Here’s How to Keep Medical Bills From Sending You Into Bankruptcy

Dealing with major health problems is stressful enough, but mounting medical bills can make that stress even worse.

It’s hard to pin down exactly how many people file bankruptcy because of medical debt, in part because it’s usually a combination of factors that leads to bankruptcy. But along with a job loss or divorce/separation, medical issues are a top reason that people end up in bankruptcy.

That’s not a huge surprise, considering that only 40% of Americans have enough in savings to cover a surprise $1,000 expense. So how can you stop medical bills from sending you into a financial spiral?

First and foremost, don’t ignore the bills. The problem won’t go away, and it definitely won’t get better on its own. If you have insurance, get in touch with your insurer, says Martin Lynch, director of education and the compliance officer with Cambridge Credit Counseling. Confirm the amount that insurance won’t cover and ask for an itemized bill. You can contest the charges or negotiate the amounts. Once you’re satisfied that the charges are correct, talk to the hospital about what assistance it can offer.

“I’d appeal to the health care provider, particularly if they’re a nonprofit, to figure out how they can work with you to reduce the costs of treatment,” Lynch says. “Nonprofit hospitals are required to work with low-income patients to provide assistance in these situations.”

That doesn’t mean you’re out of luck if you’re dealing with for-profit institutions. They also should be willing to work out a payment plan with you, Lynch says. Most would rather get some money from you on a regular basis than turn the debt over to collections.

“You might propose paying the insurance rate if, for some reason, a particular procedure isn’t covered,” Lynch says.

Find an advocate

If you don’t feel comfortable dealing with your insurer or medical provider on your own, you might consider hiring a medical billing advocate. They will analyze your medical bills and look for overcharges, duplicate charges and errors. They can talk to your insurer about fixing errors or about why  something wasn’t covered. They also can negotiate with doctors and hospitals to lower the amount you owe.

You will have to pay for the service, and you’ll want to do some research to find a reputable advocate. Some advocates charge a percentage of what they save you; others charge as much as $100 an hour. Look for advocates who offer free consultations.

There are also less traditional funding options that Lynch suggests exploring if you’re facing ongoing treatment. Reach out to charities that are devoted to helping families fight a particular disease or pay medical bills. Ask for help through your church or a religious organization. “Crowdfunding may also be an option worth pursuing,” Lynch says.

If you have Medicare, the State Health Insurance Assistance Programs offers help with complaints, appeals, and coverage issues.

Does a loan make sense?

Another option is taking out a loan to pay off your medical debt. In many cases, this isn’t a good option because most medical debt doesn’t include interest, whereas a loan does. But there are a few situations where a loan provides advantages.

“Some hospitals offer 10% off your balance if you can pay your bill off in full right away,” Lynch says. “Still, any loan you take out would have to be more affordable than the hospital’s payment plan.”

Lynch doesn’t recommend using a credit card to pay off medical debt.

“You’d be adding significant interest to a balance that probably has little or no interest attached,” he says.

The one exception would be a credit card with a long-running 0% interest balance transfer or introductory rate offer. The important thing is that you pay off all or most of the debt before the introductory rate expires.

Don’t delay

The risk of waiting too long to address your medical bills is the same as with any other unpaid debt. “Your credit can be damaged, and you can be sued,” Lynch says.

Still, medical bill debt is handled a little differently than other unsecured debt. The three major credit reporting bureaus now wait 180 days before displaying past-due medical bills on your credit report. So if you pay off your debt in full or come to a payment agreement by then, it won’t show up on your report unless you miss payments later on.

In the end, the best way to avoid bankruptcy and take care of your medical debt is to talk to your insurer and your medical provider. Negotiate and come up with a payment plan. Just make sure the plan meets your budget, Lynch says, and always put your mortgage and car payments first.

Related article: What happens when you file bankruptcy?

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