Medical Debt

Medical debt refers to the money owed for healthcare services.

Medical debt is any debt an individual is responsible for after seeking medical care, whether physical or mental health. Below you will find more information on medical debt, how it works, and a few caveats of the American health system related to medical costs.

Can You Get Medical Debt Even With Insurance Coverage?

Yes, it is possible to have medical debt even if you have health insurance. To understand how this happens, comprehending the way that health insurance coverage works is essential. With medical insurance, a company will pay for health care, usually after a deductible, up to a certain point.

For example, let’s say that a person has a $10,000 medical procedure lined up. For their insurance to step in, they will need to pay a deductible (out-of-pocket costs) which, let’s say, is $200. If that insurance company/plan only covers up to $8,000, that person will be responsible for paying $1,800. After the procedure, that person will have to pay $1,800 in medical bills, despite health insurance coverage. Of course, there are exceptions with deductibles when lives are at risk, and a person needs immediate medical care.

The Importance of Your Insurance Plan

Every medical insurance company and plan is different, so it is extremely important to pay attention to the details of yours, so you’ll know exactly what kind of coverage you have. This is essential before signing up for a plan. Another thing to keep in mind is that not all hospitals and clinics accept every insurance type, which means more medical debt to pay. So, try and find a place that takes your health coverage before seeking medical care, if possible.

Options To Repay/ Eliminate Medical Debt

Paying and eliminating medical debt is possible; there are a few ways you can do so:

Pay the Medical Bill in Full

If you are able to, then consider paying your medical or dental bill in full. You should be able to make a payment online, in person, or over the phone.

Payment Plan From the Hospital or Clinic

Most hospitals and private clinics will provide their patients with a payment plan for their medical bills, usually without having to pay any interest. You will usually get a bill with a minimum amount due. If you cannot afford that minimum balance, contact the hospital or clinic, and they may be able to lower that required payment.

Negotiating With Your Hospital or Clinic

When you get a medical bill, you may be able to negotiate the balance with a hospital or clinic, especially if your financial situation doesn’t allow for significant medical debt. One thing to do is to ask for each cost itemized, and you may find that the medical bill amount may go down simply from that. To negotiate a medical bill, you will have to speak to the billing department.

Using a Loan or Credit Card To Pay off Medical Debt

Another option to consider is that many other people who owe medical debt use; taking out a loan or credit card to pay off any medical debts. Sometimes, you may get a more manageable repayment option with a credit card and loan. Or you can use one of these options to pay for health care before receiving treatment if you don’t have access to insurance programs.

Assistance Programs

There are all kinds of assistance programs out there that can help if you are having difficulty affording medical care.

If you don’t already have health insurance, then you should look into Medicare or Medicaid, which the Affordable Care Act introduced to the American healthcare system. Both Medicare and Medicaid provide affordable medical coverage to low-income households (adults and children). Although these programs may not be accepted by several practitioners (as many may prefer private insurance), there are many who do. And although it may not be the best care available, Medicaid and Medicare coverage can at least help those within the federal poverty level to get the basic medical help they need—which can sometimes be life-saving!

When it comes to certain illnesses, you may find specific charities that can provide you with the funding you need to get treatment along with paying for prescription drugs. Head online and begin your search for those charitable foundations; make sure to search at a national, state, and local level for the most resources.

And finally, an option that many Americans use for costly medical care is crowdfunding. Crowdfunding is the process of raising money through online donations. There are several platforms that you can use; GoFundMe is a popular one because it is free to set up and trusted by many people. Once you set up your page and account, anyone on the internet can donate to help you pay for medical care.

What Happens if I Cannot Repay My Medical Debt?

According to several surveys and information, including the 2020 Survey of Income and Program Participation (conducted by the United States Census Bureau), most American adults have medical debt, an average of $250 per adult. For many households, $250 or even $500 can be manageable. However, what happens if the total medical debt they owe is hundreds, thousands, or even hundreds of thousands more, and becomes unaffordable? If you cannot afford to make payments on your medical bills, those bills should not be ignored, as these actions can lead to debt collectors, which can result in garnished wages and court fees if sued. And according to Kaiser Health News, a non-profit organization that focuses on medical journalism, many hospitals have threatened past patients with delinquent debt. The good news is that there are definitely options you can consider:

  • Negotiate with your hospital or clinic to bring down the debt amount or for a payment plan.
  • Look at charitable organizations and assistance programs for help.
  • Consider bankruptcy as a last option. With Chapter 7 bankruptcy, all your unsecured debts, including medical debt, will be discharged.
  • Look into loan options like home equity or personal loans to repay your medical debt.

Does Medical Debt Affect Credit?

In the past, paid-off consumer medical debt would show up on your credit reports; however, that has changed as of July 2022. This change will impact many people because, according to the Consumer Financial Protection Bureau, 58% of debts recorded (as of 2022) in collections were for medical bills.

As of July 2022, paid medical debt will not appear on consumer credit reports. In addition to this, medical collections under $500 will not show up there, and there is an extension in the time that new medical debt in collections will show up on credit reports.

If the unpaid medical debt does appear on your reports because you can’t pay it off before that time frame, it can impact your credit. One way that debt can impact your credit scores is because of your credit utilization and debt-to-income ratio. Having your credit utilization over 30% and your debt-to-income ratio over 40% or so can hurt your scores.

What if I Get a Medical or Dental Bill That Isn’t Mine?

Mistakes happen all the time with medical bills, especially if you share a name with another patient. And so, if you receive a bill in which you know you did not seek care, definitely call the hospital or clinic to clarify things. If there is incorrect information on your credit reports from any of the bureaus, be sure to go through the steps of fixing those errors and also look into whether your identity is safe. Keep in mind there are also scams out there, so before you pay any medical bill, verify that the health costs are legitimate.

Survey of Income and Program Participation (SIPP) | US Census
As of July 1, your medical debt may no longer hurt your credit score—here’s why | CNBC News
Sick and struggling to pay, 100 million people in the U.S. live with medical debt | NPR
Hundreds of Hospitals Sue Patients or Threaten Their Credit | Kaiser Health News

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