How to Deal with Medical Debt

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One of the biggest challenges consumers face today is mounting debt. From credit cards to student loans to underwater mortgages, debts can stack up to the point where they become overwhelming. Some of these debts can be managed; we can learn to curb our spending via credit cards for example or refinance a mortgage under the HARP program. There are certain debts however that we can have little control over and those include medical debt. After all, few would argue that nothing is more important that our health, or the health of our loved ones.

That’s why for many of us, medical debt is unavoidable. After all we are more concerned about our health or our loved one’s health, blinding us to how much it will all cost. Medical bills can pile up to the point where bankruptcy seems to be the only option. Unpaid medical debt is the cause of 62 percent of bankruptcies in 2007 according to a study from the American Journal of Medicine.

According to a report from NerdWallet Health, unpaid medical bills and the resulting medical debt will affect almost 2 million people a year and is the number one cause of bankruptcy filings.

“A lot of Americans are struggling with medical bills,” said NerdWallet Health Vice President Christina LaMontagne.

According to the report approximately 56 million adults who won’t resort to bankruptcy, will still struggle with medical debt. Perhaps even more shocking, almost 10 million of those adults have fulltime health coverage will still amass medical debts they can’t pay.

A pile of medical debt is why many times people will automatically seek out the services of an affordable bankruptcy attorney. However, there are ways to deal with medical debt that won’t send you to bankruptcy court.

A recent article published by the National Consumer Law Center outlined strategies for dealing with medical debt.

Don’t borrow from Peter to Pay Paul

Medical debt should be a low priority. Your mortgage, car and basic necessities need to come first. Just about any other bill should have priority. Medical debt however should never be the cause of incurring another new debt. Never try and pay off medical debt with a credit card, nor should you even consider taking out a second mortgage or some sort of personal loan.

Also, be weary of the so-called “medical” credit cards; they will usually have an interest rate as high as all other credit cards. These medical cards are oftentimes pitched at your medical providers office. The problem becomes that the medical bills you might charge on that card absolves the medical provider of the debt. It then becomes no different than a regular credit card with a higher interest rate, and the consumer loses any chance of negotiating that medical debt with the medical provider. Medical debt will usually have a much lower interest rate and most often will not incur late charges like credit cards.

Medical debt also takes longer to show up as a negative item on your credit report unlike credit cards; the delinquent payments from credit cards show up almost immediately on your credit reports.

While it should be a low priority, medical debt can’t be ignored. But keep in mind that consumers have rights when it comes to medical debt; important information you need to know.

Dealing With Debt Collectors

Some medical providers seem quick to turn an unpaid medical bill over to a collection agency, after a month perhaps two; other providers may take up to six months. No matter the time frame, once a professional debt collection agency gets the medical debt, there job is to get that debt paid, no matter what.

Debt collectors will try and get the money in ways that aren’t always in your best interest. They may try and convince you to make the medical debt a higher priority, skip a car payment, miss a house payment; take out that second mortgage, fill up that empty credit card, and threaten to report you to the credit reporting agencies.

The constant harassment is designed to wear the consumer down. Remember, the debt collectors job is to get the debt paid; they are not working in your best interest, they are working to make money for their firm or client.

There are federal laws in place to protect you the consumer; under these federal laws, sending a formal letter to the debt collector should make them stop.

You can prevent the debt from going to a collection agency however by contacting the medical provider before the unpaid debt goes to the debt collector. An explanation of why you are unable to pay and that you will not pay if a collection agency gets involved may prevent the provider from sending that debt to the agency.

Credit Reporting Limits when it comes to Medical Debt

Another good reason to not let your medical debts go to collections is that very few medical providers will report you to the credit bureaus. Only when your medical debt is sent to collections will you need to worry about seeing it on your credit reports. And the three major credit reporting bureaus have all agreed not to report your medical debt if is less than 180 days old. This all gives you time to take care of your medical debt before it starts affecting your credit.

Be Diligent!

There is a way to reduce your medical debt right away. When you get your bill carefully review it for any unauthorized charges and errors. In addition, if you have health insurance check the explanation of benefits (EOB) to see if there are any inconsistencies between that and the medical bill. If you find any charges you feel were not authorized, or any errors contact either the medical provider if those were on the bill, or the insurance company if those were on the EOB.

And look out for something called “balanced billing”. This is the practice where an insurance company bills you the patient for the disallowed balance on the bill. In other words, the medical provider bills you for portion of the bill that your insurance won’t. This practice is against the law in Florida and many other states. For Medicare and Medicaid patients, medical providers usually can’t bill you for rates that were agreed upon by Medicare and Medicaid.

Finally, if you receive a bill that you feel should be covered under your insurance or that contains errors, contact your insurance provider. They may be able to get the error corrected quickly. The same for your medical provider; however, do this as soon as you can. Waiting could get the collections process going.

You can also appeal if insurance still refuses to pay. Let the insurer know that you would like to appeal. Again, don’t wait too long, many times there are deadlines. If your insurance company is refusing to appeal or you are not satisfied with them, you can contact your state insurance commissioner. In Florida that information can be found here.

Financial Assistance

Federal law requires that nonprofit hospitals have policies that offer financial assistance to patients. This assistance is in the form of discounted, and in some cases free, services. Information on these programs can be found at the nonprofit hospital or their website. In addition, most medical providers charge different rates for insured and uninsured people. The uninsured person will be charged higher rates. However, if you are an uninsured person and have a hardship or some other compelling financial reason, you might be able to be charged the “insured” rate for the same exact service, thus lowering your bill.

Be Proactive

The key to all this is being proactive. As the patient, or the caregiver, it is up to you to make contact with the medical provider. Whether you are seeking relief through financial assistance, clarification of errors, a balanced billing issue, or any of a number of compelling reasons, make sure to seek help from the medical providers or your insurance as soon as possible.

While it is rare for a medical provider to sue someone over an unpaid bill, it does happen. The best defense (provided you at least made an effort to contact the medical provider) is to argue that the bill, thus your medical debt isn’t reasonable. After all, many times a patient can’t agree to what the charges will be prior to the medical service being rendered. And you already know that hospitals charge a higher rate for uninsured person, so a judge who is compassionate may consider this a valid argument. This may not result in the debt being forgiven, but it could lead to the medical provider settling for a lesser amount or coming to some other financial agreement.

Medical debt can be a huge burden. You can’t just wish it away. However, you can take steps to lessen that burden. If all else fails, contact the affordable bankruptcy lawyer here at the Badgley Law Group. We may be able to get you the relief from medical debt and all your other debts, quickly and affordably.