4 Important Things to Know About Medical Debt

Millions of people in the US have medical debt. It is particularly easy to find yourself in because healthcare in the US is more expensive than anywhere else in the world, the system is difficult to understand, and the pricing for procedures and services is often opaque. On top of that, many of us find ourselves uninsured or underemployed at some point in our lives and have to pay large amounts of our healthcare costs out of pocket. 

We can’t always afford it.

There’s good news and there’s bad news. The bad news is that without comprehensive healthcare policy reform, Americans are likely to keep struggling with medical bills. Depending on who you ask and the years in question, the cost of healthcare has outpaced the rate of inflation by up to 6 times, particularly for advanced medical procedures. The good news is that medical debt can be more manageable than consumer debt as long as you are informed about what your options are.

If you find yourself with medical bills you can’t immediately pay, here is what you need to know.

Medical debt is easier to deal with when it is still administered by the practitioner, facility, or hospital that provided the care, so if you can’t pay, act fast.

When you can’t pay a medical bill, it is best to be proactive about addressing your budget shortfall. Most nonprofit healthcare providers will offer you an interest free payment plan that you can afford, and as long as you stick with these payments, the debt will not negatively impact your credit score. For larger bills and debts to hospitals, you may also be entitled to need-based aid, and if you have gone to a nonprofit facility, it is required by law to offer a financial assistance program. Speak to a patient advocate or social worker who can help you understand your payment options. In some cases you may even retroactively qualify for aid and not have to pay at all. However, in order to have access to these resources you have to address the overdue bills while the balances are still managed by the providers. 

You lose that assistance and protection once your medical debt moves to a collection agency.

Like many types of debt, once medical debt is in arrears, it can be sold for pennies on the dollar to collections agencies who essentially place bets on how likely you are to pay all or part of your overdue bills. This is a complicated and frustrating (but exceedingly common) practice that some activists and nonprofit organizations have addressed by buying debt and forgiving it in order to save people from the emotional and financial hardships caused by medical debt. 

Once the debt is in collections, there is no way to get assistance from the hospital employees who exist to help patients to navigate payment plans, benefits, or social services. While medical collections are weighed differently than other types of collections on  your credit report, it still gives you negative marks. These debts can never reverse course and be sent back to the providers. This is why acting as quickly as possible is key to managing your debt in the most beneficial way.

You can negotiate the sticker price for medical procedures and care.

The price that appears on your hospital bill is often higher than the price that a hospital will accept to clear your account. The initial price presented is something called a “chargemeaster rate” and is used to start the negotiations hospitals go through when they work with insurers, which also haggle on the price that will ultimately be paid. 

You should haggle, too. 

Check out a website like Healthcare Blue Book to help find reasonable costs for the procedure and start from there. Ask your healthcare provider what the base rate is, and if you have a lump sum of money that you can throw at it (without sacrificing your security net, of course) then you should do that. If you are not being charged a fair rate you can appeal. The process can be tedious and take a long time, sometimes even years, but it is possible to win the battle.

Never pay for medical debt with a credit card.

Credit cards charge up to 30% in interest, while payment plans with hospitals and other facilities are often interest free. Medical debt will not increase your utilization rate or be flagged as debt on which you have not made sufficient progress towards payoff. It doesn’t have as negative an impact on your credit report as consumer debt or collections, and is way less costly. In addition, once the bill is paid on your credit card there is no incentive for the provider to negotiate costs. You’ll often wind up paying more money for the services and the interest over time.

Medical debt sucks, and feels particularly unfair, since most of us acquire it when we are simply trying to take care of ourselves. Long term, we can hope for policy change that provides a wider reaching solution, and we can vote in ways that support our vision of a more just healthcare system. Short term, however, know your rights and take these tips to help make managing these costs a little less painful.

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