There’s no denying that health care is essential. Doctor visits, over-the-counter medications and medical treatments are necessary to keep us well.
Whether you’re a fairly healthy individual or living with preexisting conditions, you likely know medical bills can be expensive, which makes it all too easy to incur medical debt—where overdue payments are sent to a collection agency—leading to stress and uncertainty about the future.
What Is Medical Debt?
Medical debt is any balance or amount owed after receiving medical services or goods, according to Shannon P. Miller, a partner at national financial services law firm Maurice Wutscher in Philadelphia. “In a broad sense of the term, this would include amounts owed that are not past due, as well as amounts that haven’t been paid and have become delinquent and sent to collections,” he says.
The majority of debt in third-party collections in the U.S. (58%) comes from medical bills, finds a recent report by the Consumer Financial Protection Bureau (CFPB). And, according to the Kaiser Family Foundation (KFF), medical debt is more prevalent for minorities and people with disabilities.
Additionally, about 43 million U.S. adults have medical bills on their credit report, which account for $88 billion in total outstanding medical debt.
Insurance Coverage and Medical Debt
Unfortunately, health insurance doesn’t cover all medical expenses. “There’s always some sort of out-of-pocket cost, such as deductibles, coinsurance and copays,” says David Berg, president and cofounder of Redirect Health, a third-party health insurance administrator in Phoenix.
When health insurance doesn’t pay for the total cost of the medical services or goods you receive, you’re responsible for the remaining balance, adds Miller, who represents a leading operator of general acute care hospitals and outpatient care centers. You can expect to be billed by or on behalf of the health care provider.
Virtually any type of health care can put you in medical debt, with the most common types including diagnostic tests, hospitalizations, emergency room visits and outpatient services, says Jay Moore, M.D., chief clinical officer at Paytient, an employer and health plan-sponsored payment platform for medical expenses. “Unpaid bills lead to bad debt, and bad debt leads to rising costs [for the patient and care provider],” he explains.
Medical debt frequently occurs when individuals are living with chronic or long-term illnesses and routine costs are expected, says Berg. One common source of medical debt, however, usually comes from hospitalization costs, such as an emergency room visit, as these stays are often a surprise for many patients, he explains.
What Happens If You Ignore Medical Debt?
First and foremost, know your rights regarding debt collection. Medical debt typically goes to a collections agency that will attempt to collect the amount you owe after it’s 90 days past due. Since debt collectors can only contact you about debts you actually owe, be sure to confirm the debt is yours.
Ask the debt collector about repayment options if you indeed owe a balance. “Many times, the debt collector may have authority to settle the balance you owe for less than the full amount and/or offer repayment options that include paying a nominal monthly amount until the balance is satisfied,” explains Miller.
“The provider may also involve a law firm to pursue legal avenues of recovery, including filing a lawsuit, obtaining a judgment and then executing upon that judgment,” explains Miller. In some states, this means the ability to garnish wages, bank accounts or levy on property, such as cars and even a home. Also, if your debt is reported on your credit report as delinquent by collections, your credit score could take a hit.
While this process may sound scary, you do have protections as a patient. Per the Debt Collection Rule, debt collectors don’t have the right to harass you. If they do call you, however, you don’t have to worry about going to jail, as medical debts are civil debts and jail time for these types of debts is against the law.
If it passes, the 2021 Medical Debt Forgiveness Act may help you as well. It proposes extending the waiting period for medical debt on a credit report to one year. The act also aims to remove paid medical debt from consumer credit reports.
How Can You Tackle Medical Debt?
There are a number of ways you can deal with your medical debt, including:
- Understanding your health insurance policy. Take time to review your health insurance plan carefully. You should know exactly what it covers and what it doesn’t. If you’re unsure, reach out to your provider.
- Setting up a payment plan. Bills can still be sent to collections even if you’re making payments. If you partially pay or make regular payments but go past the due date, the remaining amount of your bill could be sent to a collections agency. Talk to your provider if you can’t afford all of what’s due. They may be willing to set up a payment plan.
However, many providers prefer giving a discount—as much as 50% off—if you can pay the balance that day, depending on the type and duration of treatment, according to Maria Montecillo, a private health insurance and billing advocate in New York. This way, they can save on the administrative costs of payment plans.
- Negotiating a lower price: Don’t hesitate to negotiate with the health care provider for a lower amount. Explain if you’re unable to afford the full cost and ask what they typically charge insurance companies or what Medicare covers.
- Avoiding credit cards: While it might be tempting to put your medical debt on your credit cards, doing so can do more harm than good if you cannot afford to pay your credit card bill in full. Certain credit cards may come with much higher interest rates and easily increase the total amount of your debt.
- Considering credit counseling: Credit counseling agencies are nonprofits that can help with your medical debt. You may use the National Foundation for Credit Counseling to find a reputable agency.
How to Find Financial Assistance
Many hospitals and providers provide financial assistance programs for patients who can’t pay their bills. There are also charity care programs, which offer free care to patients with a family income below 250% of the federal poverty level.
“Ask the hospital billing department if you can apply for charity care. Even if you think you make too much money or own too many assets, many hospitals are privately run and therefore do not have to abide by the poverty guidelines set by the state you live in,” says Montecillo. “It’s a free application, so the worst thing they can do is deny it. There is nothing to lose.”
There may be programs that offer care at discounted rates. These are generally for patients with no insurance who aren’t eligible for federal programs and a family income in excess of 250% of the federal poverty level that doesn’t exceed 400%.
You may also get financial assistance for high-cost drugs and if you don’t have insurance, you can leverage federal assistance programs like Medicaid and the Children’s Health Insurance Program or CHIP to help assist with the cost of care, says Berg.
He recommends you arrange financial assistance before you intend to receive care, if possible, rather than after. “Since it can take time to understand your options and set up your assistance, doing so prior to your medical care can be a huge benefit to you.”
Even if you’re still paying medical debt, rest assured that you can still receive the care you may need from many hospitals. Dentists, however, might have different stipulations.
By: Anna Baluch