10 Tips for Managing Medical Debt

Medical debt can be a life-changing burden. 137 million adults struggle with medical financial hardship in the United States, according to recent data. And that was before a global pandemic. Medical debt can cause major uncertainty, as families question how they’ll be able to cope.

How People Go Into Medical Debt

137 million adults struggle with medical financial hardship in the United States.

Journal of General Internal Medicine

There are several reasons why Americans find themselves in medical debt. Even if you feel like you have good health insurance, you might still find yourself struggling to cover large or unforeseen medical bills.

The truth is anyone in the United States is at risk of a job layoff, denied claim, or cost discrepancy. Sudden illness, diagnosis of a chronic illness, and a severe injury can all result in medical bills that are outside the scope of your insurance coverage. High deductible plans can also lead to medical debt if an individual isn’t prepared to cover the deductible all at once.

While expensive medical bills and medical debt can be difficult to avoid, there are ways to manage this debt and eventually get out of it.

10 Tips for Managing Medical Debt

Of all of your options, the best thing you can do is ask for help right away. No matter your situation, don’t be afraid to see if you qualify for financial assistance. Nonprofit hospitals have assistance policies in place by law. Even if you think you might not qualify, give it a try. 

If that doesn’t work, you may find another option on our list below. We’ll cover some tips on what to do and what not to do for managing medical expenses.

Here are ten tips for managing medical debt:

1. Don’t Use a Credit Card for Medical Debt

While it might seem like a great idea to add your medical bill to your credit card, it can cause even more problems. Charging a large sum to your credit card will often require you to pay high interest on a large bill. And this can lead to worsening debt down the line.

Your doctor’s office may not call for you to pay the bill, but you will end up with a bigger medical cost than you started with. Credit card debt is also a harder hit on your credit report than a medical bill. So, using your credit card may ease the tension at first, but it’s not the best plan for paying your bills long term.

2.Stop Bill Collectors from Calling

If you are finding yourself stressed from the added pressure to pay the bill, you can have debt collectors stop calling you. You can do this in two ways: send a no-contact letter or tell them not to call you over the phone. 

Once you put yourself on a do not call list, don’t ignore the hospital bill. Be sure you face the creditors even if your bill has gone into collections. You may be able to negotiate the price. 

3.Don’t Pay Full Price

Hospitals often bill patients at chargemaster rates. A chargemaster rate is an inflated price quoted to insurance companies, chosen specifically so the insurers can negotiate. The insurance company may actually pay only half of that chargemaster rate.

If you are charged the higher rate, you should consider negotiation. Try asking your health care provider directly for the lower price. 

To do this, let the provider know you can’t pay the full price. Ask them what they charge Medicaid and Medicare companies for the procedure. Once you find out the lower rate, ask for that price. 

If for any reason, you can’t find out the rate from the health care provider, you can look it up in the healthcare bluebook. Always question the price you are given to be sure it is a fair one. 

4. Pay Your Other Bills First  

It may seem that if you don’t pay your medical bills right away, you will ruin your credit. The fact is you have more time than you think. You do need to be sure you have a roof over your head and transportation to and from work. Some bills need to be taken care of before others. 

When you feel you have no other options, you may attempt to postpone paying your bills or borrow from retirement funds. Understand that borrowing from credit cards and retirement funds pose risks. Many people borrow from retirement funds and face penalties as a result. If your bills are more than 7.5% of your adjusted gross income (AGI), you don’t have to pay the 10% penalty from your retirement fund.

Even if you decide to borrow from other funds, try to take care of other bills like your mortgage first.

Again, medical debt is not as harmful as other debt when it comes to your credit report. It’s weighted differently on your credit score. The law even blocks credit bureaus from putting medical debt on your credit report before six months. After seven years, debt doesn’t appear on your credit report anymore. 

5. Reach Out for Medical Debt Consolidation and Forgiveness

If you have already applied for a bank loan, taken out a credit line on your retirement plan, or put your medical debt on a credit card, you may be eligible for forgiveness.

Companies offer debt consolidation where they can buy back your loan and give you a lower monthly payment. You have to be careful with these options because all of them are not equal. Ask about the interest rate and payment options before you sign anything.

Debt forgiveness is the better option, as it will be sure to cover all your bills. You would have to qualify, but forgiveness programs can come straight from the hospital. Never assume you earn too much, because you may still qualify to get some to the debt erased. 

Every hospital’s debt forgiveness program is different, but the application is similar. They will ask for tax documents, pay stubs, and household size. The amount of forgiveness will be based on income factors and more. Remember, don’t be afraid to start by asking for help. 

6.Negotiate Your Medical Debt

In the same way, you can ask for debt forgiveness, and you can negotiate your medical debt. You can negotiate directly with the hospital before it goes into debt collection because they will lose money once it does. 

Negotiation works best if your bills have gone to a collection agency or if you are being charged higher rates than usual.

If your bills have gone into collections, your debt collectors have likely paid for the bill at a reduced cost, so they have room to still make a profit. You can negotiate the price down to something you are more willing to pay. Even then, you may have the option to set up a payment plan. 

If you negotiate, don’t be afraid to really ask for what you need to lower those costs. Chances are the collections agency will lower the price more than you expected. 

If you don’t feel you have the capacity to negotiate, you can find a professional to negotiate on your behalf. This is best if you feel there are medical billing errors. 

Negotiation companies will ask for a percentage of the money you no longer have to pay, so only take this option if you can’t negotiate on your own. Be aware that if they don’t save you any money, they don’t get paid. 

A patient advocacy nonprofit like the Patient Advocate Foundation may even be able to help. You can find a reputable counselor at the national foundation for credit counseling

7. Know the Law

Medical bills can not be reported on your credit by law until it’s late for six months. That grace period exists so that hospitals can negotiate with insurance companies to see if the insurer will pay the bill. This also gives you time to negotiate, find assistance, or set up a payment plan. 

Remember, even if medical debt makes it on your credit report, you won’t be penalized as much as other debt. The debt doesn’t carry as much weight as credit card bills. If your insurance ends up paying the medical bill, anything that was added to your credit report will be removed. 

Another thing to consider is that by law, nonprofit medical facilities are required to have financial hardship assistance in place. Even if your medical provider never mentions financial assistance, reach out, and find out what they are. 

8. Double Check the Bill

Before you ask for assistance, double-check your health care bill because you may not have been charged correctly. Check with your insurance provider to find out if they were charged correctly and that they paid all they were supposed to cover.

Other issues to look out for is double billing, services that you didn’t receive, and any coding errors. Coding errors are mistakes on your bill that charge you for the wrong medical procedure. Any of these errors on your bill can give you cause to question and negotiate the bill.

9. Set up a Payment Plan

Some medical providers will offer a payment plan directly with them. In many cases, you can break the bill up into monthly installments without getting any interest. Each provider is different, so be sure to double check that there isn’t an interest rate. 

You can also ask to set up payment plans once your bill has gone into collections. In both cases, be aware of any late fees, so you can be sure you aren’t paying more on the bill than you intend to. 

A medical credit card is different from a payment plan and works like most credit cards. You will have to go through a credit check to be approved in this case.

10. Use a Financing Option

If your provider offers payment plans, it’s possible they offer medical credit cards or financing programs. These options to pay off your medical debt often come with an interest-free period and special rates. However, you will be charged interest and late fees once that grace period is over. 

Be careful with this option, because they may have special fees if you defer or miss a payment. This is the best option if you feel you can pay the entire bill within the grace period.

Knowing your Options

The average American adult spends nearly 10,000 dollars a year on medical care. Whether you feel you are on the brink of bankruptcy or were unfairly charged, there you have option. No situation counts you out of asking for help and being charged fairly.

Once you research your options, you’ll see you have control over certain aspects of your health care costs. Try to take the opportunity to ask for help. This way, you can be sure not to pay the higher chargemaster rate. Check with your insurance company and use the resources above to make sure you were charged a fair amount. 

Though debt can be a stressful situation, put your health and peace of mind first. Allow yourself the freedom to pay your other bills. Your credit report will survive medical bills while you figure out how to pay. 

You are within your rights to negotiate your bills at any point during care. If you still can’t pay your negotiated price, seek forgiveness and payment plan options. These ten tips will depend on your specific situation, but don’t be afraid to try any of them.