Strategies for Managing Medical Bills to Avoid Long-Term Financial Struggles

A big medical bill can cause panic for anyone who has experienced medical debt.

Disregarding your debt can negatively impact your long-term financial stability.

Jeff Smedsrud, co-founder of HealthCare.com, stated that he has observed many instances where individuals receive a bill but disregard it for six months. It is only when they receive a collections notice that they address the matter.

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A report from the Consumer Financial Protection Bureau indicates that approximately 58% of bills in collections and on credit reports are medical bills. Additionally, about 43 million credit reports contain collections for medical debt, according to the research.

Medical debt can negatively impact credit scores, as evidenced by a survey from Healthcare.com, which found that 52% of millennials and 48% of Gen Xers reported that medical debt had harmed their credit.

If you have a low credit score, it can be challenging to obtain loans or favorable interest rates, regardless of whether medical debt is included in your credit report or not. While some credit scores may not penalize medical debt as severely as others, lenders typically treat all debt in collections the same if it appears on your credit report. Even if you pay off a debt, it can remain on your credit report for up to seven years.

To prevent a series of problems, promptly address the debt upon receiving the bills.

Caitlin Donovan, spokeswoman for the National Patient Advocate Foundation, advised assuming the total on a bill is incorrect.

Donovan stated that approximately half of medical billing errors occur when patients are directly billed instead of the charges being submitted to insurance.

Ensure that your insurance has been billed before paying an outsized bill from a care provider, such as a doctor or hospital.

Your insurer will provide you with an explanation of benefits (EOB) detailing what your insurance plan is covering for the care you've received.

Donovan stated that the tool is useful. After receiving the EOB indicating that the provider has correctly submitted to your insurer, it informs you of the amount you are required to pay.

Hospitals may offer financial assistance to those who meet certain eligibility requirements, which can vary among facilities and states. If you don't qualify, try negotiating a lower amount or entering into a payment plan agreement.

"It's crucial to determine your monthly budget before committing to a $500 payment plan, as you don't want to end up in a financial bind," Donovan advised.

If you pay off your debt slowly with a credit card, you could end up paying significantly more due to the average interest rate of 16.17%.

Smedsrud of HealthCare.com stated that you could potentially increase $10,000 to $15,000.

Services exist that can negotiate your bills on your behalf for a lower amount.

Smedsrud stated that they possess expertise and could recognize that if the medical service had been coded differently, it would have resulted in less cost.

He stated that the billing office would have to choose between zero payment or a lower amount.

Smedsrud stated that these services may charge a fee for the portion of savings they generate, but you should never be required to pay upfront.

It's worth inquiring about the cost of medical debt when communicating with a collection agency, as these agencies may resell the debt to other firms if they are unable to collect on it initially, and its value can decrease each time it is sold.

Smedsrud advised that the consumer should inquire from the agency about the amount they paid for the debt, as it could have been originally worth $10,000 but may have been resold and reduced in value.

Before receiving medical services, inquire about your cost share and request a discount if it is unaffordable.

Smedsrud advised against underestimating the willingness of providers to negotiate and offer discounts on the cost of smaller procedures that are not part of a larger system.

You may be able to find a more affordable cash price or a payment plan for the service or procedure.

Historically, one of the biggest reasons for unexpected large medical bills was unknowingly using out-of-network providers in your care, resulting in bills that your insurance may not have fully covered.

The No Surprises Act is a new federal law aimed at preventing unexpected charges, but consumers should remain vigilant for billing errors.

A new federal law could benefit consumers in controlling their healthcare costs by requiring hospitals to make their standard charges, including negotiated rates with insurance companies and discounted cash prices, publicly available on their websites. This would enable consumers to compare prices and make informed decisions about their healthcare services.

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