A Guide to Combating Medical Debt
Overwhelming medical debt is the No. 1 reason Americans file for bankruptcy. In fact, according to a study out of the City University of New York, 66.5 percent of bankruptcy filings cite medical expenses as a contributing factor.
These expenses often stem from unexpected emergency room visits or surgeries, costly bills after life events (the labor of a child, for example), or treatments for fertility or chronic illness. Regardless of their source though, they pose a serious financial burden for the everyday American.
Not only can costly medical debt make it difficult to pay household expenses, like rent, utilities and grocery bills, but getting behind on those bills can mean a lower credit score, a constant barrage of calls from collections agencies or, in dire situations, even a filing for bankruptcy.
Are your sky-high medical bills forcing you to consider bankruptcy? This guide can help you find medical bill assistance programs, walk you through the bankruptcy process and help get your credit back in good standing.
Dealing with Medical Debt
Having a solid emergency fund or Health Savings Account is vital in the event an unexpected medical cost arises. Unfortunately, most people don’t have these funds at their disposal. According to the Federal Reserve, nearly half of all Americans don’t have the cash to cover a $400 emergency expense. And many of those people said they’d need to finance the bill in order to pay it off.
If you’re currently without an HSA or flush emergency savings fund, it’s important you take steps to prevent unexpected medical costs where possible. To do this, call doctors and hospitals ahead of time to confirm they’re within your insurance provider’s network. You should also ask about how the charges will be coded at the doctor’s office and connect with your insurer to be sure these are covered expenses.
When a medical bill does arrive, take this step-by-step approach to tackle it:
1. Make sure you understand the bill.
First, is it a bill or an Explanation of Benefits? An Explanation of Benefits (EOB) is simply a statement from your insurance company explaining what medical services were covered (and how much they contributed.) Since you’ll be responsible for any remaining balance past that, you will usually receive an EOB first, and then the actual bill later. That bill should come directly from the provider or hospital system they work for.
Second, look at the line-item charges and be sure they’re accurate. If something looks off or says it was not covered by your insurance company, call them up and get the details.
2. Negotiate the debt.
The best time to try and negotiate your medical costs is before any care has been provided. If you don’t think you can afford the full cost of the services you need, ask early on about reduced costs or some sort of payment plan.
Providers may still negotiate with you after the bill is issued. Consider asking for a reduced fee in exchange for paying the bill off ASAP or setting up a repayment plan that spreads your costs across several months or years.
Other tactics that might work:
- Offer cash. Credit cards come with fees and cost the provider more to process.
- Ask for insurance rates. Medical providers offer reduced fees for different insurers. See if your doctor will let you pay the reduced rate of one of their insurance clients.
- Do your research. Use the Healthcare Bluebook to gauge the average cost of the care you received. If something doesn’t align with your bill, negotiate to pay only the Bluebook value.
3. Consolidate the debt.
If your medical debt has started to become overwhelming or you’ve fallen behind on your bills, it’s time to consider consolidation. This combines all your debts into one single account, allowing you to pay just one bill per month, ideally across many months or years.
You can do this by putting the debts on a high-balance credit card or taking out a loan. Keep in mind that even if your credit score has dropped due to your unpaid debts, there are bad credit loans that can help.
4. Consider an income-driven hardship plan.
Income-driven payment plans are available to Medicaid participants with low income. They function like standard re-payment plans in that they spread your medical debt across smaller monthly payments over time. In some cases, providers may even reduce your debt if you’re on one of these plans. Because of this, you’ll want to consider an income-driven hardship plan immediately — as soon as your medical bills arrive.