Even with adequate health insurance, a pricey medical operation or a prolonged illness can put you in a lot of financial trouble. You might be able to get by if you have an emergency fund or other funds to fall back on. Otherwise, you may need to work out an arrangement with your healthcare professional for manageable minimum monthly payments till the debt is paid off.
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To begin, review your medical bill and start comparing it to your insurance’s explanation of benefits if you get one. Figure out how much you’ll have to pay, but don’t just accept your bill at face value. You can always start by negotiating the total cost.
Be honest with your provider about your financial situation. You’ll almost certainly be charged more if you don’t have insurance than if you do. You can use the fact that there is a pricing difference to your advantage.
A FEW KEY FACTS YOU NEED TO KNOW ABOUT MEDICAL DEBT:
● As per recent data from Debt.com, more than half of Americans now have medical debt, rising from 46% in 2020. Diagnostic examinations, hospitalization, and emergency department visits account for more than half of all medical debt in the United States (57 percent).
● You have 30 days from the first bill date to ask for a fair payment plan from the hospital. Until the 30 days are up, the hospitals cannot send your bill to a collection company or a lawyer.
● If you do not pay your medical bills, you risk damaging your credit score, having your earnings garnished, having liens placed on your property, and not maintaining any money in your bank account.
● Medical debt might have a negative impact on your credit score. A debt collection that affects a credit report can drop a credit score by up to 100 points in the FICO range of 300 to 850.
● After seven years, medical debt may be removed from your credit report, but it doesn’t imply you’re free from responsibility. Medical debt is a type of debt that never goes away. It does, however, include a statute of limitations, but it works in a different way than you might expect.
● Negotiating with the actual creditor rather than collection agencies can be helpful, and you may be able to lower your medical payments significantly.
● Medical collections can be removed from your credit report in three ways: a) Send a goodwill letter requesting relief, b) Negotiate to have the medical bill reporting removed in exchange for cash (also known as a Pay For Delete), and b) challenge the account until it is removed.
● Know that debt collectors purchase debts for pennies on the dollar for medical debts in collections, and this provides you with a lot of bargaining power. If you think you can bargain with the collector, you might be able to do the job of a medical bill attorney yourself.
● If a health insurer eventually pays the costs, the medical collections will be removed from your credit record. You need to dispute the error with the credit bureau. You should get it removed if your medical bill is in collections by mistake and is less than 180 days old or has been paid by insurance.
Now we’ll focus on the ways to deal with medical debts. Let’s get started.
HOW TO DEAL WITH MEDICAL DEBTS LIKE A PRO
1. VERIFY YOUR MEDICAL DEBT
Anytime you get a bill, particularly a significant one, try to read it carefully. (If you didn’t get an itemized bill, ask for one.) Two of the most typical mistakes are multiple charges for much the same service and payments for services you haven’t ever obtained. Your provider must be ready to explain any expenses or costs to you if you don’t recognize them.
Keep an eye out for “unexpected medical bills” if you use private insurance. These are unanticipated medical bills that you get from a provider who isn’t in your health insurance company’s network. The most prevalent surprise billers are anesthesiologists and emergency room doctors. A surprise bill is issued in more than half of all ambulance rides, with an average cost of $450.
Since the provider and your insurance do not have an agreed rate, the provider can charge you for the portion of the cost that the insurer did not cover. Balance billing is the term used to describe this process. Some states have legislation to protect customers against unexpected expenses, and the federal No Surprises Act is effective from January 1, 2022. You should not receive unexpected invoices if you have Medicare or Medicaid because balance billing is prohibited under those programs.
2. TRY TO NEGOTIATE WITH THE ORIGINAL SERVICE PROVIDER
Even if your bill is correct, you might be able to bargain for a lesser price. Patients frequently push for discounts, and hospitals and medical institutions are often willing to cut expenses if asked. If you can demonstrate that paying the whole sum might be challenging or impossible given your current financial condition, you’ll make the strongest argument.
Nonprofit hospitals are required to provide financial help to low-income patients under the Affordable Care Act. They must also make their policies available on the internet. If you meet the criteria, you may be qualified for a full or partial bill decrease. This type of support is popularly known as Charity Care.
3. ASK FOR A WORKABLE REPAYMENT PLAN
The medical servicer may also offer to let you pay in installments that are more manageable for you. (Before you ask, think about coming up with a sum that covers your wages and other regular expenses.)
According to the National Foundation for Credit Counseling, many providers will set up a low- or no-interest repayment plan. Note that this is in both the provider’s and your best interests; it’s better to recover as much of their money as possible than never receive it at all.
If you’ve got enough cash to pay off your medical debt, you might be able to convince the servicer to offer you a discount. The provider will receive money immediately and save credit card processing fees.
4. DEMAND A PROMPT PAY DISCOUNT
If you pay your payment in full within 30 days, several hospitals and doctors’ offices will grant you a one-time discount, as much as 10% off.
Some experts advise requesting a more significant discount. Using the Healthcare Blue Book to see what other neighboring clinics or physicians charge for the standard of treatment you received will give you some ammunition for your argument. If you were overcharged, you might be able to argue that you are entitled to a price reduction.
5. PRIORITIZE YOUR DEBTS
You most likely have additional financial commitments in addition to your medical debts. You’ll have to prioritize paying your debts if you don’t have enough financial support to cover them all.
Your most pressing debts are often related to keeping a roof over your head, such as mortgage or rent payments, taxes, and so on. Apart from that, you may also have credit card debts, payday loan payments, student loan installments, car loan payments, etc. To handle your debt burden, you may use specialized programs such as credit card consolidation, payday loan settlement, student loan forgiveness, etc.
Medical debt can be at the bottom of your priority list. But do not ignore it. If you meet with a credit counselor, they can assist with this. If you think you’re incapable of satisfying certain creditors, make an effort to contact them and inform them of your situation.
6. STOP USING CREDITS CARDS TO PAY MEDICAL DEBT
Transferring your medical expenditures on a credit card is generally a bad idea unless you’re confident you’ll be able to pay off the balance fully before interest accrues. With a high credit card interest rate, you’d just be delaying the inevitable and accumulating a lot more debt. Furthermore, if you fail to make at least the minimum monthly amount on your credit card bill, it will immediately appear on your credit report.
Using a new credit card with a 0% APR introductory rate or loading the debt on an existing card and then moving the balance to such a card could be an exemption. If your financial condition is such that you’re having trouble paying your medical costs, you might not be eligible for one of these cards.
In general, paying your medical expenses using a check or debit card is the best option—make sure you receive a receipt. If you want to get reimbursed through a flexible spending account or a health savings account (if you have one), you’ll need a receipt. You’ll also need proof if the provider invoices you for the same services again.
7. USE OTHER LOANS TO PAY OFF MEDICAL DEBTS
If you have a house with more than 20% equity in it, a home equity loan or line of credit might help you pay off your medical bills. These loans often have low-interest rates with repayment over a five to twenty-year period. The disadvantage is that they are secured by your home, which you risk losing if you default on your payments.
A cash-out refinance is another option for homeowners. In essence, you pay off the remainder of your current mortgage by taking out a new loan for a higher amount depending on your home’s equity. The excess between the two amounts can then be taken in cash and used for whatever you like, including paying off debts. The new loan will certainly have larger mortgage payments, which is a disadvantage.
Another option is getting a personal loan. Because these loans are usually unsecured, you aren’t risking your home. They do, however, have higher interest rates, and you may not be eligible for one, at least not at a reasonable interest rate if you already have a lot of debt. Some lenders offer medical loans, which are personal loans expressly designed to pay medical expenditures.
8. BE AWARE OF THE IMPACT ON YOUR CREDIT
Like any other missed bill payment, outstanding medical debts can adversely impact your credit score. But that won’t happen right away, so you’ll have some time to prepare. Most healthcare service providers do not report late repayments to Equifax, Experian, or TransUnion, so they won’t be added to your credit reports or affect your credit score.
However, if your debt is turned over to a bill collector, that authority may report it to the credit bureaus. Fortunately, it will not show on your credit report until another 180 days have passed, thanks to a law adopted by the credit bureaus in 2017. This provides you more time to pay off the loan or work out a payment plan.
You can go to annualcreditreport.com to get a complete view of your indebtedness. Due to the Covid-19 epidemic, you can now pull your report once per week until April 2022.
9. SEEK PROFESSIONAL HELP
There are philanthropic foundations and other groups that assist patients in paying their medical or prescription drug expenditures; The PAN Foundation is one of them.
There is a range of services available to help with medical bills, some of which are free and others not. You can, for example, hire experts such as attorneys/CPA’s, or businesses like debt settlement companies to bargain on your behalf.
The National Foundation for Credit Counseling can connect you with a member agency to assist you with debt management. Some credit counseling organizations can also help you negotiate a repayment arrangement with your creditors.
10. DEDUCT MEDICAL COSTS ON YOUR TAX RETURN
As per the IRS, if you itemize your tax deductions, any healthcare expenses that exceed 10% of your adjusted gross income (AGI) are tax-deductible.
For example – if your AGI’s 10% is $5000, and you itemize tax deductions; whatever money you paid as medical debt above that $5000 is tax-deductible.
BOTTOM LINE
No matter how overburdened you feel by medical debt, don’t ignore it. You’ll save yourself from some type of damaging long-term impact by using one of the above methods. Take the time to address your issue as early as you can and you’ll be surprised at the results.