Unlike racking up credit card debt or borrowing to buy a home or car, medical debt usually accumulates thanks to an illness or injury that’s out of your control. And yet, the debt can be as burdensome and damaging to your finances.
What you might not realize is that often, you don’t have to pay back the entire balance. In fact, you could get a big chunk of your medical debt forgiven if you meet certain requirements.
Want to know more? Here are the steps you should take if you’re hit with unmanageable medical bills.
Double-check your billing and insurance coverage.
Before you even think about paying back a dime, make sure you really owe the full amount you’ve been billed.
“There is a disproportionately large number of people who have medical billing errors,” said Janet Alvarez, a personal finance expert at Wise Bread who once struggled with medical debt of her own. According to Alvarez, it’s common to be over-billed, billed for things that didn’t happen or double-billed.
In fact, one expert previously told HuffPost he estimates that 30 to 40 percent of medical bills, excluding pharmacy bills, contain errors. “So the first thing that you should do is go through your medical bills with a fine-toothed comb and make sure they’re accurate; if there’s any doubt whatsoever, call your doctor,” Alvarez said.
The second step is to check that the bill was correctly run through your insurance if you’re insured. “I can’t tell you how many times I’ve had a medical bill in which one of the medical assistants missed a number on my insurance card, or failed to bill my insurance properly for whatever reason,” she said.
Take a look at your insurance policy and make sure you understand your coverage. Then, compare your coverage to the explanation of benefits you receive from your insurance company. If you see any discrepancies, “You should immediately contact the provider’s billing department and ask for clarification,” said Carolyn McClanahan, a medical doctor, certified financial planner and director of financial planning at Life Planning Partners, a financial planning firm.
“If you think it is something that should have been covered by your insurance, and if it isn’t clarified by your provider, call your insurance company representative,” McClanahan said.
Alternatively, if you find that your bills or policy are too complex to really understand, you can work with a medical bill advocate. These advocates are experts in medical billing and can review documentation to find errors for you, as well as negotiate on your behalf. Just keep in mind that their services typically cost $100 per hour or more.
Look into medical debt forgiveness programs.
If the medical debt is legitimate and it’s been billed through your insurer, or if you don’t have insurance, your next step is to call the health care provider and discuss what sort of remedies are available to you. “In some cases, especially if you owe money to a hospital or large medical institution, they can offer you debt forgiveness if your income meets certain threshold requirements,” Alvarez said.
And don’t assume you earn too much; medical debt forgiveness is often awarded on a sliding scale, so that even middle-class folks can qualify to have some of their debt discharged. “In my case, they forgave something like 75 or 80 percent,” Alvarez said.
Though the process for obtaining medical debt forgiveness varies by medical institution, the application process is fairly standard. Hospitals will ask for documents such as tax returns, pay stubs, etc., and award forgiveness based on factors such as income, household size and more.
“Generally speaking, anybody in patient financial services at the billing office is equipped to help you. And if the first person you speak to doesn’t seem to understand your question or doesn’t seem to be empowered, simply ask to speak with their supervisor,” Alvarez said.
McClanahan noted that when it comes to in-network care, it can be tough to negotiate after the fact because they are charging the “insurance rates,” which are less than the self-pay rates, and you are on the hook for your deductibles and co-pays.
However, if the bills are for out-of-network care, you can and should negotiate these bills with the provider and ask your insurer for help with the negotiation, McClanahan said. Out-of-network charges have been under scrutiny lately, and many states are passing laws that regulate them. There is also federal legislation pending. “Learn the rules for your state on out-of-network billing. If you are having trouble with out-of-network billing and the organizations won’t work with you, complain to your elected officials. They are getting sick and tired of hearing about this, and hopefully, we’ll get meaningful legislation passed soon.”
Finally, if you are uninsured, McClanahan recommended you negotiate hard. “They are charging you crazy high fees as their ‘posted charges’ when regular insurance and Medicare pay much less for the same services,” she said, noting that offering to pay in cash definitely helps. “Some hospitals have charity care, so ask about their programs and see if you qualify.”
Negotiate a settlement or payment plan.
If you don’t qualify for debt forgiveness, there are still other options to reduce what you owe. For instance, offering to pay a smaller amount in one lump sum could get your bill reduced by as much as 20-40 percent, according to Alvarez. Settling your medical bills for less than you owe typically works best when the amount isn’t much ― say, a few hundred dollars.
If you owe a significant amount of money, another option is to work out a payment plan. “They’re almost always interest-free, so there’s no penalty for paying over a period of time. That payment plan can also be as little as $20 to $30 a month,” Alvarez said. “And if you find that you’re able to accelerate payments and pay it off more quickly, you can do so with no prepayment penalty.”
Alvarez shared that years ago, she was billed $1,400 for an upper endoscopy procedure that she had to pay for out-of-pocket. At the time, she couldn’t afford to pay it all at once, so she ended up negotiating a payment plan of $25 a month over a period of several years. It took a long time to repay, but with no interest, it was an easy way to get rid of the debt without it affecting her credit score.
Know your rights surrounding medical bills and your credit.
Speaking of credit scores, leaving medical debt unpaid is one way to harm yours. And a low credit score leads to problems borrowing money, securing a place to live, opening utility accounts and more.
According to a recent survey by Consumer Reports, nearly 3 in 10 insured Americans had an unpaid medical debt sent to a collection agency. Close to one-fifth said their credit score was negatively affected by unpaid health care bills.
Having any kind of debt sent to collections can wreak havoc on your credit. But in the case of medical debt, it helps to know your rights. Recent changes to the law have made it more difficult for medical debt to negatively affect credit scores.
For instance, the three major credit reporting agencies now have to wait 180 days before they can list an unpaid medical bill on your credit report. Also, if you had an unpaid bill that was later paid by your insurer, it must be removed from your credit report immediately so it doesn’t continue to harm your score. If you do find medical debt on your credit report that shouldn’t be there, you should dispute the error.
Mounting medical bills can seriously mess up your financial situation. However, if you’re willing to put the time into navigating the complex medical billing industry and advocate for yourself (or pay someone else to), there’s usually no reason to let medical debt hold you back. Even if you can’t get your debt forgiven, you should be able to work out some kind of plan. It’s always worth trying.