How Much Do Collection Agencies Pay for Medical Debt?

Legal Expert
Sarah Edwards, BS

Sarah Harris is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: Collection agencies purchase medical debts for a fraction of their original value, sometimes as little as 4% of the original medical debt amount. Learn about the debt buying process and get help with medical debt in collections from SoloSuit’s simple guide.

Getting a collection notice means that your creditor decided to sell your debt to a professional collection agency, and you’ll probably hear from it frequently in the coming months. Debt collectors take the collections process seriously — after all, their entire business model is collecting old debts and pursuing consumers for payment.

While you can’t stop a creditor from charging off your unpaid medical debt and selling it to a collection agency, it helps to know how the process works. In some cases, you may be able to use it to your advantage.

Settle your medical debt fast with the help of SoloSettle.

Settle with SoloSettle

Make an Offer

How collection agencies buy medical debt

Costs for medical care in the U.S. are notoriously high. Purchasing a health plan through the Affordable Care Act’s online marketplace can set you back an average of $560 monthly, and an in-patient hospital visit can run into thousands of dollars.

People without health insurance are at high risk of incurring large medical bills, especially if they experience a catastrophe that requires surgery or extended time in a medical facility. But health insurance doesn’t cover all your medical costs. Most plans have deductibles and require co-pays for certain services. A $50,000 hospital visit can cost you $5,000 or more, even if you have a decent plan.

Hospitals aren’t allowed to turn away patients who need emergency care, even if they don’t have health insurance. Uninsured patients who need their services will receive a bill afterward and may be unable to pay it.

If you don’t pay an outstanding medical bill, your creditor will try to set up a payment arrangement with you. If time passes and you don’t attempt to repay the debt, it may charge off the obligation and sell it to a collection agency.

Typically, collection agencies purchase outstanding debts from providers and hospitals in their area. Some larger medical providers partner with specific collection agencies and regularly sell them debts.

Collection agencies buy outstanding medical debts at a fraction of their original value, especially if the chance of collecting the entire amount is remote. Debt buyers may pay as little as $0.04 to $0.14 for every dollar of a consumer’s outstanding debt. These costs vary depending on the age of the debt and the likelihood of collecting some of the money due. In other words, collection agencies may pay as little as 4% of the original medical debt amount and then try to collect on the full amount, making a huge profit if they do.

What happens after a collection agency buys your medical debt?

Once a collection agency gets hold of your outstanding medical debt, it will initiate communication with you via a written letter. The first letter from the collection agency should note the amount you owe and your original creditor. It will also give you 30 days to dispute the debt.

You should immediately ask the collection agency to validate your debt. A debt validation confirms that the collection agency is the proper new debt owner. You can also ask it to provide an age for the debt, which tells you how long you have until the statute of limitations runs out.

If you’re unsure how to draft a Debt Validation Letter, use SoloSuit’s Debt Validation Letter template.

If you don’t make arrangements to repay your medical debt, the collection agency may take legal action against you. A medical debt lawsuit can make a bad situation worse, especially if the collection agency wins a judgment. The judgment will allow the agency to garnish your wages or seize money from your bank account.

Let’s consider an example.

Example: Ned is out surfing one day when a shark suddenly attacks him. Fortunately, his injuries aren’t too severe, but he needs stitches for a bite to his torso. Ned goes to the local hospital, which treats him for the shark bite. He doesn’t have health insurance and receives a $4,000 bill from the hospital a few weeks later. Ned doesn’t have the money to pay the hospital bill, so he ignores it. Six months later, a collection agency purchases Ned’s account and contacts him. Ned sets up a monthly payment plan to pay off his medical bill over several years, which lets him avoid legal action from the collection agency.

Take action when a collection agency purchases your medical bill

When a collection agency purchases a medical debt you owe, you’ll likely hear from it often.

Make sure that the agency is the proper debt owner before you agree to make any payments. You may be able to set up payment arrangements or settle the debt for less than you owe. While having a medical debt in collections can be frustrating, addressing the situation head-on is better than allowing it to fester.

Do you need help settling a medical debt? Check out the following video to learn the steps to debt settlement.

What is Solo?

Solo makes it easy to resolve debt with debt collectors.

You can use SoloSuit to respond to a debt lawsuit, to send letters to collectors, and even to settle a debt. SoloSuit's Answer service is a step-by-step web-app that asks you all the necessary questions to complete your Answer. Upon completion, we'll have an attorney review your document and we'll file it for you.

SoloSettle can help you contact your debt collector or creditor and negotiate the debt to settle for less, all online. It simplifies and streamlines the process to settling your debt.

No matter where you find yourself in the debt collection process, Solo is here to help you resolve your debt.

>>Read the FastCompany article: Debt Lawsuits Are Complicated: This Website Makes Them Simpler To Navigate

>>Read the NPR story on SoloSuit. (We can help you in all 50 states.)

How to Answer a Summons for debt collection in all 50 states

Here's a list of guides on how to respond to a debt collection lawsuit in each state:

The Ultimate 50 State Guide

Debt collector guides

Are you being contacted by a debt collector? We’re making guides on how to resolve debt with each one.

Arbitration

If the thought of going to court stresses you out, you’re not alone. Many Americans who are sued for credit card debt utilize a Motion to Compel Arbitration to push their case out of court and into arbitration.

Below are some resources on how to use an arbitration clause to your advantage and win a debt lawsuit.

Bankruptcy

Bankruptcy is a great way to legally resolve debt, but it's usually best to consider it as a last resort. Here are some bankruptcy guides to help you decide which debt resolution option is best for you.

Check your case status

Don’t have time to go to your local courthouse to check the status of your case? We’ve created state guides on how to check the status of your case throughout the US, complete with online search tools and court directories.

Credit

Debt has a big impact on your credit. Below is a list of guides on how to repair and improve your credit, even while managing major debt, along with other credit-related resources.

Debt collection FAQs

Find answers to some of our the most commonly-asked questions about debt collection below.

Debt collection documents and templates

If you're dealing with debt, these documents and templates will help you respond, protect your rights, negotiate, and resolve your debts.

Debt relief

We’ve created a specialized guide on how to find debt relief in all 50 states, complete with steps to take to find relief, state-specific resources, and more.

Debt settlement

Debt settlement is one of the most effective ways to resolve a debt and save money. We’ve created state guides on debt settlement. Find out how to settle in your state with a simple click and explore other debt settlement resources below.

Eviction

Facing an eviction? The following guides will help you navigate your situation with confidence.

Federal debt collection laws

Knowing your rights makes it easier to stand up for your rights. Below, we’ve compiled all our articles on federal debt collection laws that protect you from unfair practices.

Legal aid

Helping people find access to justice is at the heart of Solo's misison. If you're dealing with a legal debt issue, the following guides will help you through it.

Medical debt

Having a health challenge is stressful, but dealing with medical debt on top of it is overwhelming. Here are some resources on how to manage medical debt.

Personal finance

Learn how to manage your finances and overcome crushing debt. Check out our personal finance guides below.

State debt collection laws

Debt collection laws vary by state, so we have compiled a guide to each state’s debt collection laws to make it easier for you to stand up for your rights—no matter where you live.

Statute of limitations on debt

Like all debt collection laws, the statute of limitations on debt varies by state. So, we wrote guides on each state’s statutes and more.

Stop collection calls

Do you keep getting calls from an unknown number, only to realize that it’s a debt collector on the other line? If you’ve been called by any of the following numbers, chances are you have collectors coming after you, and we’ll tell you how to stop them.

Wage garnishment

Forgot to respond to your debt lawsuit? The judge may have ordered a default judgment against you, and with a default judgment, debt collectors can garnish your wages. Here are our guides on how to stop wage garnishment in your state, plus other wage garnishment resources.

The Debt Hotline

Hosted by Team Solo, The Debt Hotline breaks down debt and personal finance topics with help from attorneys, financial experts, and industry pros. We respond to real questions to help you navigate debt with knowledge and courage.

Other debt resources

It only takes 15 minutes.

And 50% of our customers' cases have been dismissed in the past.

"Finding yourself on the wrong side of the law unexpectedly is kinda scary. I started researching on YouTube and found SoloSuit's channel. The videos were so helpful, easy to understand and encouraging. When I reached out to SoloSuit they were on it. Very professional, impeccably prompt. Thanks for the service!" - Heather

Get Started