Even if you have good health insurance, a costly medical procedure or lengthy illness can saddle you with a substantial amount of medical debt. If you have an emergency fund or other savings to draw on, you could use those funds to pay your unexpected medical bills. Otherwise, you may need to negotiate with your medical provider to arrange for affordable minimum monthly payments until the debt has been paid off. Here are nine steps that can make the process easier.
Key Takeaways
- Medical billing errors are common, so before you pay a bill, try to ensure the charges are correct.
- Hospitals and other medical providers are often willing to reduce the amount you owe if you can show that you'd be unable to pay in full.
- Providers may also be willing to work with you to create a repayment plan, spreading your payments over a reasonable time period.
1. Make Sure You Really Owe the Money
Medical bills are notoriously inaccurate. So, whenever you receive a bill, especially a substantial one, try to review it closely. (Ask for an itemized bill if you didn't get one.) Among the most common errors are duplicate charges for the same service and charges for services you never received. If you don't understand a particular charge or its cost, your provider should be able to explain that to you.
If you have private insurance, watch out for so-called "surprise medical bills." These are unexpected medical bills you receive, typically from a provider that isn't part of your health insurance carrier's network. Ambulance rides can also result in a surprise bill, at an average cost of $940 in 2020.
Surprise bills can be unusually high because the provider and your insurer do not have a negotiated rate, and the provider can bill you for whatever amount the insurer didn't pay. This practice is commonly referred to as balance billing.
Note
Some states have laws to protect consumers from surprise bills. A federal law, the No Surprises Act, went into effect on Jan. 1, 2022.Note that if you have Medicare or Medicaid, you should not receive surprise bills because those programs forbid balance billing.
2. Try to Negotiate It Down
Even if your bill is accurate, you may be able to negotiate for a lower amount. A 2021 LendingTree survey found that three-quarters of respondents had attempted to negotiate a medical bill and 92% of that group had succeeded in getting their bill reduced or dropped altogether.
As that success rate suggests, hospitals and medical practices are accustomed to patients lobbying for discounts and are often prepared to reduce bills if asked. You'll make the most persuasive case if you can show that paying the full amount would be difficult or impossible based on your current financial situation. There is certainly no harm in asking.
Under the Affordable Care Act, nonprofit hospitals (which account for most hospitals) must make financial assistance available to low-income patients. They must also post their policies online. If you qualify, you could be eligible for a full or partial reduction of your bill. This assistance is sometimes referred to as charity care.
One way to try to lower your debts is to use a debt relief company. These companies can negotiate with creditors on your behalf to lower the amount you owe. However, many debt relief companies charge hefty fees that may reduce the amount you'd save in the long run. Make sure you research debt relief companies and ensure any company you work with is reputable.
3. Ask for a Workable Repayment Plan
The medical provider may also agree to spread out your payments in a way that will be manageable for you. (Before you ask, try to have a number in mind that takes into account your income and other regular expenses.)
According to the National Foundation for Credit Counseling, many providers will arrange for a low- or no-interest repayment plan. Remember that this is in the provider's interest as well as yours; better to get their money over a period of time than never to see it at all.
If you have enough money to cover your medical debt, you may be able to persuade the provider to give you a discount for paying the bill by cash or check. Not only will the provider receive its payment right away, but it will also avoid credit card processing fees.
4. Seek Help
There are a variety of services you can draw on for assistance with medical bills, some free, some not. For example, there are individuals and companies that you can hire to negotiate on your behalf. Groups like the Alliance of Claims Assistance Professionals, the Alliance of Professional Health Advocates, and the National Association of Healthcare Advocacy have online directories that you can use to search for one near you.
The National Foundation for Credit Counseling can direct you to a member agency that will offer advice on managing your debts. Some credit counseling agencies will also help negotiate a repayment plan with creditors.
In addition, there are philanthropic foundations and other organizations that help patients pay medical or prescription drug bills. One of them is the PAN Foundation, which also provides a list of other funding sources on its website.
5. Prioritize Your Debts
Chances are that you have other financial obligations besides your medical debts. If you don't have enough income or other resources to cover them all, you'll need to prioritize. Your most urgent debts probably involve keeping a roof over your head—monthly mortgage or rent payments, utilities, and so forth. Medical debt may be lower on the list.
A credit counselor, if you see one, can help you prioritize your debt payments. Even if you are unable to pay certain creditors, be sure to reach out to them and let them know what is going on.
6. Be Aware of the Impact on Your Credit
Unpaid medical debts, like other missed bill payments, reflect poorly on you and can have a negative effect on your credit score. However, that will not happen immediately, so you have time to settle your debt and stay in good financial health.
According to Equifax, one of the three major national credit bureaus, most healthcare providers do not report late bill payments to it or its two main competitors (Experian and TransUnion), so they typically won't be reflected on your credit reports or factor into your credit score.
But if the provider turns your debt over to a collection agency, that agency may report the information to the credit bureaus. Fortunately, under a rule enacted by the credit bureaus in 2017, it will not appear on your credit report before another 180 days have elapsed. That gives you additional time to pay the debt or negotiate a plan to do so.
Beginning July 1, 2022, fully paid medical debt is no longer included on credit reports from Equifax, Experian, and TransUnion, even if it was listed on your report for several years. Additionally, the current six-month time period when medical debt first appears on your credit report was lengthened to one year.
In April 2023, all three credit reporting bureaus removed any medical debt with an initial balance of less than $500 that had been sent to collections from credit reports. Equifax reported that this change expunged nearly 70% of accounts in collection from credit reports.
7. Avoid Taking on Credit Card Debt to Pay Your Medical Debt
Putting your medical bills on a credit card is usually a mistake unless you're sure you can pay off the credit card bill in full before interest begins to accrue. With credit card interest rates averaging 21.59% as of Q1 2024, you'd simply be postponing the eventual reckoning and racking up a lot of additional debt in the meantime. Plus, if you're delinquent in making at least the minimum monthly payment on your credit card bill, that will go on your credit report right away.
One exception might be responsibly using a new credit card with a 0% interest introductory offer or putting the debt on an existing card and then transferring your balance to such a card.However, if your financial situation is such that you're struggling to pay medical bills, you may not qualify for one of these cards. You'll want to have a plan in place to pay it down so you don't incur more debt with higher interest rates.
Generally speaking, your best option is to pay your medical bills with a check or debit card—and make sure you get a receipt. You'll need a receipt if you want to obtain reimbursem*nt through either a flexible spending account or a health savings account, if you have one. You'll also want to be able to prove that you paid in case the provider bills you again for the same services.
8. Consider Other Types of Loans
If you own a home and have some equity in it, taking out a home equity loan or line of credit could be an option for paying your medical debt. These loans tend to have relatively low interest rates and can be repaid over a period of five to 20 years. The downside is that they're secured by your home, and you could lose it if you're unable to keep up with the payments.
Another option for homeowners is a cash-out refinancing. Essentially, you pay off the balance of your current mortgage with a new mortgage for a higher amount, based on your equity in the home. You can then take the difference between the two amounts in cash and use it for any purpose you wish, including paying off debts. A downside here is that you'll most likely have higher mortgage payments on the new loan.
Still another possibility is a personal loan. These loans are generally unsecured, so you're not putting your home at risk. However, they carry higher interest rates than secured loans, and you may not qualify for one—or one at an affordable interest rate—if you already have a substantial amount of debt. Some lenders offer personal loans specifically for paying medical bills, often referred to as medical loans.
While it's best to leave your retirement accounts untouched until you actually retire, if you have a 401(k), IRA, or similar plan, it could be a source of cash for paying off your medical debt. You'll owe income tax on any money you withdraw, but you can avoid the 10% penalty on withdrawals before age 59½ if your unreimbursed medical expenses exceed a certain percentage of your income.
9. Declare Bankruptcy if You Must
A 2019 study found that close to 60% of all consumer bankruptcies involve medical bills. But bankruptcy has serious financial consequences for years to come, affecting your ability to get new credit, the rates you might pay for insurance, and even whether some employers will hire you. So it should generally be one of the last options for you to consider.
If bankruptcy appears to be your only recourse, you'll need to follow a series of steps prescribed by law. One of them is completing a credit counseling session with a government-approved credit counseling agency and obtaining a certificate to file with your bankruptcy petition. The counselor will review your situation and discuss possible alternatives to proceeding with the bankruptcy.
The federal bankruptcy court closest to you can provide you with a list of approved counselors. If you decide to go ahead with filing for bankruptcy, you will most likely need to hire a lawyer.
What Is the Minimum Monthly Payment on Medical Debt?
There is no official minimum monthly payment on medical debt. Your minimum monthly payment can be whatever you and your medical provider's billing office agree to. Ideally, your payment will be high enough to repay the debt over a reasonable period of time and low enough that you'll still be able to cover all of your other regular bills. Also, try to get the billing office to forgo charging interest on your outstanding balance or at least give you a low interest rate.
Can You Negotiate Medical Bills Beforehand?
Yes, with the exception of unexpected, emergency procedures, you can sometimes negotiate medical bills before the service has taken place. Ask the provider what the procedure will cost, and if you can't afford to pay that much, say so. The provider may offer you a discount. You can also call around to find out what other providers in your area charge for that service or consult a resource like Healthcare Bluebook.
Are Medical Credit Cards a Good Deal?
Medical credit cards, which you may see brochures for in your doctor's waiting room, can be a good deal for medical providers because they assure them of getting paid. However, they aren't necessarily a good deal for patients. Medical credit cards are very limited in where they can be used and what they can be used for, and their interest rates can be as high as those on any other credit card.
The Bottom Line
Medical debt can add up quickly, but you have a number of options for dealing with it. Most importantly, concerns about medical debt shouldn't cause you or a family member to delay seeking the care that you need. Medical debt can be difficult to manage, but you can take the right steps to stay on a healthy financial path.
