Medical debt: Right methods to repay it

Medical bills are not really pleasant bills to pay. Apart from physical pain caused by the medical condition, staggering medical bills take a toll on your financial, emotional, and mental health.

medical debt
Medical debt has also made people avoid medical care. This has made people develop complex and severe untreated physical and mental health problems.

In this article

According to a federal government report, credit reports show $88 billion in medical debt last June. Two-thirds of medical debt has occurred because people didn’t have the time and or the opportunity to find lower-priced options because of an acute medical emergency. It became worse with higher prices for uninsured people or if the provider wasn’t in the insurance network. Even in-network, prices are usually broadly different in different facilities or different departments of the same facility. The Consumer Financial Protection Bureau says around 20% of U.S. households have medical debt. Youngsters and low-income individuals of all races and ethnicities usually bear this obligation.

Medical debt has also made people avoid medical care. This has made people develop complex and severe untreated physical and mental health problems. As a result, many people face adverse financial consequences like account garnishment, home liens, and bankruptcy. 

What can be done?

How you pay back medical debt depends on several factors, including whether a collection agency has already gotten involved.

Suppose you have medical debt that has not gone to collection. In that case, you can try getting an itemized bill and go for a thorough cleaning or inspection for mistakes. In case the bill has inaccurate information, you could appeal it. And if you believe your insurer must have paid more of the bill, you should appeal to the insurer.

Assistance programs

When you’re sure that the bill is accurate, you must look for different financing sources to support you in paying the debt. One of the best programs available out there is the assistance program. Different states offer unique programs. Some states have programs for deadly health conditions of children, some states have brain injury programs, and other state-specific programs like Massachusetts Health Safety Net. Spend time researching your state’s programs and checking if there are programs specific to your medical condition.

You can also seek help from charity care or financial assistance no matter what state you are in through Dollar For, a not-for-profit organization that does not charge a fee to help people implement hospitals’ charity care policies. These policies are needed for hospitals to retain their nonprofit status.

Dollar For states that the law states that hospitals need to post their financial assistance policies online and must accept applications for debt forgiveness. Hospitals generally provide charity care to lower or middle-income uninsured or under-insured patients.

If you are insured, be confident there is no balance billing (when you are billed a high price for the service provided by somebody outside your network, even though the facility and your primary provider are in the network). Balance billing is now illegal by the No Surprises Act. Thus, if you are not sure whether the act covers your bill or not sure how to proceed if you find the act has been violated in your case, you need to go to the federal Department of Health and Human Services website to submit a complaint. Suppose the surprise billing involves Medicaid or Medicare. In that case, you need to reach out to the state or federal agency administering the insurance program. If you are eligible and need more help, you can consult a legal aid attorney.

Keep them informed 

Suppose your income is only Social Security, or you’re simply financially insolvent. In that case, you must ensure that the medical provider is aware of it because you are possibly considered judgment proof — which means that if your provider sued you and won, the provider will not be able to collect any money. If the provider is aware of this, the provider might be willing lower or even cancel the debt. 

Medical debt is different but doesn’t require the top priority

Medical bills are comparatively a low-priority debt when looking at rent, utilities, auto loans or leases, child support, etc. Immediate necessities like food, housing, and transportation are higher priorities since they are essential for survival. Other payments like court-ordered payments like criminal justice debt or child support should also be paid to avoid legal consequences.

Don’t think that you are ineligible for treatments when you have medical debt

Federal law requires all hospitals to offer necessary emergency or labor and delivery services regardless of the patient’s financial status. Medical debt will not be seen on credit reports until six months after the bill is due. Even if the medical debt is shown on a credit report,  nearly all the latest credit scoring systems don’t consider medical debt equivalent to other types of debt as it’s not viewed as predictive of creditworthiness. But make sure that your institution uses the credit scoring system that has this facility.

But the three major credit reporting agencies have declared that almost all medical debt won’t be included in credit reports for a year, effective July 1, 2022. The time will also be increased from six months to one year so that you can work with insurance and healthcare providers to pay back the debt before it appears on their credit files. Later, Equifax, Experian, and TransUnion will not include medical collection debt under $500 on credit reports in the first half of 2023.

Don’t fall for the credit card marketing

Don’t pay off medical debt by signing up for extra conventional debt by borrowing more from existing credit cards or other sources. You must have seen medical credit cards being marketed as well. But these offers come with high-interest rates and also remove legal protections from medical debt that are not available for credit card debt in the fine print. It would also become difficult to apply for financial assistance or charity care.

Dealing with a medical debt collector

If a debt collector has contacted you, check his/her license to verify the legitimacy. The Consumer Financial Protection Bureau has a lot of information on debt collectors.

You can partly restrict the contact with a debt collector by writing a “stop contact” or “cease” letter. The debt collector will just inform you about the legal steps they might take. This, however, applies only to collection agencies, but creditors also might respond positively to such requests. You can find a sample letter on the NCLC website.

You can also determine the types and modes of contacts like emails or calls you want to be stopped. You can restrict the number of times and places you may be contacted. Suppose a collection agency attempts to collect your medical debt. In that case, you should get an itemized bill to verify the debt is accurate.

If you believe the information given about the debt is wrong, you could write a dispute letter. Collectors are legally instructed to provide accurate information about the alleged debt. And you have the right to dispute it. If you have no idea about the debt, you must not pay until you get more information.

If you are eligible for state or federal government benefits, you need to let the collector know. 

You could also negotiate with the collector and try to get a payment plan and even lower the debt amount. The debt collector cannot give your medical debt details to the three credit bureaus for 180 days.

Know your rights

If the debt collector has sued you, do not ignore the notice. Seek legal advice and be aware of your rights so that the collector doesn’t take any advantage of your ignorance.

Bankruptcy 

If every method fails, you can look for filing bankruptcy after seeking enough legal advice for taking the serious step.

This page is purely informational. Line does not provide financial, legal or accounting advice. This article has been prepared for informational purposes only. It is not intended to provide financial, legal or accounting advice and should not be relied on for the same. Please consult your own financial, legal and accounting advisors before engaging in any transactions.

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