How to Get Out From Under Medical Debt
The good news first. More than 16 million previously uninsured Americans are now covered by Obamacare. The bad news: It sure doesn’t cover medical debt. And 70 percent of us are still struggling to get rid of it, according to a new study by the Kaiser Family Foundation and The New York Times.
One big reason? Health care plans that covered just about everything are now all but extinct. “High-deductible plans, often coupled with poorly funded Health Savings Accounts, are becoming more common,” says Thomas Nitzsche, a credit educator at Clearpoint Credit Counseling Solutions. Paying off medical debt is the leading cause of financial hardship for one in 10 of his clients.
If you’re drowning in medical debt, help is available. Don’t ignore or avoid it — follow these tips to take action and get back on your feet.
Review Your Medical Bills Closely
Thirty to 80 percent of medical bills contain errors, so take time to check the ones you’ve received. Look for common errors such as duplicate charges for the same procedure or medication, charges for canceled tests or procedures, and balance billing, says Ruth Linden, Ph.D., president of Tree of Life Health Advocates in San Francisco.
“Whenever you receive a bill from a health provider, or an explanation of benefits from your health insurer, open it immediately and review it carefully,” says Kevin Gallegos, debt expert and vice president of Phoenix operations with Freedom Financial Network. “Make sure you are not being billed twice for a service, paying a charge that insurance should cover, or [being charged] for services you didn’t receive.”
If you think there’s a mistake or don’t understand a charge, call your provider’s billing department or your insurance company right away, Gallegos says.
Negotiate With Your Doctor, Hospital, and Insurance Company
If you act swiftly, medical bills are often negotiable. Doctors and hospitals are likely to allow you to defer payments for a few months or to negotiate an interest-free payment plan that lets you contribute a small amount toward each bill every month, Gallegos says. “If you don’t have insurance, ask for a cash-payer price,” he adds. “Some providers will agree to charge the discounted fee that Medicare or Medicaid pays.”
You can also request financial aid for balances due at a hospital. “It will buy you more time and possibly allow for longer repayment terms — usually at 0 percent interest — even if denied,” Nitzsche says. You might even try asking for the whole balance to be wiped. “Some doctors will forgive a patient’s balance if the patient makes a solid case requesting forbearance, in writing,” Linden says. “It never hurts to ask.”
And don’t take your insurance company’s decisions to be final. If your insurer denies coverage for a treatment, prescription medication, or other services, “you can appeal the decision,” Gallegos says. “Talk to your doctor’s office. Sometimes they can work with the insurance company to resubmit the request with a letter explaining the need for the particular service or treatment. Alternatively, they might be able to use a different, more accurate billing code.”
Hire a Medical Billing Advocate
If you can’t handle your medical bills or they are extremely complicated, find a billing advocate. Linden helps her clients get financial assistance from hospitals and negotiates with hospitals and medical collections agencies on her clients’ behalf. Her firm recently negotiated with six providers and reduced the client’s debt by more than 65 percent.
As for price? Good news: “Most billing advocates charge on a contingency basis, which means that consumers pay a percentage based on the amount of money saved by the advocate,” Linden says.
Stay on Top of Your Credit Score
More than 43 million Americans have medical debt on their credit reports — and 15 million of those people have otherwise flawless credit, according to the Consumer Financial Protection Bureau. Thankfully, it’s getting easier to keep medical debt from wrecking your credit score.
“Outstanding debt of any type can have an impact on your credit score, but recent changes from FICO are making a difference in how medical debt is treated,” Gallegos says.
In 2015, FICO announced that paid-off medical bills will no longer affect credit scores and that outstanding medical debt will not be weighed as heavily as credit card or other kinds of debt. Finally, the latest version of the FICO formula ignores collection accounts smaller than $100.
Check your credit report to make sure the new rules are being applied to you.