Medical Debt Dictionary

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• Medical Debt Terms
• Hospital and Provider Terms
• Insurance Terms and Types
• Insurance Billing Terms
• Laws and Policies
• Federal Agencies to Know

Medical Debt Terms  

• Creditor: A party that is owed the debt and wants to receive payment. In the health care context, this is often a medical provider. A creditor can attempt to collect payments on their own. They can also hire a third party to collect the debt on their behalf.  
• Debt buyer: Distinct from a creditor. Debt buyers typically buy large packages of debt from creditors and pursue collection using debt collectors.  
• Debt collection/collection action: The action of pursuing the person or guarantor who owes the medical debt. Extraordinary collection actions are more intense actions taken to collect debt and are regulated by the IRS.  
• Debt collectors or collections agencies: Entities whose business model primarily relies on collecting unpaid debt. They can either collect on behalf of a medical provider while the provider still technically holds the debt or buy the debt from the provider. 
• Debtor: A patient or guarantor who owes medical debt due to unpaid medical bills. 
• Foreclosure or forced sale: A legal process a mortgage lender—usually a bank—can use to take ownership of and sell a debtor’s property to recover money they are owed. While medical providers cannot foreclose on a home, some studies have linked medical debt to housing instability and difficulty staying on top of mortgage payments.  
• Guarantor: The person responsible for paying the medical bill. Typically, the patient and guarantor are the same person, but it may also be a parent or other family member. 
• Medical debt: Medical debt is the general term used to describe outstanding medical bills a patient owes.  
• Placing a lien: A lien is a legal claim a creditor can place on a patient’s home or other property. This means the patient is unable to sell, transfer, or refinance their home or property before paying off the creditor. Most states require creditors to get a court order before placing a lien on a home.  
• Sale of medical debt: Hospitals and other providers sometimes sell patient debt (after a period of time) to third-party buyers.  
• Statute of limitations: The maximum amount of time in which two parties involved in a dispute (in this case, a creditor or collector pursuing payment for medical debt) can initiate legal proceedings. The statute of limitations for medical debt lawsuits varies by state.   
• Wage garnishment: Creditors may get a court order allowing them to deduct (also known as ‘garnish’) a patient’s paycheck and put that towards their debt. Federal law limits how much can be deducted from the paycheck and some states provide even stronger paycheck protection.  
• Zombie debt:  Definitions can vary, but is described by the Federal Trade Commission as “a debt you think is dead, gone, and forgotten, but has somehow come back to life.” This can include debt past the statute of limitations sold to debt collectors, who may continue to attempt to collect. In some states this can restart the clock on lawsuits, but others have passed laws to prevent lawsuits from being initiated on zombie debts.   
  

Hospital and Provider Terms  

• Bad debt: Money the creditor anticipated getting but never received for something they’ve already done or provided. In the health care sphere, this would be unreimbursed bills the provider expected the patient to pay. Note that bad debt does not include patient accounts found eligible for financial assistance.  
• Charity care: Often used interchangeably with “financial assistance.”  The term “charity” can be viewed negatively by some patients, making financial assistance the preferred term for applications.  
• Chargemaster prices/rate: The non-negotiated rate listed by hospitals and other health care providers. Essentially like the sticker price for a car.  
• Community benefit requirements: Nonprofit hospitals are required by federal law and some state laws to provide community benefits, such as financial assistance and other investments targeting community need, in exchange for a tax exemption. 
• Extraordinary collection action: Actions taken by a hospital facility against a person related to obtaining payment for an outstanding bill covered under the hospital facility’s financial assistance policy (FAP) that involve: selling the person’s debt to another party; reporting negative information to credit agencies; deferring or denying care or requiring payment before providing medically necessary care due to an outstanding bill; or taking an action that requires legal or judicial process (such as placing a lien or garnishing wages).  
• Financial Assistance: Often used interchangeably with “charity care.” This is free or discounted care offered by providers to certain eligible groups. Not all providers offer financial assistance, but federal rules require all tax-exempt hospitals to make some financial assistance available to patients.   
• Financial Assistance Policy (FAP): A hospital’s policy to provide free or discounted care to certain eligible patients. Eligibility for financial assistance can depend on income, insurance status, and/or residency status. A hospital may be required by law to have a financial assistance policy, or it may choose to implement one voluntarily.  
• Indigent care program: Often used interchangeably with the term “charity care.” States, local governments, hospitals, and other health care providers can all have indigent care programs. These programs are designed to help people who qualify to access health care services.  
• Patient advocate: Most hospitals have patient advocates (also called patient representatives) who help patients and their loved ones navigate the health care system—including understanding hospital bills, finding resources, and taking complaints.  
• Presumptive eligibility for financial assistance: Distinct from hospital presumptive eligibility, which allows hospitals to provide temporary Medicaid coverage to someone likely to qualify. Presumptive eligibility for financial assistance involves performing an income eligibility screening either before or after treatment but prior to billing to determine whether a patient qualifies for financial assistance—without the patient having to apply.    
• Self-pay patient: Refers to a patient who pays their bill directly rather than going through private insurance. Self-pay patients are typically uninsured, but may also include patients who decline to use insurance.   
• Self-pay discount (sometimes called a “prompt pay” discount): Discounts provided to patients not going through insurance. Prompt pay discounts may also be provided to patients who pay within a certain time limit, e.g. the day of service or within 30 days.  
• Sliding scale: Typically used to refer to discounted rates charged based on a person’s income.  
• Reasonable effort: What a non-profit hospital must do under federal law to inform a patient about financial assistance before starting an extraordinary collection action.  
• Uncompensated care: Health care or services provided by hospitals or other providers that don’t get reimbursed. Often uncompensated care occurs when a person does not have insurance and can’t afford to pay the cost of care.  
   

Insurance Terms and Types  

• Beneficiary: The person enrolled in a health insurance plan who receives benefits through the health insurance policy.  
• Children’s Health Insurance Plan (CHIP): The insurance program that provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid but not enough to buy private insurance. Some states also extend CHIP to pregnant individuals.  
• Dual eligible: Someone eligible for both Medicaid and Medicare.  
• Employer-sponsored insurance: Also referred to as employer-sponsored coverage or a group health plan. Typically, your employer will offer a selection of plan levels to choose from, as well as cover a portion of the monthly premiums.  
• Enrollment period: Also referred to as open enrollment. The period of time in which a person can enroll in or change their health insurance plan or other benefit program.  
• Fee-for-service: A type of insurance payment structure that pays doctors and other health care providers for each service performed. 
• Health Savings Account (HSA): A type of saving account that lets people set aside money before taxes to pay for qualified medical expenses.  
• High-deductible health plan (HDHP): 
• Managed care plans: A type of health insurance organized to manage “cost, utilization, and quality.” Most people with insurance are insured through a managed care plan, and you may hear those insurance providers referred to as managed care organizations or MCOs.  
• Marketplace or qualified health plans (QHPs): Often referred to as Obamacare. These plans are offered on the HealthCare.gov Marketplace and must follow specific requirements, including providing essential health benefits, following limits on cost-sharing, etc… These are plans available to people who don’t qualify for or have access to employer-based health insurance.  
• Medicaid: A joint federal and state program that helps cover health care costs for eligible people with limited income. There are a set of basic requirements from the federal government, but states set eligibility and coverage limits. Usually, people with Medicaid don’t pay premiums but may owe co-payments.  
• Medicare: Often confused with Medicaid. Medicare is a federal health insurance program for people 65 and over, as well as people with certain disabilities and other health conditions.   
• Prior authorization: Approval from a health plan that may be required before you’re able to get a service or fill a prescription and have it covered by your plan.  
• Qualifying Life Event: A change in situation, like getting married, having a baby, or losing health coverage, that can make you eligible for enrollment outside the yearly open enrollment period.   
• Subscriber: Also referred to as the policyholder, it is the primary person subscribing to or carrying the insurance plan.  
• Uninsured: Someone without health insurance coverage.  
• Underinsured: Someone who has insurance coverage but is still exposed to a substantial amount of financial risk.  
• Utilization review: Part of managed care, it involves things like prior authorization used to determine if healthcare services are being used “efficiently and appropriately.” 

Insurance Billing Terms  

• Cost-sharing: Basically, what you are charged by insurance for your portion of covered services. This can include deductibles, coinsurance, and copayments but does not include premiums, balance billing amounts for providers not in your network, or the costs of non-covered services. This is an excellent breakdown of cost-sharing and related terms.  
• Coinsurance: The percentage of the cost you pay after meeting your deductible. For example, your plan might have 80/20 coinsurance meaning you will owe 20% of the approved amount for the service.   
• Co-pay/copayment: A set amount you must pay for a service covered by your insurance plan. Your plan will tell you your co-pay for different services—e.g., you may be charged $35 to see your primary care physician (PCP) or $45 to see a specialist. These rates are often printed directly on your insurance card. 
• Covered services: The medical procedures, prescriptions, etc.. that are eligible for coverage under your insurance plan.  
• Deductible: What you have to pay every year before your plan will pay for most of your medical bills. Some plans might have multiple deductibles (like an in-network and out-of-network deductible, or an individual and family deductible). Some services, like preventive care, do not require you to meet your deductible. Deductibles are calculated based on the insurance contracted/agreed upon amount and are not impacted by chargemaster rates.  
• Denial: When an insurance company refuses to cover a service.  
• EOB (explanation of benefits): Even though it says, “amount you may owe” this is not a bill. EOBs show details about your claim, including the date of service and what the service was, as well as the portion of charges your insurance will cover.  
• EHB: A set of ten categories of services health insurance plans are required to cover by the Affordable Care Act. Plans can offer additional benefits.  
• Network: The providers, facilities, and suppliers your health insurance provider has contracted with to provide services.  
  • In-network: Providers, facilities, and suppliers contracted with your health insurance. 
  • Out-of-network: Providers, facilities, and suppliers not contracted with your health insurance. Sometimes a facility may be covered while a provider is not, leading to unexpected medical bills.   
• Out-of-pocket maximum: The most you have to pay for covered services in a plan year. After you hit this maximum with deductibles, copays, and co-insurance for in-network services your plan pays 100% of covered costs. This does not include monthly premiums, anything outside of your plan’s coverage, and costs above the allowed amount for a service that a provider may charge.  
• Premium: The amount you pay for your health insurance every month. Some employers cover all premiums, while others do not. People tend to focus on premiums when shopping for plans, but it is important to also consider the deductible.  
• Provider: A licensed person or organization that provides health care services. This includes doctors, nurses, therapists, labs, hospitals, and other health care centers.  
• Reconsideration: Also called an appeal. A request for your insurance provider to review a decision denying a benefit or payment.  

Laws and Policies 

For an overview of state laws around medical debt and related policies, check out Commonwealth Fund’s State Protections Against Medical Debt.  

• Affordable Care Act (ACA): Commonly referred to as Obamacare, legislation passed in 2010 providing numerous rights and protections designed to increase access to health coverage. It also provides subsidies to make health coverage more affordable.  
• COBRA: A federal law that allows eligible people to temporarily keep health coverage after ending employment. If you opt to take COBRA coverage you pay 100% of premiums in addition to an administrative fee.  
• ERISA: A federal law that governs how employers provide retirement and health insurance plans to employees.   
• Fair Debt Collection Practices Act (FDCPA): The main federal law governing debt collection practices. It prohibits debt collection companies from using abusive, unfair, or deceptive practices to collect debt—including the time of day and how often they may contact you, and what information they are required to share.  
• Fair Credit Reporting Act (FCRA): Legislation that covers how things—including medical debt—can be reported in your credit report. Provides the right for you to dispute reporting you believe to be inaccurate.  
• Medicaid expansion: A provision in the ACA that called for the expansion of Medicaid eligibility to cover more people. The federal government pays 90% of the cost of covering newly eligible people in expansion states. As of February 2024, 41 states (including DC) have opted to expand Medicaid.  
• No Surprises Act: Federal legislation passed in 2021 and enacted in 2022. It aims to address and eliminate surprise billing by limiting the amount you pay out of pocket for out-of-network physicians to something closer to what you would pay for in-network care. It also requires physicians to give patients who don’t have insurance or who are not using insurance a good faith estimate of the bill prior to services.   

Federal Agencies to Know  

• Consumer Financial Protection Bureau (CFPB): Created in 2010 under the Dodd-Frank Act. The CFPB enforces federal consumer financial laws and works to protect the public from predatory practices.     
• Centers for Medicare and Medicaid Services (CMS): The federal agency that runs the Medicare, Medicaid, and Children’s Health Insurance Programs (CHIP), as well as the federally run Marketplace. CMS also sets important health care standards and regulations.  
• Health and Human Services (HHS): The federal agency responsible for implementing programs related to social service, civil rights, and health care policy. A very large federal agency, it has 11 divisions and more than 100 programs.  
• Internal Revenue Service (IRS): Oversees the collection of federal taxes and enforcement of tax laws. This includes 501r, the section of the tax code that governs non-profit hospitals. A bureau of the Department of the Treasury.