How to negotiate medical bills and avoid medical bankruptcy

Negotiate, negotiate, negotiate. That’s the mantra to remember if you’re behind on your medical bills or facing a medical bill you can’t afford.  Understandably, most people want to avoid having medical bills send them into bankruptcy. In most cases, the sooner you deal with your medical debt, the better. For one, recent changes to the way medical debt is reported to the credit bureaus means your debt won’t show up on your report until it’s 180 days past-due and has been reported by a debt collector. That gives you time to work out a plan before it impacts your credit score. And many healthcare providers are willing to make a deal with you.

Related article: The states where people have the most unpaid medical bills

Review your medical bills

The first step to dealing with your medical bills is to make sure they are accurate. There’s a good chance your bill will have an error — an estimated 80% of medical bills contain a mistake. Some common errors to look for include:

• Duplicate charges
• Inaccurate insurance information
• Inclusion of services or procedures you didn’t receive
• Overcharges

Some errors, like upcoding, are harder to spot than others. Upcoding is when a procedure is given the code of a more serious treatment or diagnosis. In those cases, especially for a large bill, you might want to work with a medical billing advocate. You can also call your insurance company to ask about specific costs or why a procedure wasn’t covered.

If your medical debt is older, and you haven’t paid anything toward it or at least not recently, check your state’s debt statute of limitations first, says Michael Bovee, the co-founder of Resolve, who has been working in debt resolution for the last 20 years.

In California, for example, the statute of limitations for most unsecured debt is four years. If your medical debt is coming up on the statute of limitations, you may just want to wait for it to age off your credit report, Bovee says. You’ll still owe the debt, but you can’t legally be sued for it. If you do wind up being sued, you would have to show that your debt has passed the statute of limitations. Debt collectors also can still contact you to pay the debt even after the limitations has run out.

Related article: A state-by-state guide to debt statutes of limitations

If your debt is newer, but you can’t afford to pay it all, it’s time to act. 

Ask to pay less or receive assistance on your medical bills

First call your insurance company and ask for an itemized bill. If everything looks OK, get in touch with your medical provider and explain that you can’t afford what you owe and ask for a discount. If you have specific reasons for why you can’t afford the bill (a recent job loss, a divorce) don’t be afraid to say so.

If you don’t have insurance or your medical bill is still very high even after insurance, there’s a good chance the provider may agree to lower your bill, says Martin Lynch, director of education at Cambridge Credit Counseling.

You may also be able to get a discount if you agree to pay a certain percentage of your bill right away or you offer to pay in cash. Also ask the medical provider about any financial assistance or charity programs they might have.

Nonprofit hospitals, for example, are required to help reduce the cost of your treatment if you show that you can’t pay, Lynch says. Some organizations also may also agree to accept the insurance rate for a procedure if your insurance didn’t cover it, he says.

Many healthcare providers offer 0% payment plans. So if you can afford to make monthly payments, it pays to ask to be put on a plan.

“Most hospitals would much rather get something from you every month than turn your debt over to collections,” Lynch says.

Get any payment plan in writing to protect against your debt being sent to collections, Bovee says.

What if your debt has already gone to collections? 

Ideally, you would handle your medical bills before they are sent to debt collection, but if debt collectors are already calling, you can still negotiate your debt. 

You can offer a settlement amount, either in a lump sum or as installments in exchange for the rest of your debt being settled. Settled debt stays on your credit report for seven years from the time your account first became delinquent.

The tricky part of debt settlement is coming up with the money for the settlement, especially if it’s a lump sum. You may have to get creative with how you raise the money, or even how you coordinate other bills. 

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 as soon as possible. Ask for discounts, financial help and about payment plan possibilities. Be honest about your finances and how much you can afford to pay toward your debt. And always put your mortgage, car payments and student loans first, Lynch says.