Consolidating Medical Bills

Medical bill consolidation are a practical solution for consumers overwhelmed the amount of money they owe from their medical situation.

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With millions of Americans out of work, their healthcare options dwindling and the COVID-19 pandemic causing the economy to plummet, medical bills could be piling up.

A Salary Finance survey from earlier in 2020 found that almost a third of working Americans have some kind of medical debt and about 28% of those individuals have an outstanding balance of $10,000 or more on their medical bills. A whopping 54% of people with medical debt admitted that they defaulted on paying those bills for a variety of reasons.

Those issues have consumers wondering about their options for ridding themselves of medical debt and whether consolidation is a good option.

Medical debt consolidation means combining your various medical bills and taking out one loan to pay them all off. You are still in debt, but you only have one creditor and one payment to make each month, instead of multiple payments to multiple creditors.

You should realize that medical debt isn’t like credit card debt or a bank loan. In most instances, there is no interest attached to medical debt and much more leeway in terms of repaying it or possibly negotiating a lower amount to repay.

Should I Consolidate Medical Debt?

Medical bill with stethoscope on calculator

Before contemplating a consolidation plan, you should focus on a key fact: Medical debt doesn’t accrue interest. Though a hospital or medical practice eventually will hand your unpaid bills to a collection agency, the debt is interest-free.

Why is that important?

If you decide to wipe out medical debt with money from a home equity line of credit (HELOC), a credit card or a personal loan, you will pay interest on the new debt. You might not owe the hospital anymore, but you will owe the source of your new credit, with interest that accrues every month that you maintain a balance.

It’s generally not a good idea to transfer or consolidate medical debt unless you owe money to other creditors. If you have a medical debt and unpaid balances on your credit cards that you also can’t afford to pay, you might want to meet with a nonprofit credit counselor to discuss how to consolidate all your debts into a payment you can afford.

However, before committing to a consolidation plan, there are pros and cons to weigh and questions to ask.

  • Does it make financial sense?
  • Will such a plan actually eliminate my debt or only extend the financial suffering until I need to file for bankruptcy?
  • Can I accept the terms of the plan and what assets would I consider using as collateral?
  • Do I need help, and if I do, what will it cost?

How to Consolidate Your Medical Bills

There are several forms of medical debt consolidation, including a personal loan; home equity loan, credit card and some debt management programs allow for it.

When you first receive a medical bill, you should try to negotiate a payment plan that fits your monthly budget. Failing to notify your medical provider that you likely won’t be able to pay a debt often proves to be a major mistake that ultimately results in a greater cost to you.

If you fail to pay your medical bills, the provider will likely turn them over to a collections agency, which might be unwilling to negotiate a  lower payment and could possibly seek a court judgement if you fail to make payments.

The one downside of a debt reduction package that includes consolidation is that it will appear on your credit report and it could lower your credit score. Still, the drop in your credit score will be less than if you let your debts go into default — an inaction that could result in a bankruptcy filing.

The worst option — and one you definitely want to avoid if all possible — is attempting to pay your medical bills with a credit card. This is a mistake that people in debt often make and it usually proves to be a costly miscalculation.

If, even after negotiation with your medical provider and insurance company, you are still unable to pay your monthly medical bills, there are consolidation options that you can pursue to reduce your financial obligations.

Medical Debt Consolidation Services

Banks, credit unions, online lenders and nonprofit credit counseling agencies are the best choices for medical debt consolidation, but if you are in a desperate situation, you might also consider using credit cards to solve the problem.

If the problem has reached the stage where you are overwhelmed, it would be in your best interest to call a nonprofit credit counseling agency and get free advice on how to deal with debt.

Here is a look at some of your choices.

Personal Loan

A personal loan from a bank or credit union is one way to eliminate medical debt, but there are drawbacks to this option.

A personal loan will pay off the combined medical debts, but leaves you with a monthly payment that includes interest charges. Medical debts typically don’t have any interest charges. Thus, it would make more sense to make monthly payments directly to the medical debts and skip the interest charges associated with a personal loan.

If you do choose the personal loan route, be sure to shop around for the best interest rate available.

Home Equity

Another option for tackling crippling medical bills could be tapping into your home equity and rolling your medical debt into your home-loan debt. One perk of doing this is the interest that you will pay on your home-equity loan can at least be deducted from your taxes.

Home equity loans should carry the lowest interest rate charges of any loan for medical debt consolidation.

However, this strategy could be particularly costly considering that you would be putting an asset (your home) on the line for an unsecured debt (medical bills), which is never a sound strategy.

If you fail to make payments on a home-equity loan your lender could foreclose on it and you might lose your home. Failure to pay your medical bills will hurt your credit score and likely land you in the hands of a collections agent, but at least it wouldn’t be putting your home in jeopardy. If you still think that rolling your medical debts into your home-equity loan is a good option be sure to apply to several different institutions so that you can get a good interest rate.

Credit Cards

Using credit cards to pay off medical debt would certainly qualify as a quick fix idea, but it would be costly and ultimately prove to be short sighted. While this option might appease your medical provider and keep the collections agencies off you for a while, you will likely be faced with double-digit interest rates on those medical bills if you can’t pay them off in full by the end of the billing cycle.

Putting medical debt on your credit cards is a mistake that continues to hurt you each month because of the high interest fees you will also be hit by.

The better solution is to alert your medical provider that you expect to have problems paying those bills and options such as a sensible payment plan or a reduced judgement might be presented. Using credit cards will only compound your problems in terms of paying off the bills.

Medical Debt Collections

Medical debt consolidation form surrounded by calculator, money and medicine

The health care system is very complex. Even if you, like most people, have medical insurance, your policy might not cover all medical services and might limit you to a select list of providers. Before you visit a doctor or go to a hospital for a non-emergency issue, contact your insurance company to learn what your policy covers and which providers are available under your plan.

Even if you follow the rules, you can still run into trouble. Sometimes insurance companies are slow to process claims, resulting in healthcare providers sending you bills for services that insurance should cover. If you receive a bill for covered procedures, contact the provider and the insurance company to make sure the claim is being processed.

You should discuss charges with medical providers before undergoing treatment. Though this probably isn’t possible in an emergency, it is if you have an elective procedure. Know what the provider will charge and how much your insurance company will pay.

Though these are prudent steps, they don’t always prevent a medical bill you can’t afford. If you can’t pay even after insurance, talk to the provider and try to negotiate. Do this right away. You don’t want your unpaid bill sent to a collection agency, which is far less likely to want to negotiate than the original provider.

Collection agencies must follow state and federal laws that protect consumers from unfair collection practices. If a debt collector is pursuing you, research your legal protections and how to file a complaint. But they can do damage to your credit report and pursue legal avenues to force you to pay.

You should also ask the collection agency to specify the amount of debt and contact the original medical provider to verify the amount. Nearly two-thirds of people who complained to federal regulators about medical debt collection issues complained that they were pursued for money they didn’t owe.

Medical bills have shelf lives. If a medical debt is more than seven years old, it falls under a statute of limitation and will no longer be a factor in your credit report. For that reason, it’s best to tackle your most recent bills, since they will remain on your credit report the longest.

What to Do Before Counseling?

If you decide there’s no way you can pay a medical debt in full, contact the hospital or doctor who billed you to discuss the problem. In many cases, medical bills issued to those without health insurance or with sub-par policies are inflated. Medical providers call those amounts the retail cost of service, but few people with insurance pay the full cost.

If you politely explain your situation to the healthcare provider, it’s likely you can negotiate a reduction. Hospitals and doctors often prefer a reduced payment to no payment. Tell them how much you can afford and try to negotiate a plan. You can also offer to pay a lump sum with the provider writing off the balance. If you do this, it could have a negative impact on your credit score, but at least the bill is settled.

The health care system is very complex. Following these steps might limit what you must pay. If you still don’t have the money, consider asking friends and family for help, and research medical financial assistance. It’s better swallow your pride than to not pay your bills and face a default that might lead to a bankruptcy filing.

What to Expect in Debt Consolidation

Seeking help from a nonprofit credit counseling agency through a debt management program or debt settlement is always an option.

If you or a debt settlement service negotiate a debt reduction package that includes consolidation, it will appear on your credit report and probably lower your credit score. Yet the drop in your score that results from debt settlement will almost certainly be less than if you allow your debts to go into default, which could result in a bankruptcy filing.

Many nonprofit credit counselors don’t routinely negotiate settlements with medical providers. In many cases they will contact the providers with a proposal after they negotiate a settlement with credit card issuers, proposing a payment that would be included in your debt management plan. Medical providers might not respond to their request or refuse to be a part of the payment agreement. Typically, the nonprofit debt settlor will charge you a monthly management fee, often $50 a month or less, during the repayment period.

Debt management plans normally last three to five years. If your medical debts are part of your plan, they will be combined into a monthly payment that you’ll make to the credit counseling/debt management service. Before you enter a debt management plan, make sure you will be able to make the monthly payment that the debt counselor negotiates with your creditors.

Debt management plans normally lower your monthly payments and can work to improve your credit score if you make the negotiated payments on time. Once the medical provider accepts a lower payment under a management plan, the nation’s credit-rating services will update your credit report, re-characterizing the debt from unpaid to settled (paid).

Getting Started

The first step in debt consolidation is getting all your medical bills together, making sure the bills are accurate and do an accounting that tells you exactly how much you would have to borrow to eliminate the whole stack.

The next step would be to choose the option that makes the most financial sense for your situation. To do that, try asking yourself these questions:

  • If you choose to take out a personal loan to pay off your debts, how much interest are you having to pay on top of those existing bills?
  • Credit cards are a quick fix method to get rid of the debt, but potentially an extremely expense one. Is it worth paying double-digit interest on a medical debt, just to see it go away?
  • A home equity loan puts your house at risk. Should you really risk a secured asset to pay off unsecured loans?
  • Would consolidating your medical bills into one monthly payment save you money, protect your credit score and keep the collections agencies at bay?

These are all tricky, but very serious questions that you must ask and answer in order to find the best way possible to pay off medical bills.

If you are confused or overwhelmed by the situation, it might help to get a free consultation with a professional from a nonprofit credit counseling agency. The counselors there are trained to help you answer all of these questions and give you educated advice as to the option that works best for you.

Sometimes, good advice can serve as the best medicine for someone sickened by medical bills.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it seven years ago, helping birth into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering college and professional sports, which are the fantasy worlds of finance. His work has been published by the Associated Press, New York Times, Washington Post, Chicago Tribune, Sports Illustrated and Sporting News, among others. His interest in sports has waned some, but his interest in never reaching for his wallet is as passionate as ever. Bill can be reached at


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