Medical Debt

Medical Debt: What to Do When You Can’t Pay

People often feel ashamed of their medical debt, seeing it as a personal failure. In fact, it's more of a mass affliction.

Americans are estimated to collectively owe as much as $140 billion in outstanding medical debt.

Lack of insurance and a steadily increasing cost of health care are the two main culprits behind the growing medical debt problem.

What if you can't pay your hospital bills? What if you have accumulated medical debt and have no way of paying it on time? On both accounts, the consequences can be serious.

People may forego the care they need, including doctor appointments, tests, treatments, and prescription medications, reports the Kaiser Family Foundation, a health policy analysis nonprofit.

They may struggle to pay other bills, deplete savings, damage their credit, and even declare bankruptcy.

KEY TAKEAWAYS

• Millions of Americans struggle with high medical bills and medical debt can be particularly problematic for those who lack adequate insurance.
• Filing bankruptcy is often used as a last-resort means of dealing with overwhelming medical debt.
• Unpaid medical bills can be detrimental to your credit score and financial security.
• Check all medical bills for errors and try to settle an unaffordable debt for less than the full amount.

Medical Debt Is More Common Than You Think

In the U.S., many people are not paying their medical bills because they can't afford them. According to data from the U.S. Census Bureau, 19% of American households could not afford to pay for medical care they received right away.

Households with children are more likely than those without children to have unpaid medical bills.

Lack of insurance is one key reason for unpaid medical debt. An estimated 31.2 million U.S. residents under the age of 65 in the U.S. are uninsured.

They may not have the option to obtain insurance through the workplace, or may be self-employed and unable to afford steep insurance premiums. Regardless of the reason, a lack of health insurance coverage can quickly translate into an unaffordable financial burden for those who require medical care.

People commonly respond to medical debt by delaying vacations, major household purchases, cutting back on household expenses, working more, borrowing from friends and family, and tapping retirement or college savings accounts to pay those bills. And of course a lot of medical debt remains unpaid.

Note

If you're uninsured you can check the federal healthcare marketplace for insurance coverage options or contact your local health department to determine eligibility for Medicaid.

How to Manage Unpaid Medical Debt

When healthcare bills start piling up, it's important to be proactive rather than ignoring the situation. If you’re faced with medical debt you can’t pay, try these tips for reducing what you owe so you can minimize the effect of your bills on your finances, health, and future.

Check for Errors

Various sources will tell you that anywhere from 7% to 80% of medical bills contain errors.

The true percentage is anyone’s guess, but the risk of a mistake is apparent:

So how do you find errors on your medical bills? Sean Fox, co-president of San Mateo, Calif.-based company Freedom Debt Relief, says to start by reviewing the explanation of benefit statements from your insurer, ideally right after you receive them.

Look for duplicate items, services you didn’t receive, services you don’t recognize, and charges that your insurance should have covered. Review your healthcare providers’ bills to make sure your insurance has paid them accurately. Call your insurance company or your provider’s billing department to clarify anything you don’t understand or to look into any possible mistakes, he says.

A more advanced technique is to get copies of your medical records and attempt to compare them with charges for which you’ve been billed. You may need an expert’s help to secure those records and make sense of everything.

If your health care provider does not provide you with an itemized bill, don't hesitate to request one so you can see exactly what services were billed and how much each costs.

Negotiate Your Bill

If you want to negotiate your bill, speak with your healthcare provider’s medical billing manager—the person who actually has the authority to lower your bill. Don’t wait until your bill is delinquent or in collections, at which point your credit score may be affected. Talk to someone as soon as you receive your bill and have verified its accuracy.

If you have low income or are experiencing financial hardship—even if the hardship is due entirely to your medical bills—request hardship assistance. Hospital charity care may be available based on your income and savings. In fact, according to Fox, some hospitals are required by state law to provide free or reduced services to low-income patients. As soon as your bills arrive, let your providers know if medical problems have affected your income and ability to pay.

One strategy for justifying lower charges is to compare the price you were billed to those charged by other providers in your area. Use a website such as NewChoiceHealth.com or HealthcareBluebook.com to get an idea of what you should be paying. If you have health insurance, your insurer’s website might also have a tool that lets you get an estimated cost of care for various procedures.

Advocate for Yourself

On its website, Medical Billing Advocates of America recommends starting by asking for an aggressive discount for immediate payment, saying something like, “If I pay you 30% right now, will you write off the rest?” This strategy can work because your provider will save time and money if they don’t have to pursue payment from you for months or years.

If you can’t afford to pay even a percentage of your full bill immediately, try asking for a 25% discount if you make a large down payment now. A less aggressive strategy is to ask if the provider will charge you the discounted fee that Medicare or Medicaid pays.

If you can’t arrange a reduced payment, ask about a zero-interest payment plan. Whatever terms your provider accepts, make sure to get them in writing.

Get Outside Help

Few healthcare consumers are experts in medical billing. A savvy choice is to enlist the help of someone who is: a medical caseworker, debt negotiator, or medical billing advocate. These professionals might be able to reduce what you owe when you can’t or are too timid to try.

Medical billing advocates are insurance agents, nurses, lawyers, and healthcare administrators who can help decipher and lower your bills. They’ll look for errors, negotiate bills, and appeal excessive charges. Expect to pay an advocate around 30% of the amount by which your bill is reduced.

You can also ask to speak with a caseworker from your hospital or insurance company if you need help understanding your bills and resolving payment issues, says Fox. A caseworker may be able to refer you to charities, churches, community organizations, and government agencies that can offer financial assistance.

Special Considerations

In March 2022, the major consumer credit reporting measures unveiled measures to reduce the effect of medical debt in collections on consumer credit scores. They included:

• Removing repaid medical debt previously in collections from credit reports
• Increasing the time before medical debt in collections appears on a credit report from six months to a year
• Ending credit reporting for medical debts in collections below $500

The first two measures were to go into effect on July 1, 2022, and the third in the first half of 2023.

In April 2022, the Biden administration unveiled a range of measures to minimize the burden of medical debt and abusive collection practices. These included barring the consideration of medical debt in assessing applications for federal loan programs.

Medical Debt Relief

Medical debt never happens by choice. The cost for treating a sudden illness or unexpected surgery can cripple a family budget, but there are programs that ease the strain of dealing with medical debt.

Medical Debt & Costs

The Affordable Care Act, better known as “Obamacare,” helped a record number of Americans enroll in health insurance plans, but did nothing to slow the spending on healthcare. Thanks to the ACA, 91.2% of Americans had health insurance at the start of 2017, up slightly from 90.9% the year before. However, Americans spent $3.3 trillion on healthcare or about $10,348 per person. That is up 18.9% in just five years. Healthcare spending in the U.S. accounts for 17.9% of the gross domestic product.

Medical Debt Consolidation & Forgiveness

Americans have significant trouble when it comes to paying for their medical treatments, especially when they already are in debt with credit cards, auto loans and mortgages. The Kaiser Family Foundation/New York Times survey in 2016 found that 26% of Americans between the ages of 18-64 said they had problems paying medical bills.

According to a 2016 Kaiser Family Foundation study, 52% of debt collection actions in the U.S. contained medical debts. Medical debts were responsible for half the bankruptcy filings.

But there are options for dealing with those bills. Debt.org can help with options like debt consolidation, debt settlement and as a last resort medical bankruptcy. If you or someone in your family has encountered a serious condition, find out where you can get medical debt relief that eases the situation. You have options for medical debt help that remove the stress of paying for healthcare.

Debt Relief Options

Negotiating Medical Debt

Doctors and hospitals lose money when your debt is sent to collections, so they should be willing to cut a deal if you negotiate directly with them. Figure out what you can afford to pay each month and see if they come up with a payment plan to match that.

If you are uninsured, try asking for the rate they give insured patients. Doctors and hospitals tend to cut insurance companies a break in fees.

Medical Debt Consolidation

Hospitals don’t charge interest on medical bills. That is important to know because the primary goal of debt consolidation is to lower your interest rate. Medical debt consolidation is only an option if you have already paid the bills with a credit card. In that case, it’s the same as credit card debt consolidation.

Qualifying for Medicaid

Medicaid provides free or reduced cost insurance for low income individuals. Both income and assets determine your eligibility.

Requirements vary from state to state, but you will qualify if your earnings are below the standard for the Supplemental Security Income (SSI) program. The SSI limit is $750/month in “counted income” for 2018. In general, if your total earnings are less than $2,250/month you should qualify.

Applicants can only qualify with less than $2,000 (or $3,000 for a couple) in assets. That is in cash and savings. Personal property like a car and a house are generally excluded.

Asking Family and Friends for Help

Crowd-funding websites like GoFundMe or YouCaring, which is now owned by GoFundMe, have made it easy to set up a donation account. Nearly half of the money raised on those two platforms ($930 million of $2 billion on GoFundMe) were for medical bills.

You shouldn’t need to worry about tax implications because donations and gifts don’t count as taxable income up to $15,000 per individual gift.

Law/Acts Relating to Medical Debt

Over the last few years, governments and institutions woke up to the fact that a lot of Americans were being unfairly punished on their credit reports for medical debt.

The urgent and unexpected nature of medical debt doesn’t accurately reflect someone’s true credit worthiness. A study by the CFPB showed that one-in-five credit reports contain medical debt that distorts the consumer’s credit position.

Finally, in 2017 a law was passed that required credit reporting agencies to allow a 180-day grace period before medical debt is listed on credit reports. This gives doctors, hospitals and insurance companies time to figure out the billing and who is going to pay.

More importantly, it gives patients a buffer period to dispute certain charges before it shows up on their credit report, or time to look for financial assistance for medical bills.

In addition, any unpaid medical bills on your credit report that later get paid by insurance have to be removed from the report. That prevents the negative marks from lingering and lowering your credit score.

The Fair Isaac Corporation newest scoring model, FICO Score 9, minimizes the impact of medical debt. You won’t be punished as severely for medical debt in collections and paid medical debt as you would traditional debt.

More legislation has been proposed to erase punitive damage caused by paid medical debt and eliminate credit penalties related to healthcare, but the bills have yet to make it out of Congress.

Make Sure the Bill is Accurate

The first course of action when leaving a doctor’s office or hospital is to check with your insurance company to make sure that they were billed properly. You want to be sure your insurance was applied correctly, and that they paid for everything you were supposed to be covered for, before you pay the remaining cost.

Always review your medical bills for inaccuracies. Mistakes are common. Health care is expensive. Don’t pay for treatment you didn’t receive.

Check for these common mistakes in your medical bills:

• Double billing – check to make sure it isn’t a duplicate bill for something you have already paid.
• Services not rendered – a fraudulent charge made by a health provider for a service that wasn’t delivered. Dishonest health providers might do this to inflate bills they think will be covered by the government or insurance anyway.
• Coding errors – health providers use codes when they submit claims to insurance companies. Sometimes these codes can have typos that accidentally bill you for a more expensive medication or procedure.

Free Health Care Providers & Non-Profits

There are government programs other than Medicaid that provide free or reduced-cost health care. Some non-profit organizations do the same.

Health Resources and Services Administration (HRSA)

The HRSA is a good place to start. They are an organization run by the federal government with a mission to “achieve health equity through access to quality services.” Their website has a database in which you can search for an affordable health center in your area.

Hill-Burton Obligated Facilities

If your income is below the federal poverty line, these facilities are required to provide you with free care. Those with an income up to twice the federal poverty line might qualify for reduced-cost care. You may even apply for assistance after medical bills have been sent to collections. Decades ago these facilities took grants or loans from the federal government to update their facilities with an agreement that they would offer free care to low-income Americans.

FreeClinics.com

This website lists clinics that offer services for free or reduced rates. These clinics are run by nonprofit organizations or receive federal grants and state subsidies. Some of the services include:

• Pediatric health
• Dental work
• Women’s health
• Behavioral health

The Bottom Line

The inequities of the U.S. healthcare system affect millions, while few can be sure they won't confront a medical issue beyond the scope of their insurance coverage and ability to pay. Control what you can by making sure your medical bills are accurate, negotiating for lower charges, and knowing your rights when it comes to medical debt collections. And if you can’t manage these tasks on your own, get outside help from an expert.