How to Negotiate Medical Bills in Collections

How do you negotiate medical bills in collections and settle for less than the full amount owed? Adopt three sets of tactics that may compel a creditor to grant partial forgiveness.

First, offering a reduced lump sum payment is a common approach recommended by debt relief companies. The trick lies in gathering enough money to make a compelling offer.

Second, making small payments over time is another method. Just make sure that the creditor agrees in writing to this plan.

Third, pushing back against medical collection agencies with validation letters and possible legal violations put them on the defensive.

Settlements with Lump Sum Payments

How do you negotiate a settlement on medical debt and get the creditor to agree to partial forgiveness? The most effective option is to offer an immediate lump sum payment. In exchange, the collection agency may agree to accept only a small percentage of the balance as payment in full.

The trick is finding enough money and convincing the creditor to take something rather than nothing. Finding grant money is preferred, but most patients ultimately turn to other solutions.

Lump Sum Payment

Prepare an offer to settle the medical debt with a reduced lump sum payment. Creditors are more likely to forgive of part of the balance when they receive a large sum of money immediately. Also, demonstrating financial hardship at the same time

Do you qualify for debt relief? (Sponsored Link) Consumers have three ways to raise the money for the reduced lump sum payment.

  1. Consolidate payments into an escrow account. You purposely stop paying other creditors in order to accumulate the money. This also shows hardship and gives the agency a reason to forgive part of the balance. 
    1. Owe more than $10,000 in unsecured debt
      1. Credit cards
      2. Personal loans
      3. Medical bills
    2. Have a steady income to fund an escrow account
    3. Lack of resources to pay all obligations in full
  2. Tap savings and investments. The agency may require a larger lump sum amount if they suspect you have resources in reserve.
  3. Take out a debt consolidation loan. It may be difficult to qualify if you have delinquencies and/or collection accounts appearing on your consumer report.

Percentage Accepted

What percentage of medical debt is typically accepted in a settlement? The average person should expect the creditor to accept 25% to 30% and forgive the remainder. However, three main factors affect these percentages.

  1. Size of the balance: creditors expect a higher percentage for smaller amounts and lower percentages for larger amounts
  2. The capacity of the debtor: people with resources typically pay a higher percentage than those suffering financial hardship
  3. The threat of bankruptcy: creditors may accept low-ball offers when they risk getting nothing in a court ruling

Dealing with Medical Collection Agencies

How do you negotiate medical bills in collections? How do you deal with the agency when you cannot pay? Preparation is the key to successfully reaching an agreement to pay pennies on the dollar instead of the full amount.

Combine the settlement and payment plan tactics noted above with knowledge of debt collection laws, validation letters, minimum lawsuit amounts, and more.

Collection Laws

Good knowledge of medical debt collection laws is critical to any successful negotiation. Knowing your legal rights puts you in a better bargaining position. Of course, hiring an experienced attorney helps make the strongest case.

Statute of Limitations

The statute of limitations on medical debt (SOL) time bars creditors from filing lawsuits in order to compel payments through a civil judgment or property lien. The SOL laws vary by state and range from 3 to 15 years.

The statute of limitations clock starts ticking on the date of your last payment. Be careful not to reset the SOL when bargaining with medical collection agencies.

  • Making any payments on the obligation
  • Acknowledging that you owe the money

Consult an attorney licensed in your state for help interpreting these points.

Fair Debt Collections Act

The Fair Debt Collection Practices Act (FDCPA) attempts to eliminate abusive industry practices and promotes consistent State action to protect consumers. Use possible FDCPA violations to push back against the medical debt collection agency.[1]

The FDCPA protections extend into 6 categories. Research the law and know your rights.

  1. Communication with the consumer
  2. Harassment or oppressive conduct
  3. False or misleading representations
  4. Unfair practices
  5. Validation of debts
  6. Legal actions by collectors

The FDCPA imposes civil liabilities to any debt collector who fails to comply with any section of the law. The threat of a countersuit puts you in a strong position.


The Health Insurance Portability and Accountability Act (HIPAA) contains privacy rules regarding protected health information. Use possible HIPAA violations as a bargaining chip with the medical debt collection agency.[2]

HIPAA defines “individually identifiable health information” as data that relates to –

  • Individual’s past, present or future physical or mental health or condition,
  • Provision of health care to the individual, or
  • Past, present, or future payment for the provision of health care to the individual

The collection agency could face significant fines if they violated HIPAA by mishandling your protected health information – especially after reporting information to the credit bureaus.

CategoryLevelMin Fine
1· Unaware  

· Unable to correct

2· Should know  

· Unavoidable

3· Willful neglect  

· Attempt to correct

4· Willful neglect  

· No attempt to correct


Debt Validation Letter

You have the legal right under the FDCPA to request a medical debt validation letter as another bargaining tactic with the collection agency. The agency must send you the consumer a written notice containing key elements.

  1. Amount owed
  2. Name of creditor
  3. Three separate statements
    1. Right to a dispute within 30 days
    2. They will respond to disputes by verifying the debt or judgment
    3. They will provide the name and address or original creditor

The debt validation letter puts the onus on the agency to prove that you owe the money. Poor record keeping on the part of doctor offices and hospitals and insurance companies can result in a free pass.

Minimum Lawsuit

What is the minimum amount that a collection agency will sue for? If you owe less than the estimated minimum, then ignoring calls could be a valid negotiation tactic. The answer is different for each agency and consumer.

  1. Agency: the amount owed should be higher than the cost of hiring an attorney, filing the lawsuit, and appearing in court.
  2. Consumer: the person must have something to attach a lien against – a house, car, bank account or wages to garnish.

Answering Summons

How do you answer a summons for medical debt? A civil lawsuit brought by a collection agency is a serious matter that could have severe financial consequences. Pay close attention.

  1. Do not ignore the summons. Appear in court to plead your case and avoid a default judgment.
  2. Hire an attorney. Or, contact Legal Service Corporation to see if you qualify for aid based on your income.[3]
  3. Do your homework. Review your insurance company explanation of benefits statements and other documentation.
  4. Total your assets. The court could place on a lien on your home or car or garnish wages.
  5. Know your legal rights. Research the laws in your state in addition to those noted earlier.
  6. Investigate bankruptcy. Know the pros and cons of chapters 7 & 13 if you owe more than you can possibly pay.

Agreements with Monthly Payment Plans

Paying hospital or doctor bills by making small payments is always a viable negotiating tactic. However, you do not get to decide the amount by yourself. The creditor must agree to the terms.

First, ask about charity care. Then, put the payment plan in writing (signed by the dentist, doctor, hospital). Avoid having your account sent to collections by following through.

Sent to Collections

Can medical bills be sent to collections if you are making payments? Yes, your dentist, doctor, or hospital can send the unpaid balance on your account to collections at any time. It is a business decision.

Just because you are making small payments does not mean the provider finds this acceptable. For example, $5 every month on a $10,000 bill will not do. You have to reach an agreement first and then fulfill the terms.

  • Are you sending money every single month?
  • Is the amount enough to retire the balance in a reasonable time?
  • Do you have a signed written agreement?

Minimum Amount

What are the minimum monthly payment on hospital and other medical bills? The provider’s billing department has no legal obligation to accept a small installment payment of any size. No government agency or law imposes a minimum.

Two factors determine the acceptable monthly payment amount.

  1. Size of the outstanding balance
  2. Number of installments in the term

Having a minimum payment standard is unworkable when each patient owes a different amount. Instead, ask the billing department the maximum number of monthly installments they are willing to accept.

Refuse Payment Plan

Can a medical debt collector refuse a payment plan? Yes, they can. There is no legal requirement that forces a collection agency to accept any offer. You must work out an agreement they are willing to accept.

  1. Small installment payments take longer to retire the debt
  2. Long repayment periods have higher rates of future delinquency
  3. People with poor credit scores rarely follow through

Most collectors work on commission. They are happy to accept a payment plan that retires obligations quickly from people with a record of honoring commitments.

Footnoted Sources:

[1] Fair Debt Collection Practices Act


[3] Legal Services Corporation