We weigh our options before putting purchases like an expensive outfit or a fancy dinner on credit. But when it comes to medical care, there is often no option but to receive treatment now and pay later. And for many, the impact of medical debt is long-lasting and severe.
According to the Kaiser Family Foundation, more than 25% of American families struggle to pay their medical bills. Surprisingly, many of those with medical debt have health insurance; expenses simply outstrip their coverage. This is devastating and can lead to losing a home, a car, savings, and retirement funds. In fact, the #1 reason cited for personal bankruptcy filings in the U.S. is medical debt.
Is it possible to prevent this medical debt from having such a strong impact on our lives? Luckily, the answer is yes. There are some proactive steps we can take to deal with medical costs and protect ourselves and our families from overwhelming debt.
First, whenever you receive a medical bill, check it closely for mistakes or charges you can’t verify. Compare the Explanation of Benefits (EOB) from your health care plan with what you’ve been charged, and question anything you don’t understand. You can reduce your debt by reducing your bill.
If you have confirmed that the bill is correct and you know it is beyond your means, it is crucial to understand that medical debt is viewed differently than other kinds of debt. Bills from health care providers or hospitals seldom carry late charges or interest charges on the outstanding balance. Most medical bills won’t be reported to credit agencies or affect your credit rating for six months or longer, so you have more time to pay or resolve the issues. In fact, the three major credit reporting agencies (TransUnion, Experian, and Equifax) must wait 180 days before adding medical bills to your credit report.
Unlike other institutions, medical care providers are often willing to reduce your balance owed if you can show hardship; simply contact the office manager and ask. They may be willing to work out a payment plan with you, especially if you contact them early on. It costs less for them to work with you than pay a collection agency later.
Similarly, if you’re in financial duress, you may be eligible for financial assistance from the hospital. Nonprofit institutions have policies to cover or eliminate medical charges for those who meet their criteria. Check to determine if you can tap into those plans. Many hospitals, even if they are for-profit, will set up a payment plan if you ask.
Whatever you do, do not pay medical debt with a loan or credit. Even though you may get pressure to do so, do not put medical expenses on credit cards, even the “medical” credit cards that are offered in doctors’ offices. If you do, those expenses get swallowed up by all the other credit purchases, resulting in a faster collection effort and higher penalties on unpaid balances. Similarly, don’t take out a second mortgage to cover medical bills. That will only add another payment to your monthly budget—one that can be with you for a very long time.
Unpaid medical bills only add to the burden of illness or injury. By checking the accuracy of your bill, working with your medical provider, and avoiding putting medical debt on credit, you can prevent these debts from ruining your credit and your peace of mind.
Sources:
https://library.nclc.org/dealing-medical-debt-consumer-advice-nclc
https://www.fool.com/retirement/2017/05/01/this-is-the-no-1-reason-americans-file-for-bankrup.aspx
