Even those with health insurance aren’t immune to medical debt problems. Though the federal Affordable Care Act (Obamacare) expanded the number of people with insurance coverage, little has been done to hold down rising premiums and deductible limits, pushing many Americans who live paycheck to paycheck toward insolvency.
No one knows how many bankruptcies are the result of budget-breaking medical expenses, but it is certain that a big hospital bill or the cost of treating chronic conditions plays a big role in many of the hundreds of thousands of annual filings.
Even those with jobs and insurance feel the pain. Deductibles and copayments rise each year for many insured employees, and in a recent survey one in five said they had trouble paying medical bills.
If you fall off a ladder or suffer a heart attack, the cost of treatment could be astronomical. Good insurance will cover a large portion of the cost, but almost every policy today has a deductible – often a very large one. The bills can be overwhelming for people without insurance, or those who have substandard policies. There are alternatives, however, and if you can’t pay a hospital bill, they should be pursued.
What Happens to Unpaid Medical Bills?
If you don’t pay your medical bills and are unable to find assistance that might help resolve them, it’s likely that they will eventually be assigned to a collection agency. In fact, the Federal Reserve estimates that more than half the accounts sent to collection agencies involve medical debt.
Just like credit card issuers, hospitals and medical practices sell debt they can’t collect after a period. This will often usher letters, phone calls, emails and text messages demanding payment. Although collection agencies can’t threaten you with arrest or call at inconvenient times, they will try to make you uncomfortable and they’ll remind you that failure to pay will severely ding your credit rating, making it hard for you to obtain loans in the future.
If you are unable to negotiate with the collection agency, you could eventually face a civil lawsuit demanding payment. Being in medical debt can turn your financial life into a nightmare.
What can you do? While the debt is still in the hands of the doctor or the hospital where you were treated, look for errors in the bills you received. Mistakes are very common and include double billing for a procedure, service or supply. You can do this on your own or, if it seems too difficult, you can hire a medical billing expert to do it for you.
If you can’t find errors, try negotiating with the doctor, the hospital or the bill collector. Ask what the lowest rate the provider charges insurance companies and try to get that rate applied to what you owe. Also, ask if the collector will accept a no-interest payment plan, or look into medical financing. Remember, whether it’s a medical provider or a debt collector, the entity seeking payment will often prefer something to nothing.
You should explain your situation to the collector, emphasizing your inability to pay the full amount billed. If you don’t have health insurance, ask what Medicare reimburses for the service or treatment and offer to pay that. Try to remain calm when you discuss your bill and always take notes. Be certain to ask the name of the person taking your call and any reference number that might be assigned to your account so that you can take the issue up with someone else, if necessary.
If you have enough money on hand to pay a reduced bill, offer to pay immediately. Also offer to provide information confirming your income. If your income is low enough, a nonprofit hospital or clinic might be willing to reduce or eliminate your debt.
Establish a Payment Plan
Though medical debt can be onerous, it has one advantage over credit card debt – there is usually no interest due on what you owe. For that reason, it’s usually a bad idea to pay a bill with a credit card if you can’t afford to pay off the credit card in the next billing cycle. Unlike medical debt, credit card debt comes with interest, which can easily exceed a 20% annually on the balance.
One way to prevent your medical provider from selling you debt to a collection agency is to work out a mutually agreed payment plan with the medical provider. A medical provider that accepts a payment plan will generally not report you to one of the nation’s three giant credit-rating agencies, avoiding damage to your credit report.
Even if you haven’t come to an agreement with the hospital or medical practice, try sending a partial payment, perhaps 2% or 3% of the balance, each month. If the provider accepts your payments, it might be willing to cash your checks and hold on to the debt until it is repaid. The arrangement might benefit you and the provider, who can avoid selling the debt to a collector for pennies on the dollar.
Government Assistance for Medical Bills
Before you decide there’s no way to pay a medical debt, consider turning to a government program for help. Medicaid and state Children’s Health Insurance Programs (CHIP) both provide medical expense assistance to those who can’t afford insurance.
Both Medicaid and CHIP are federally funded but state-administered programs that offer help to those whose family incomes fall below certain thresholds. Contact your state’s human and social services agencies or a state Medicaid office to learn if you qualify.
If you are a veteran, have a disability or are at least 65 years old, you are likely to be eligible for Medicare or medical care through the Department of Veterans Affairs. Veterans should contact the VA and seniors and the disabled should learn about Medicare. The Benefits.gov website offers a questionnaire that can help you locate an appropriate program.
Hire a Patient Advocate
If you lack the time or understanding to navigate the healthcare system yourself, you might consider hiring a patient advocate, agents trained in how the system works and negotiating on your behalf. Patient advocates typically charge between $100 and $165 and hour and will often charge 20% to 30% of whatever savings they might realize for you. Qualified advocates are experts at analyzing medical bills and can ferret out irregularities. They can also conduct negotiations for you. The Claims.org website can help you find an advocate in your area.
Bankruptcy and Other Alternatives to Medical Bills
Medical providers and collection agencies can both file lawsuits to collect unpaid debts. If you are unable to negotiate a repayment plan with them, a collection suit is always possible and a judge might order your wages garnished to satisfy the debt. People with very low incomes are exempt, but those who make more are subject to garnishments that can dig into your take-home pay and lead to other financial problems.
Filing for bankruptcy short circuits the process. Medical debt can be discharged or greatly reduced depending on the type of bankruptcy you file. Before considering medical bankruptcy, you should discuss the options with a nonprofit debt counseling agency to go over the options and determine whether bankruptcy makes sense for you.