One in 5 working-age Americans with health insurance has problems paying their medical bills. Among those without insurance? Almost 3 in 5.
The immediate response to a growing stack of bills is rarely logical. Panic is the more common go-to, usually paired with a healthy dose of trying to ignore the problem. But ignoring medical debt only makes the situation worse. Skipping payments can leave your information in the hands of a collection agency — and your credit in the toilet.
You need a plan, but you don’t have to come up with it all by yourself. Here are some options for tackling your debt.
Assessing (and Minimizing) the Damage
You can’t start fixing the problem without a clear picture of how much medical debt you have, so review all your charges. Once you know exactly what you owe, call up your doctor’s or hospital’s billing department. Going to your medical provider directly is a great way to show you’re being proactive, making it less likely that they’ll send your payment to collections — and it’s always better to work with your provider than with a collection agency.
Start by clarifying any errors you find in the charges and confirming that everything’s in order. After that, it’s time to negotiate. Ideally, you’d pay the bill on time and in full, but your provider prefers some payment to nothing at all. Ask if you qualify for any discounts or charity care programs that could reduce the total amount you owe.
If your bank account is looking a little thin and you still can’t pay off the entire bill, ask your medical provider to work with you to create an interest-free payment plan that fits your monthly budget. Communicate your financial situation clearly and calmly: “I’m unable to pay the entire amount of my bill right now, but I’d like to pay something. Given my financial situation, what discounted payment options are available to me?”
When Negotiating Fails: How to Make Your Last Resort Less Painful
If you’re not able to negotiate a monthly payment you can afford, consider paying off any outstanding medical bills with a credit card. Many cards offer zero percent introductory interest periods for as long as 18 months, allowing you to pay off your bills without interest (as long as you stick to that time frame). If you’re relying on a promotion to avoid extra fees and interest, just be extra careful that you follow the terms and conditions to get the most out of the deal.
That said, shifting your debt to a credit card only makes sense if it empowers you to pay it off. When you’re looking at truly overwhelming medical bills, bankruptcy becomes a legitimate option. If you qualify for Chapter 7 bankruptcy, your debt can be discharged completely. If you file for Chapter 13 bankruptcy, you’ll follow a repayment plan that enables you to pay off the debt within three to five years.
But keep in mind that bankruptcy isn’t a magic wand that makes financial problems disappear. Bankruptcies can stay on your credit report for up 10 years and put qualifying for financing on big purchases like a home out of reach. In dire circumstances, though, it can provide a pathway to freedom from debt.
Avoid Future Debt
The best way to deal with medical debt is to avoid it in the first place. Granted, that’s not always possible — but there are ways to protect yourself from drowning in bills before they come.
Build an emergency fund. Stashing away a few months’ worth of expenses for a rainy day can give you a financial buffer the next time you need sudden medical care. Even setting aside a little money here and there can leave you with a sizeable pool of money to draw from by the time a medical emergency happens.
Assess your current insurance coverage. It’s impossible to predict exactly what your future medical needs will look like, but you have some insight. If you’re planning on getting a specific procedure in the next year or so, will your insurance cover it? If you unexpectedly land yourself in the hospital, are your out-of-pocket costs going to be insurmountable?
Consider supplemental insurance. The costs associated with coinsurance, deductibles and extended hospital stays can add up quickly. Supplemental insurance like critical illness and accident or hospital indemnity plans can help cover costs that normal plans don’t by sending lump sum payments directly to you — meaning you’ll have cash to go toward bills or any other expense that comes your way.
The financial burden of medical bills can add strain to already stressful situations. Give yourself a few minutes to freak out before deciding how to take action. Be proactive about your medical debt, whether you’re already paying it back or just looking ahead to future bills.