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How to handle medical debt in 8 steps

Follow these steps to lower your bills, monthly cost or handle collections.

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Medical debt can be a lot easier to deal with than other types of debt. There are several steps you can take to lower your bill before it even shows up on your credit report. And if you reach out to your healthcare provider within a few months of getting a bill you can’t afford, you might even be able to get it dismissed entirely.

After it goes to collections, your credit will be damaged and it can be harder to handle. But it’s still possible to negotiate down or come up with a more affordable payment plan.

How to handle medical debt

These steps can help you dig your way out of medical debt. Which step you start with will depend on how far along you are.

  1. Make sure your bills are accurate
  2. Contact your insurance company
  3. Negotiate down the costs with your provider
  4. Ask for a payment plan
  5. Consolidate your debt
  6. Apply for financial assistance
  7. Sign up for Medicaid
  8. Use a medical bill advocate

Step 1: Make sure your bills are accurate

Go over your medical bills to make sure the charges match up with the care you received. In some cases, you might have to request an itemized receipt to go over the costs with a fine-toothed comb.

If you see any line items that look out of place, call your provider and ask for clarification. This alone can make your medical bills more affordable.

Step 2: Contact your insurance company

Now that you confirmed your bill is correct, it’s time to make sure your insurance company is covering everything it’s supposed to. Ask them to rerun your bill to make sure that it didn’t accidentally leave out any costs that are covered. This step is especially important to take if there were any errors on your original medical bill.

Step 3: Negotiate down the costs with your provider

Negotiating down the cost might be easier than you think. Many providers automatically charge a “chargemaster rate,” which is the price it charges insurance companies. In some cases, they may have a range of prices for one procedure.

Call your provider and be upfront: Tell them you can’t afford the bill and ask what they charge different insurance companies, Medicare, Medicaid and uninsured individuals. Then ask for the lowest price. You can also use the healthcare bluebook to compare what other providers are charging for similar procedures and bring it up if your provider’s prices appear to be higher than average.

Also ask about discounts for different payment methods. You might be able to get a discount for paying your bills within a certain period of time. And some hospitals might waive some of the cost if you pay in cash.

Step 4: Ask for an interest-free payment plan

If there’s no way you’re going to be able to cover that bill all at once, ask for a payment plan. Many are willing to break up your bill into installments, usually without interest. This is more common with hospitals than with private practices — and sometimes you’ll even find information about your payment plan at the bottom of your bill.

In some cases, these will be based on a loan term. And if your salary is low enough, you might be able to qualify for an income-driven hardship plan.

Step 5: Consolidate your debt

When your healthcare provider doesn’t offer a free repayment plan, a consolidation can be your next best option. You have two main options: A debt consolidation loan or a balance transfer credit card.

  • Debt consolidation loans. These are personal loans that you can use to break up your debt into installments and avoid going into collections. Typically you’ll have between three to five years to pay it off with a rate of 4% to 36% APR.
  • Balance transfer credit cards. These credit cards come with a 0% promotional APR for around 12 to 18 months. It’s a better deal than a loan if you can pay off your debt during that time. But after the promotional period, these are usually more expensive than loans.

Generally, you’ll need to have a good credit score of at least 670, have a steady job and few other debts to qualify for a competitive deal. It’s also best for debts that are worth less than half your annual income — otherwise it’s likely you won’t qualify. Usually personal loans don’t go any higher than $100,000.

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Step 6: Apply for financial assistance

When a payment plan just won’t cut it, look into your financial assistance options.

Charity care

Also known as a financial assistance policy charity care programs offer reduced rates for low-income patients, especially at hospitals. Also can halve your bill or even eliminate it completely. Requirements vary depending on where you live and your provider. But typically they’re less strict than Medicaid.

Nonprofit assistance

There are many charities and nonprofits dedicated to helping families in need — especially those with children — handle medical debt. Some good places to start include CancerCare Copayment Assistance Foundation, the Patient Access Network Foundation and the HealthWell Foundation.

Step 7: Check if you’re eligible for Medicaid

If you’ve been eligible for Medicaid for the past three months, you may be able to use it to cover your bills retroactively — as long as your bills are from that period. While it varies depending on your state, you can often qualify as a single person making around $15,000 a year — sometimes more.

Enrolling in Medicaid can also help you avoid expensive medical bills that you can’t afford in the future.

Step 8: Use a medical bill advocate

A medical bill advocate is a professional who will negotiate your medical bills down on your behalf — for a fee. They can be a great last resort before your bills go into collections, but they can also be costly. You can start your search for a legitimate advocate with the Medical Billing Advocates of America.

6 tips for handling medical debt

  • Don’t ignore your medical bills. You have much fewer options for getting out of debt if you let your bills go to collections — plus it’ll damage your credit. Start dealing with it as soon as you can and you might be able to significantly reduce it.
  • Make sure you have a bill, not an explanation of benefits. Often you’ll receive a letter from your insurance company before you get the bill explaining your potential charges. If you don’t have your bill yet, you still have time to negotiate the costs — but you aren’t on the hook for anything yet.
  • Don’t pay it off with a regular credit card. Credit cards have higher rates than most other types of credit. Unless you’re putting it on plastic for the points and plan to pay it off right away, you can quickly start racking up interest charges.
  • Weigh medical bills against other debts. Medical debts aren’t as damaging to your credit as other types of debt, and might not come with interest at all. Make sure you aren’t neglecting credit cards and loans to pay off that medical bill.
  • Use a debt repayment strategy to handle multiple bills. Use the snowball or avalanche method to prioritize which bills to focus on first to get out of debt without getting overwhelmed yourself.
  • Don’t give up. Persistence is key. If you can’t negotiate down your bills the first time, call again and try with someone else. You might be more successful another time around.

How can I handle medical debt from coronavirus treatments?

Outpatient treatment and hospitalization due to the coronavirus are both pricey, and not all treatment costs are covered by insurance, especially if you received care from an out-of-network provider. Fortunately, these treatments are no different than any other medical care. Ensuring your bills are accurate, working with your insurance provider and using a bill advocate are all legitimate ways to deal with any coronavirus-related medical debt.

Hospitals and doctors offices also likely have hardship programs and payment plans available for patients who are in need, and there are a number of financial assistance programs available during COVID-19 to help with other debt you might have.

How to deal with medical debt collectors

Typically it takes around 90 days before your healthcare provider sends your debts to collections — though it could be as fast as 60 days and as long as 180 days. Once your debts are in collections, you’ll have fewer options than before — but there are still steps you can take to manage the debt.

Know your rights

If your bill has gone to collections, you still have rights. Read up on the Fair Debt Collection Act, which outlines what is and isn’t allowed during the debt collection process.

What is the statute of limitations on medical debt?

A statute of limitations (SOL) is the period where legal action can be pursued. For medical debt, this is the time frame a collection agency has to sue for money you owe on an outstanding bill.

The SOL begins on the date of your last payment, and there are certain actions you can take that resets the clock. Making a payment or even acknowledging that you owe money may restart your debt’s SOL, so consult an attorney to discuss your specific situation.

Find out the statute of limitations on debt in your state

Make sure you’re not falling for a scam

Not all debt collection is aboveboard, which is why knowing your rights is critical. Medical debt collections fall under the same scope as all other collections. This means a medical debt collector can’t call you outside of normal hours, threaten you with jail time or force you to pay immediately.

There are also a few scams you should be aware of:

  1. You don’t recognize the account. If a collection agency contacts you about a procedure or doctor’s visit you don’t have any record of, it might be a scam. Request proof of the bill and check it against your own records. Even if it’s legit, if it’s been over seven years, the debt might be past the statute of limitations in your state.
  2. You can’t find any information on the collection agency. It’s not uncommon for medical offices to sell debt to a collection agency, but if you can’t find any solid details on the one contacting you, it could be a scam. It’s best to call your provider and ask where it sold your bills so you can confirm the debt collector is legit.
  3. You’re pushed to pay as soon as possible. Scam collection agencies typically want you to pay quickly — usually with threats of jail time or lawsuits. Take note of this and the name of the collection agency, and cease contact until you’re sure the collectors you’re dealing with are the real deal.
  4. You’re asked to pay via wire transfer. Legitimate debt collection agencies usually only accept payment via check, debit card or credit card — methods that can be easily traced. If you’re asked to pay through cash or wire transfer, you may be dealing with a scam collector.

Ask for a payment plan

Many debt collectors also offer payment plans if you genuinely can’t afford to pay it off — though negotiating one can be tougher than working with your provider. Make sure to get the payment plan in writing and record all phone conversations if possible. This can help prevent the collections agency from starting collections again

Hire a professional to negotiate on your behalf

If talks aren’t going anywhere with your debt collector, you might want to consider signing up for debt settlement. With debt settlement, you hire a professional to negotiate down your bills, usually in exchange for paying a reduced fee all at once.

Typically you owe a percentage of your savings after your debt has been settled — and it can be costly. If you decide to go with this option, make sure you’re going with a legitimate company.

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Before you sign up with a debt relief company

Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And they aren’t always transparent about these costs or drawbacks that can negatively affect your credit score. You might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.

Consider alternatives before signing up with a debt relief company:

  • Payment extensions. Companies you owe may be willing to extend your payment due date or put you on a longer payment plan if you ask.
  • Nonprofit credit counseling. Look for free debt-management help from nonprofit organizations like the National Foundation for Credit Counseling.
  • Debt settlement. If you can manage to pay a portion of the bill, offer the collection agency a one-time payment as a settlement. Collection agencies are often willing to accept a lower payment on your debt to close the account.

File for bankruptcy

As a last resort, you can get out of collections by filing for bankruptcy. Medical debt is unsecured, it’s discharged when you declare bankruptcy — just like credit card debt.

If your income and financial situation qualify for Chapter 11 bankruptcy, your medical debts will be dissolved. And if you file for Chapter 13 bankruptcy — which is more common — your medical bills are lumped in with your other unsecured debt as part of your repayment plan.

How does medical debt affect my credit score?

If you have unpaid medical debt that’s been sent to collections, it can harm your credit score — but not as much as other types of debt. And until it reaches collections, it won’t have much of an impact at all.

In fact, medical providers usually can’t move your bills into collections until 60 to 180 days after nonpayment. To learn more, read our guide to how medical debt impacts credit.

Can medical debt be inherited?

It depends on your state, but in many cases, the answer is yes. This is because nearly 30 states across the US have filial responsibility laws, which allow creditors to contact children of the deceased for any medical bills that aren’t covered by estate assets.

Creditors usually have between two to six months to make a claim against the estate. Check your state’s laws and speak with an estate lawyer about your specific situation.

Must read: Am I responsible for my spouse’s medical debt?

If you live in a community property state, you may be responsible for your deceased spouse’s medical debt — even if you didn’t cosign it or act as a guarantor. However, the exact wording of your state’s laws will determine your responsibility. The easiest way to find out is to consult with an estate lawyer.

Bottom line

The first step to conquering medical debt is organizing your bills and figuring out exactly how much you owe. From there, you can start negotiating with your creditors, look into nonprofit assistance programs or refinance your debt with a lower interest rate or better terms.

To compare your options, check out our guide to medical loans or explore more debt relief services.

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