If you’re struggling with medical debt, you’re not alone. Medical costs in the U.S. are often unmanageable. Even if you have medical insurance, the deductibles, copays, and non-covered services can add up quickly. Mounting medical expenses, high-pressure phone calls, concern about your credit report, and the threat of debt collection lawsuits can make a difficult situation even worse. Fortunately, there are some simple steps that may be able to help you reduce medical debt to a manageable level.
If you’re struggling with medical debt, you’re not alone. Medical costs in the U.S. are often unmanageable, and medical debt is one of the main reasons people file for bankruptcy. Even if you have medical insurance, the deductibles, copays, and non-covered services can add up quickly. Mounting medical expenses, high-pressure phone calls, concern about your credit report, and the threat of debt collection lawsuits can make a difficult situation even worse.
Fortunately, there are some simple steps that may be able to help you reduce medical debt to a manageable level. Many people miss out on these opportunities because they don’t know their options. Whether you already have a pile of unpaid medical bills or you’re looking for ways to manage medical debt moving forward, these tips can help.
Step 1: Have Mistakes Removed From Your Bill
Most people don’t look too closely at their medical bills. The line items can be overwhelming, and the total doesn’t matter as much as the post-insurance balance. So, it’s the bottom line that gets most of the attention. That’s an understandable approach, but it can also be a serious mistake. Billing errors happen, and identifying them can save you money.
When you receive your medical bills:
Request an itemized bill if the bill you receive is just a summary.
Review the bill carefully for charges you don’t recognize - medical billing is complicated, and a simple typo can mean that you’re charged for the wrong test or for a medication you didn’t receive.
Compare the bill with the explanation of benefits (EOB) from your health insurance company to make sure they match up.
If you find a problem, take action. If the bill from your medical provider contains errors, doesn’t give you full credit for payments made by your insurer, or fails to reflect in-network discounts, contact the provider and ask them to revise the bill. If you can’t get help from the billing office, ask whether the facility has a patient advocate you can speak with.
When you’re dealing with medical collections, the bill you receive will typically be very abbreviated. The medical collection agency might not have complete information about the medical debt. But, they should be able to provide you with the name of the original healthcare provider and the date of service. With that information in hand, you can request a more detailed breakdown from the hospital or doctor’s office.
If the problem is that your insurance company hasn’t paid for services that should have been covered, you can appeal the denial. But, the timeframe granted for appeal is usually limited, so it’s important to review bills and EOBs as they arrive and be sure to act before the deadline if you find a mistake.
Step 2: Ask For Financial Aid
It might not have occurred to you to pick up the phone and say, “Hey, this bill is too much. Can I pay less?” While you probably don’t want to use that exact language, asking for a break on your bill can have surprising results. If the billing department can’t help you, ask whether the facility has a patient advocate or medical billing advocate.
This strategy can be especially useful if you’re one of the growing number of people receiving surprise medical bills. The surprise medical bill phenomenon is increasingly common. It can occur when you are treated at a hospital or clinic that is in-network for your insurance carrier, but the facility uses out-of-network providers.
When this happens, you expect to be held responsible for your deductible and copay. But, when the hospital bill arrives, you find that your share is much larger than expected - or that some services aren’t covered at all. When this happens, don’t be afraid to ask for help.
Of course, your options will vary. They will depend on the healthcare provider, your financial circumstances, and other factors. Here are some of the possibilities you could uncover when you call your medical provider to ask about financial aid:
Some providers, particularly hospitals, have financial assistance programs. These programs assess your need based on your income, the size of your medical bill and other variables. Depending on your circumstances, they may reduce your bill or even write it off entirely.
Some healthcare facilities that receive government funding or grants may offer discounts based on income and other qualifications.
Your provider might know about nonprofits or state and local governmental programs that could help.
You might be eligible for Medicare, Medicaid, or some other form of government medical coverage.
Your provider might be able to offer a payment plan that allows you to make manageable monthly payments over time.
Medical providers could try to get you to use credit cards to pay medical debt. They could approach you about your existing Visa or MasterCard or promote a dedicated healthcare credit card. Be very cautious when approached about using credit cards to pay off your debt. What can look like a solution in the short-term does nothing to reduce the amount of debt you’re responsible for overall. In fact, high interest rates can mean that you’ll pay significantly more in the long-run. Don’t default to using credit cards without exploring all of your options. This is especially important because medical bills aren’t factored into your credit score in the same way that credit card bills are. Overdue medical bills won’t hurt your credit score as much as overdue credit card bills will.
Your provider isn’t the only place to look for assistance. Do some research of your own in addition to seeking their help. One simple way to discover resources in your local area is to call 211. That number is reserved by the United Way nationwide. It operates as a central source of information about various types of assistance available in your local area. You can also search for healthcare resources on their website.
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Step 3: Negotiate A Lower Fee By Paying A Lump Sum
Medical costs in the U.S. are among the highest in the world. Unfortunately, those high costs deter many people from receiving the medical care they need. Even those with good medical insurance coverage and middle-class incomes struggle. They often find themselves making hard decisions about medical care, or facing financial stress after treatment. If you have funds available to make a significant payment all at once, you may be able to bargain for a lower total cost.
Negotiating In Advance
The ideal time to negotiate for discounted medical care is before you receive the care. Many providers prefer to receive payment up front. They might be willing to accept less than full price if you are prepared to pay in full in advance.
Before you reach out to your provider to cut a deal, you should conduct research using the Healthcare Bluebook. This online resource tells you the “fair price” for a particular procedure. It even color codes providers so you’ll know whether their typical charges for that treatment fall within the fair range.
If you can reach an agreement with the provider, this approach will do more than save you money. It will also mean that you leave the hospital or provider’s office on the day of service paid in full. There will be no waiting to see how big the hospital bill will be. There will also be no crunching numbers to figure out how much you can afford to pay each month.
Negotiating After Treatment
Don’t worry if you didn’t gather this information and negotiate for a lower price before receiving treatment. When you receive your bill, you can contact the provider. Ask them if they’d be willing to cut the cost if you make full payment of the reduced amount you’re proposing to pay. Debt collection can be time-consuming and expensive. So, for some providers, it’s worthwhile to accept less in exchange for being able to mark your account paid in full.
Why? It’s one less unpaid balance pending. Often, you can accomplish as much by picking up the phone as a debt settlement company could. In fact, you may do better on your own. Many creditors, including medical providers, won’t work with a debt settlement company. And, you’ll save fees by handling it on your own.
Policies differ from provider to provider. Not every provider offers discounts. But you have nothing to lose by asking. Indeed, you could be pleasantly surprised by the response. The best way to find a workable solution is to explore all of your options.
Step 4: Understand What’s at Risk
Medical Collections and Credit
Many people with medical debt are concerned about the impact that those unpaid medical bills will have on their credit scores. It’s true that any collection account looks bad on a credit report. Having accounts in collections can impact your credit score. But, there is some good news.
The FICO Score 9 - the most recent FICO credit scoring system - gives a lot less weight to medical debt than previous systems did. Medical collection accounts will still show up on your credit report, but they won’t have as much effect on your credit score. And, once a collection account is paid off, it’s removed from the calculation entirely.
The bad news is that, even though FICO Score 9 officially rolled out way back in 2014, adoption has been slow. Many lenders still use older models, which give medical collection items more weight. Credit scores also differ slightly. They depend on which of the three major credit bureaus a lender uses. Your credit report usually looks a little different from credit bureau to credit bureau. For instance, one may include a collection account that hasn’t been picked up by another.
So, for the moment, the impact of delinquent medical bills on your credit is a bit unpredictable. It will partly depend on which credit score model a lender relies on.
Medical Collection Efforts
Medical debt might be treated differently from other types of delinquent debt on your credit report. But, it doesn’t get any special treatment when it comes to collections. Past-due medical bills may be collected in-house. Medical bills may also be turned over to an outside collection agency.
You can be sued for unpaid medical debt. The provider can get a judgment for the amount of the debt. The judgment might include interest, collection costs, and other fees. Then, the provider can collect on that judgment just like a judgment for unpaid credit card debt or some other type of debt. Those options may include wage garnishment and seizure of bank accounts and other assets.
In other words, there’s a lot at stake. With the possible impact on your credit report and score, along with the threat of a lawsuit or other aggressive collection action, it can be risky to ignore medical debt. And, you should never ignore a debt collection lawsuit.
Don’t be defeated by medical debt. Knowing your options can make all the difference. Carefully review your medical bills. Make sure your insurance carrier has paid for all covered services at the appropriate rate. Research and apply for any available assistance. Consider negotiating lump sum settlements if you have the funds. Work out a manageable payment plan if possible.
Even when you do everything right, medical debt can be overwhelming. Have your medical bills become unmanageable? Have you been sued for medical debt or threatened with a medical collections lawsuit? Do you have a lot of other debt in addition to your healthcare debt? If so, you may want to consider Chapter 7 bankruptcy. Medical debt is dischargeable in Chapter 7, meaning that your legal obligation to pay that debt can be wiped out.
Upsolve is a non-profit organization providing personal finance and consumer protection resources to people across the United States. Our free online tool helps people with simple Chapter 7 bankruptcy cases file without an attorney.