How to Finally Pay Off Your Medical Debt
Millions of people struggle to pay off medical bills every day. According to a 2016 survey from the Kaiser Family Foundation and The New York Times, 26 percent of U.S. residents – both insured and uninsured – face serious financial challenges due to medical bills. Thanks to deductibles, copays and other costs, even those who … Continue reading How to Finally Pay Off Your Medical DebtThe post How to Finally Pay Off Your Medical Debt appeared first on MagnifyMoney.
Posted — UpdatedThanks to deductibles, copays and other costs, even those who had insurance were forced to:
- Spend less on food, basic household items and clothing (75 percent)
- Use up most or all of their savings (63 percent)
- Take on more hours or work a second job (42 percent)
- Add to credit card debt (38 percent)
Unpaid medical bills are generally sent to collection agencies — some after only 30 to 60 days of nonpayment.
The idea was to give consumers sufficient time to deal with insurance payment delays and other issues.
Despite this change, it’s still unwise to sit back for half a year, hoping your own medical debt will somehow resolve itself. Should it eventually wind up on your credit report, it could stay there for up to seven years and hurt your credit score, making it harder to qualify for credit in the future. You could also be sued and maybe even have your wages garnished, in a worst case scenario.
Here are some steps you can take to finally start tackling your medical debt.
In this post, we’ll cover:
Catch errors early
The power of negotiating
Use a 0% credit card
Take out a personal loan
Find extra cash for medical bills
Learn More
Can Medicaid help?
Should you crowdfund your debt?
Catch errors early
If the debt was recently incurred, your initial medical bill(s) might include the phrase “insurance pending.” Don’t make any payments until all benefits have been applied.
For new and older bills alike, make sure you’re being charged correctly. For example, some offices still mistakenly bill for preventive care that should be fully covered under the Affordable Care Act.
Other mistakes are the result of human error, such as entering an incorrect billing code. If you’re being charged for a service or treatment you don’t think you received, contact the billing department for an explanation. If any errors are determined, ask for a new itemized statement.
To the average consumer a billing error might be invisible, such as being charged for individual services vs. “bundled” ones. If your healthcare debt is extensive, consider hiring a medical billing advocate. This person understands the nuances of medical costs and can also help you work out a solution with the healthcare provider, such as writing off a portion of the debt (more on that below).
The power of negotiating
Suppose you and/or the medical billing advocate have fixed any errors but you still can’t afford the remainder. Most hospitals have programs to reduce some (or even most) of the costs for patients who have trouble paying.
Contact the billing department and ask to talk with a supervisor, says Martin Lynch, a certified credit counselor and Director of Education and Compliance Manager at the nonprofit Cambridge Credit Counseling in Agawam, Mass.
Then suggest one of these solutions:
- You are willing to pay 25 percent of the balance and get the rest written off. The representative will likely reject this idea, but it’s a starting point for negotiations. (If you’d be able to pay your share all at once or fairly quickly, say so.)
- You will pay a lump sum upfront (as much as you can afford without destroying your budget) and then arrange a monthly payment plan.
- Either plan would be contingent on having the interest waived and any late fees or other charges removed from the balance.
The point isn’t to dodge your obligation, but to be realistic about what you can afford.
“Don’t low-ball, thinking you can get a great deal. They provided services in good faith and need to be repaid in some fashion,” Lynch says.
Use a 0% credit card
Before you do that, create an ironclad plan to pay the card off – and make sure the plan works with your current budget. Once that promo period ends, regular APR charges will apply.
Take out a personal loan
If you qualify for a loan with a better rate, take it and pay off your medical debt. After that, make it a priority to repay the personal loan. Think of the debt as an enemy.
Find extra cash for medical bills
Look for better deals on insurance and phone/Internet, and throw the savings at your debt.
Do a “spending freeze.” Choose to do without one or two things for a set period of time. For example, you might give up a month’s worth of Friday night happy hour meet-ups with friends in favor of Netflix and snacks at home.
Make lunch and/or coffee. Wait until you see what a brown bag and travel mug can save you in a month’s time.
Every extra dollar you put toward the balance is a victory in that financial battle. People who take charge “realize they are in control and can make this change very quickly,” Skeels says.
Learn More
Can Medicaid help?
If your medical debt is relatively recent, use the link above to find out if you are eligible for retroactive coverage.
Should you crowdfund your debt?
While some medical debtors have decent success on sites like GoFundMe and IndieGoGo, you shouldn’t count on it. A study from the University of Washington found that 90 percent of GoFundMe medical campaigns don’t hit their targets; some don’t get anything at all.
If you do go this route, strong marketing and social media skills will improve your chances.
The Internal Revenue Service has not issued specific tax guidelines on crowdfunding. According to the Block Advisors tax preparation company, crowdfunded donations for medical bills and other “life event” causes are likely to be considered gifts, rather than income, and possibly not taxable.
The bottom line
Your medical debt is more than a heavy psychological burden. If you don’t do something about it, you’ll pay a lot of unnecessary interest and wind up with a lower credit score and, maybe, a lawsuit.
No doubt about it: Debt stinks. Get proactive about vanquishing it. Take a positive attitude toward the process, Cygan says: “I am in control of my money and my future financial security.”
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