gens office agreed with me that they didn’t verbally tell me and since I needed the procedure it my have been under duress and therefore an unconscionable contract.
This would mean court.

I did contact my State Rep. and suggested we get some laws on the books to help in the matter.

I’ll keep you posted.

[Prof]

The good Dr. may not be covered by Truth-In-Lending if he does not regularly extend credit:

15 USC Sec. 1602:

f) The term "creditor" refers only to a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required, and (2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement. Notwithstanding the preceding sentence, in the case of an open-end credit plan involving a credit card, the card issuer and any person who honors the credit card and offers a discount which is a finance charge are creditors. For the purpose of the requirements imposed under part D of this subchapter and sections 1637(a)(5), 1637(a)(6), 1637(a)(7), 1637(b)(1), 1637(b)(2), 1637(b)(3), 1637(b)(8), and 1637(b)(10) of this title, the term "creditor" shall also include card issuers whether or not the amount due is payable by agreement in more than four installments or the payment of a finance charge is or may be required, and the Board shall, by regulation, apply these requirements to such card issuers, to the extent appropriate, even though the requirements are by their terms applicable only to creditors offering open-end credit plans. Any person who originates 2 or more mortgages referred to in subsection (aa) of this section in any 12-month period or any person who originates 1 or more such mortgages through a mortgage broker shall be considered to be a creditor for purposes of this subchapter.

[Quixote]

I realize this isn’t a tax matter and it may be moved but I’d like to start here.

Many on the board are in law and I need your advice.
I needed a medical procedure and my insurance didn’t pay it all. The Doctor’s office wants payment in full. I can’t so I called to make arrangements. They said it was their policy to demand the bill be paid in 6 months at 35% interest or they’d report me to the credit companies as delinquent.

I contacted my State Rep. and the Banking Com. But they said the Doctor wasn’t regulated and I most likely signed a payment agreement before the procedure in all the small print.

I’m willing to pay but feel 35% is ridicules and potentially unlawful.
Your suggestions are appreciated.

I'm assuming you've gone over the charges and verified that 1) you were charged only for services actually performed, 2) that your insurance provider has paid for everything covered by your policy, and 3) that your insurance provider has not paid for anything not covered by your policy.

My own experiences with medical bills for major operations and an extended illness have led me to conclude that the final bill after insurance is at best an approximation of reality. I have found LPC's suggested approach to work, except I always use an interest rate of zero.

[AFTP]

I had my state’s Insurance Commissioner verify that my insurance company was within my policy and did nothing wrong.
The focus now is if this Dr. is out of line with 35% interest and payment in full in 6 months.

[gottago]

I don't know how much money is involved, but most insurance companies require prior authorization before procedures and it should have been made clear to you at the time how much you would be expected to pay. Many doctors/hospitals require you to pay all or part of "your share" before the procedure. Sometimes the insurance company will pay less if this is not done by the doctor/facility before the service is provided.

Speaking of fees and interest, just received today the CP14 from the IRS in response to the correct 2005 return that was filed back in June. The original tax due 4/15/2006 was $9471 and with the penalties and interest the total now due is $14,140. $4700 in interest/fees have accrued in 18 months--is that more than 35% interest? Just an observation (really) but it does make me wonder how they ever expect even a non TP to ever get back in compliance if they get behind, lose their job or have unexpected expenses. At least the doctor won't seize your bank account or car

[grixit]

What about public exposure? See if your local tv news has a muckraking reporter. "Excuse me sir, are you planning to see Dr. Jones? Were you aware that Dr Jones has a policy of charging 35% interest or ruining a patient's credit rating? Oh wait here's the head of the medical center. Director, can you explain this letter? Some people might say your doctors of greedy, but i'm sure you have a reasonable explanation..."

Of course that tactic might require a change of doctors.

[AFTP]

New development-

I called and asked to see their policy on collections and where I sighed agreeing to it.

They said at the bottom of my bill is written “ delinquent accounts may be subject to interest penalty.”

They said that’s all that legally has to be known and I’m now subject to the agreement.

I say it’s bull!

[Duke2Earl]

I have a simple approach. I would pay the amount of the medical bill without any interest or penalty. If they want to then proceed and sue me for the interest... well then, I'll see them in court.

[Duke2Earl]

I have a simple approach. I would pay the amount of the medical bill without any interest or penalty. If they want to then proceed and sue me for the interest... well then, I'll see them in court.

[AFTP]

They wont take it to court.
They said they would simply report me to the credit agencies as delinquent and ruin my credit.

[Imalawman]

They wont take it to court.
They said they would simply report me to the credit agencies as delinquent and ruin my credit.

And that's the crux of the matter here. Of course court is an option. But by that point the credit history will be tainted.

I'm curious, does the doctor's office know that you've contacted the AG's and medical board. I would suggest that you let them know what you are doing. Give them your position and as always make sure to speak with someone (face to face if possible) that can actually do something for you. The whiny little secretary can't do a damn thing. The last thing you want is for them to report you to the credit agency. Sure, you can kick their ass all over the court room, but avoid that result at all costs. Perhaps it might be worth paying a few hundred dollars for an attorney?

[Weathervane]

New development-

I called and asked to see their policy on collections and where I sighed agreeing to it.

They said at the bottom of my bill is written “ delinquent accounts may be subject to interest penalty.”

They said that’s all that legally has to be known and I’m now subject to the agreement.

I say it’s bull!

There's a diference between a patient agreeing to make payment arrangements to satisfy an un-paid bill, and then there's delinquent accounts.

As far as I can see, the fact that you have told them that you are more than willing to pay your share that your insurance company did not pay does not in any stretch qualify you as a delinquency.

I'd tell them that it is as big a surprise to you that your insurance didn't cover the entire amount, and that you will make regular payments to satisfy the balance, if they pursue the 35% interest and report you to a credit agency, then you are very sorry that they treat their patients this way and will seek care from another provider, as well as tell everyone you know to avoid their office like the plague.

In the mean time, you need to let the physician know that you think he botched your operation.