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Guide to Paying Medical Debt

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medical-debtMore than 50 million working-age Americans struggle to pay health care bills. And medical debt is a still a common cause of bankruptcy even among those who are insured. But it's possible to successfully challenge and negotiate medical bills. And you may be able to affordably finance medical bills.

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Medical Debt Has Many Solutions

Here are some ideas that might help you. We'll be covering:

  1. Reviewing and challenging hospital and doctor bills
  2. Dealing with insurers
  3. Negotiating down your costs
  4. Working with ombudsmen
  5. Getting help from charities and other external sources
  6. Borrowing in the least painful ways

Only occasionally do any of those clear up financial headaches completely. But, taken together, they might reduce the pain.

Medical Debt Facts

That statistic about 50 million working-age Americans struggling to pay medical bills came from a 2015 study by the Kaiser Family Foundation. But that's only part of the story. Because it doesn't include those who've reached retirement age.

And, of course, it's often people in that older age range who typically face the most medical issues. A 2017 study by Fidelity Investments reckoned the average couple who turned 65 that year could expect to pay $275,000 in pharmacy, hospital and doctor bills during the remainder of their lives. And yes, that's after the help they're due from Medicare.

Health insurance is, of course, hugely important to those who can afford it. But even they are not wholly protected. The Kaiser study found those who were insured were slightly more likely to declare bankruptcy over medical debt than those who were uninsured.

unexpected medical debt

Insurance's Limited Insulation

There are probably plenty of reasons for that. But one may be that the insured feel insulated from health costs and prepare for the unexpected even less than the uninsured. When you're not expecting them, deductibles and copays can seem as ruinous as the raw doctor bills themselves.

In fact, the co-author of a report into medical bankruptcies, published in the March 2019 edition of the American Journal of Public Health, summed it up. "It's just life," University of Idaho sociologist Deborah Thorne told the Atlantic. "It's not like they've done anything wrong."

But enough of that depressing stuff. Let's get on to some practical suggestions.

Reviewing and Challenging Hospital and Doctor Bills

Let's hope clinicians are better at diagnosing and treating patients than they are at billing them. Medical invoices are notorious for their high incidence of errors, including double billing, unjustified charges, wrong treatment dates and pricing that is far higher that is "usual and customary."

Perhaps in the hope that you'll fail to notice their errors, hospitals and doctors sometimes send you a single-line bill. Don't accept that. Request an itemized one.

Then there are unexplained codes used on some bills. These are excellent for insurance companies' IT systems, which can understand them instantly. But they're deeply unhelpful for patients. So call and ask for the details of every code you don't recognize or that's inadequately explained. You can also find lists of codes and their meanings online or even as apps.

When You Need Help Understanding

The system of medical billing is so broken that a whole mini-industry has grown up to help consumers challenge it. Claims assistance professionals operate nationwide and their job is to scrutinize -- and, if necessary challenge -- medical bills. And they may help with other related services, including negotiations with providers and insurers.

Some operate on a contingency basis: no win, no fee. They take a percentage (sometimes 25%-35%) of the amount they save you. Others charge a flat fee. So you need to know upfront how you'll be charged and, if it's a fee, how much.

This is a largely unregulated practice. So make sure yours is reputable and adequately qualified. At a minimum, you're looking for a registered nurse (RN).

Getting on Top of Your Medical Bill

The Fair Health Consumer organization suggests some additional steps when scrutinizing your medical bills. In fact, it begins before the treatment even starts. Because it recommends that you ask your doctor before your visit to tell you what services and procedures you're expected to get -- and how much they'll cost.

So, if your eventual bill is wildly different from that estimate, you'll have a basis for disputing it. But don't forget to keep a written note of the call, including the date, time, name of the doctor, services listed and their quoted costs.

If you're insured, you should receive from your insurer an explanation of benefits (EOB) before the bill arrives. At least in theory, your insurer should have scrubbed any double-billing and similar errors from your invoice. And the EOB should tell you how much you now have to pay in deductibles and so on. If you've paid up front, it should also include a check.

If your hospital or doctor bill doesn't match up with your EOB, something may be wrong. Call around until you're satisfied everything's OK.

Keep Records

You might be the world's least-organized person. But unless you plan on blindly paying every invoice you receive, every time, keep a file and drop your medical paperwork into it. Write the date and check or card payment reference numbers on bills as you pay them.

While you're at it, keep a record of the dates of your hospital and doctor visits, including the names of the people you saw and the tests or procedures you underwent. It's not hard. Your smartphone's calendar app will do just fine. And toss the paper you get when you leave into your file as well.

Dealing with Insurers Over Medical Bills

Some insurers may come across as uncaring ivory towers. And you may think they deserve that reputation.

But they should all be willing to play by the rules. And their call center agents ought to be patient and helpful when you raise an issue. If you get a rogue one, ask to talk to a supervisor.

Sometimes, it may take several calls and letters to resolve an issue. Be sure to log every call and take notes during the conversation. Write down the date and time and the name of the person (even if you suspect it's not the real name) to whom you speak.

But should you record your calls? Sure where you're allowed to do so.

However, the law's tricky. So in some states, you can record without the other party's permission. In others, you can't. And what happens if each party's in a different state with conflicting laws? If you're a legal nerd, by all, means research the law that applies to you. Otherwise, ask the agent's permission and respect the withholding of it. Include that refusal in your written notes.

When to Argue

You may get a faulty EOB ("explanation of benefits"). Errors are much more common than you may think.

Today's medical billing procedures are so complicated that it's easy for an insurer to make slips. Coding errors and unreasonably high prices that slip through the net are commonplace. Approach your insurer or provider assuming that the company's made an innocent mistake. You can always escalate later, though only if necessary.

But, whatever you do, don't drag your feet. Many insurers impose time limits on the period you have to file a dispute. And that can be as short as 30 or 60 days. Check your policy.

Check Your Policy before Treatment

To avoid unnecessary surprises, verify your coverage before any major procedure.

Even if you receive care in a hospital that is in your health plan's provider network, you could still get a bill for treatment from doctors or labs not part of your plan's network. That might include radiologists, anesthesiologists, pathologists and assisting surgeons.

Your plan might cover out-of-network care but require a larger contribution from you. Or it might not cover any out-of-network care, leaving you responsible for the entire cost.

To avoid a nasty "balance" bill, tell your doctor in advance that you only want to use in-network providers. Find out who will be assisting and what lab they plan to use. Then, check with your insurer to make sure they are in your network. Ask your insurer what you can do to avoid being balance billed. And ask the hospital to make sure that any doctors assigned to your case are in your plan's network.

If you have already been balance billed, try to negotiate. The provider is not obligated to give you a break. But many hospitals and medical systems have ombudsmen to help patients achieve an affordable repayment system. They may be able to help you negotiate lower costs.

What about Emergency Treatments?

In an emergency, you can't exactly check your coverage and providers. You may not even be conscious. But most plans cover emergency care no matter where you are.

You're almost certainly covered even if the hospital is not part of your network. However, just because you head to the ER instead of your doctor's office doesn't make your problem an emergency. The event must be a true emergency. Not something that could have waited or been taken care of through your assigned provider.

Negotiating Your Costs

Suppose all pleas to your insurance company fall on deaf ears. Or suppose you have no insurance anyway. And you're clobbered with a big hospital or doctor bill. Is that the end of it? Not necessarily.

You may need to call in claims assistance professional. They should have the expertise to spot mis-coding, overcharging and other billing errors. They may also be able to double back and take up your case with your insurer or provider.

But that's going to cost you, either in the form of fees or a cut of your savings. So you may prefer to at least make a start on your own.

Average Common Medical Costs

common medical costs

Source: Statista

Play Nice

Most involved in health care will review bills with you. So call or set up a meeting to run through yours with your doctor, hospital or other suppliers. But two things are essential:

  1. Do your homework first

    The internet is your friend here. Research what codes mean, and what are considered fair prices for procedures, services, care, drugs and supplies. The more you know, the stronger your position should be when you run through charges line by line.

  2. Be calm and reasonable

    You make it harder to win when you start rudely or aggressively. That's not to say you shouldn't play hardball later if the other side's obstructive or unwilling to listen. But it's usually better to begin gently

Your objective for such meetings is to get a substantial reduction in your bill. Try to get the other party to respect you and your knowledge while sympathizing over your predicament.

Don't Wait

Just as insurers set time limits on appeals, health care providers may take challenges to bills less seriously if you raise them months after they were issued. If you receive an invoice that you suspect is too high, let the provider know at once that you plan to dispute it.

However, don't be rushed into a settlement. Take time to build your case or to bring in outside help.

And don't panic, at least initially, about the harm an overdue bill is doing to your credit rating. The Big Three credit bureaus, Experian, TransUnion and Equifax, all have rules that don't allow creditors to report medical debt for the first six months. You have some time on your side.

Expect a Discount

It's common for providers of health services to shave something off bills faced by the uninsured or underinsured. And that often applies even if every item is justified. It's often in the provider's best interest to have you pay at least some of what you owe.

If your doctor or hospital ends up selling your debt to a collection agency, he, she or it may end up with pennies on the dollar, especially if the debt's old or you have few resources. Coming to a sensible arrangement with you directly is likely to generate more revenue in the end.

Kindness, consideration and empathy may play their parts in moderating bills and agreeing to payment plans. But playing ball with you often makes sound business sense.

Uninsured? Ask for Better Treatment

Hospitals and doctors typically charge different prices to different categories of patients. So the bills they charge Medicare and insurance companies are typically appreciably lower than those they send to individuals.

While that may sound unfair, it's pretty standard practice in most businesses. You charge less to -- and do special deals with -- the customers who generate most of your revenue.

But, presumably, doctors and hospitals still profit on their work for the insured. And we've already established in the last section that they have often good business reasons for cutting you some slack.

So ask that your bill be rerun as if it were going to Medicare or an insurance company. That should get you lower prices for many procedures and services and see some "padding" (debatable items) eliminated.

Of course, you've no right to demand this. It would be a favor. But there may be benefits to both parties.

Submit a Medical Debt Payment Plan

You've done all you can to lower your bills and squeeze your insurer. But what if you can't pay medical bills right away, in spite of all your efforts?

It's then that your negotiations enter a new phase. You may need to propose a payment plan -- probably involving regular installments over months or years -- that will buy you time. How likely is that to succeed?

Your chances aren't bad at all. And for the same reason your doctor and hospital played ball before. Namely, it makes more business sense for them to get what they can out of you than to sell your debt at a hefty discount to a collection agency.

But, once again, this is a favor to you rather than a right. So you may need to make a good case. If we're talking about a lot of money, you may need to reveal personal financial information that proves:

  • You truly can't currently pay everything that's due
  • The payments you're proposing are realistic
  • You aren't asking for concessions so you can maintain an extravagant lifestyle

You may hate the idea of revealing so much personal stuff. But you may not have a choice.

Some health care providers offer "income-driven hardship plans." As the name implies, these should set the installments of a payment plan in line with your income. If you think you may be eligible, ask whether one's available.

Make a Settlement Proposal

Suppose you have some savings or are able to borrow enough to pay some but not all of the debt.

You could try making a settlement proposal. You offer to pay a substantial proportion of your outstanding balance, but not all of it. In return, the provider agrees to write off the rest of your debt and give up permanently all existing claims against you. Ideally, you get them to also agree not to report the debt as anything other than "paid in full" to credit reporting agencies.

Get the agreement in writing and signed before you send any money. Again, it's entirely up to your creditors to decide whether to accept your settlement proposal. They will consider how much of your debt is collectible if they refuse to settle. The poorer your financial condition, the bigger the threat of bankruptcy, and they know this.

Working with Ombudsmen

Each state should employ its own health care ombudsman (or ombuds, if you prefer Washington State's gender-neutral term). One of his or her principal roles is to mediate in disputes between consumers and health care insurers.

The post is part of the state's role in regulating and licensing all types of insurance. So, to contact yours, you probably need to visit the website of your state's department of insurance or put in a call to it. Or you can use the Consumer Reports End Surprise Medical Bills lookup tool.

Although ombuds are generally expected to help with many aspects of health insurance -- including assisting those who can't find suitable coverage -- yours may well see his or her dispute mediation role as one of last resort. So you should normally expect to have completely exhausted your own negotiations with your insurer before calling in your ombud.

What if You Can't Pay Medical Bills? Getting Help

Perhaps the sole silver lining surrounding the dark cloud that is medical debt is the widespread recognition of the system's dysfunctionality. In other words, everyone knows that system is broken.

So there's no shame in having such debt. And no shame in asking for help with medical costs. Better yet, there is a whole host of sources of financial assistance and relief.

Medical Bill Forgiveness

The forgiving of medical bills is reserved for those who have serious issues that can be verified. For example, you could petition your medical provider for forgiveness if you have a disability that stops you from working.

If you succeed, your creditor will simply wipe out your bills, leaving you free of that debt. But don't expect an easy ride. You'll have to prove your physical and financial condition and that you're out of options.

Charitable Help

Some not-for-profits exist solely to help those with medical bills. Take, for example, the Patient Access Network (PAN) Foundation. PAN has paid out more than $3 billion in financial assistance to patients since 2004.

But it's limited in the patients it's able to help. And its selection criteria include:

  • The patient must be getting treatment for the disease covered by the program
  • The patient must have health insurance covering the qualifying treatment
  • The patient's medication or product must be listed on PAN's list of covered medications
  • The patient's income must fall at or below the Federal Poverty Level specified by the assistance program
  • The patient must reside and receive treatment in the United States or U.S. territories

If you're not eligible for help through the PAN Foundation, there are plenty of similar organizations that may be able to help.

More Sources of Help with Medical Costs

The PAN Foundation is just one of numerous potential sources of help with medical debt. Probably most patients begin by talking with their hospital, many of which have funds set aside to help those with financial issues.

Then there are state provisions: assistance offered by your state's government. Contact your Department of Human Services -- aka Department of Social Services or Health Services -- to see what's available. Many have funds in the shape of supplemental security income (SSI), Medicaid or TANF temporary assistance for needy families (TANF).

Some Excellent Charities

Cameron's Crusaders, a New England-based charity, lists several other charities that may be able to help. Some are specific to certain conditions, states or groups, such as children:

  • CancerCare Copay Assistance Foundation
  • Catastrophic Illness in Children Relief Fund
  • HealthWell Foundation
  • Leukemia & Lymphoma Society
  • UnitedHealthcare Children's Foundation

Don't forget to talk through your issues with someone at your church, synagogue, mosque or another place of worship, if you're a member of one. They'll often do their best to help.

Yes, the help you'd be getting from these would be charitable. But don't let pride stand in your way. After all, you've done nothing wrong and have no need to feel shame when asking for assistance.

And remember the generosity of spirit that was in your own heart when you've donated to good causes. You'd have wanted to help people like you as well as those who are very different.

Crowdsourcing

One relatively recent innovation is the emergence of crowdfunding as a way of paying hospital and doctor bills. Crowdfunding (aka crowdsourcing) is when you post an appeal online and invite strangers as well as family and friends to contribute money.

One of the most popular websites for such appeals is GoFundMe. And roughly one in three of its campaigns are appeals for help with medical costs. That's 250,000 campaigns each year, and together these raise $650 million annually.

But other websites offer similar services. These include:

  • Fundly
  • JustGiving
  • Transparent Hands
  • Bonfire

Crowdsourcing won't appeal to everyone. It's an extremely public way of exposing your financial (and maybe emotional and physical) pain. But you can't argue with those numbers.

Borrowing with Care -- Credit Cards

There's absolutely nothing wrong with using your plastic to pay for treatment. You might as well enjoy any rewards you earn. And credit cards come with better consumer protections than other payment methods, including debit cards and checks.

However, you really don't want to borrow using your credit cards. OK, that's too sweeping a statement. If you're only charging a few hundred and you're confident you're going to be able to pay that down over a few months, the convenience of your plastic probably outweighs its astronomical interest rate.

But don't run up your card balances with large sums that will take you a long time to pay back. Not only will that be ruinously expensive, but you could be putting your credit score at risk. Because anytime your balance is more than 30% of your credit limit, your score is being hit. So read on for better alternatives.

Medical Credit Cards

You may well have seen application forms for specialist medical credit cards and loans in your doctor's and hospital's waiting rooms. Some of these are excellent, and might even offer you six months' or a year's 0% credit.

But you need to be wary of them. They're great providing you make timely payments and can zero your balance within the agreed term. But, with many, if you slip up just once or fail to pay down the loan on time, you're likely to be hit with a painfully high "deferred interest rate."

And that rate won't apply just to your remaining balance. You'll pay it on the entire loan from day one. And you could easily end up paying close to one-third more for your treatment than the cash price.

You might be better off applying for one of those mainstream credit cards than come with a 0% APR on purchases for an introductory period. And that can last a year, 15 months or even 18 months.

Another good strategy might be to pay for your treatment with plastic and then pay off that balance with a personal loan. So you can take advantage of rewards or an introductory rate but then get better terms for the long haul.

Personal Loans

If you need to borrow larger sums (thousands -- up to $100,000+) to cover your medical bills, and you have a good credit score, a personal loan may be your best bet.

  • Personal loans come with fixed interest rates
  • Interest rates start in the 5% range and average about 7% lower than those of comparable credit cards
  • Terms range from one to ten years
  • Personal loans are unsecured and require no collateral

As importantly, you can get the money you need quickly. In minutes, you can compare personal loans online, apply and get a decision. You can have your money in a few days -- or a few hours.

For those facing significant hospital or doctor bills, personal loans are often the best way forward.

Tap Your Home Equity

Homeowners may find that tapping their equity gets them the lowest interest rate and payments for clearing medical debt. Because home equity loans are mortgages, risk to lenders is low, and so are interest rates.

But using your home equity in this way has some downsides:

  • Paying medical debt with a mortgage means you convert it from unsecured debt, which can be discharged in a bankruptcy if necessary, to a loan secured by your home
  • Setup costs for fixed home equity loans or cash-out refinancing is high. Because it's a mortgage, you'll probably pay appraisal fees, lender charges and title insurance costs
  • Home Equity Lines of Credit (HELOCs) have low setup costs but they also carry variable interest rates
  • Because home equity terms are usually long (10 to 30 years), your payment is low. But the cost is high when you stretch out a debt for decades -- no matter how low the interest rate

Using home equity to pay medical debt may be the right option if your debt is huge. But you might be better off leaving your medical debt unsecured in case you ever need to file bankruptcy.

Medical Debt - We Feel Your Pain

Options for dealing with medical debt range from negotiating lower bills to enlisting the help of charities and friends to setting up payment plans. And you may be able to finance your medical debt with a secured or unsecured loan.

While you probably can't completely eliminate the pain of medical debt, you may be able to alleviate it.

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