Medical debt is a growing problem across the U.S., as the population ages and healthcare costs continue to mount. A recent analysis of Census Bureau data conducted by NerdWallet revealed that medical costs increased by 34% between 2007 and 2017. The impact of those high costs is widespread: according to the Urban Institute, 18% of U.S. households currently have at least one medical debt in collections.
The Special Challenge of Medical Debt
While many types of debt are approaching crisis proportions across the U.S., medical debt differs from most other forms of debt. Some of the key differences include:
The fact that medical care for significant or ongoing issues is unaffordable for a significant percentage of the population
- The non-discretionary and time-sensitive nature of medical needs
- The fact that large medical debt often goes hand-in-hand with lost work time
- Medical debt often impacts people who have scrupulously avoided taking on debt and carefully managed their finances
Medical debt often creates a sense of urgency, for a variety of reasons. Remaining in good standing with medical providers is often critical, as the debtor or a family member may require ongoing car. Large medical debt is stressful, and many people plagued by medical debt are unaccustomed to carrying large debt or having past due balances.
Unfortunately, this sense of urgency can lead to questionable decisions about managing medical debt, and those decisions can make a bad situation worse.
Common Mistakes in Medical Debt Management
People under pressure to pay medical debts face many pitfalls. Two of the most common mistakes involve overpromising and shifting the debt to credit cards.
When a medical facility or debt collector is pressing for payment, it’s easy to make short-sighted decisions. Don’t let an aggressive collector push you into making a payment you can’t afford or entering into a payment plan that isn’t sustainable. The last thing you need is to throw the rest of your budget into chaos, creating additional stressors and pressure points.
Using credit cards to pay medical bills may seem like a simple and obvious solution, but can easily backfire. When you pay medical debt with a credit card, you are typically transforming low-interest or no-interest debt to high-interest debt. That means it will take longer to pay off the debt and you’ll end up paying more. And, if you run into trouble making a payment on time, late fees and potential interest rate hikes can make that debt even more expensive.
In addition, shifting a large balance to your credit card reduces available credit, which can have a significant impact on your credit score. And, shifting your balance to a credit card can cut off other, more beneficial options, such as requesting assistance from a hospital or discounts from other providers.
Managing Medical Debt is Different
The nature of medical debt introduces some challenges—you typically can’t budget for your medical care and put off the procedure until you can afford it. But, there are also benefits and options available for medical debt that typically aren’t for other types of debt. For example:
Most hospitals offer financial assistance programs, and may write off some or all of your debt if you demonstrate that you truly can’t afford to pay it
If you don’t have insurance or have a large post-insurance balance, you can often negotiate the cost
Credit reporting agencies have implemented a 180-day buffer period before past-due medical bills appear on your credit report
Although the buffer period is intended to allow for processing of insurance payments, it also creates some breathing room to calculate, negotiate, set up payment plans, or take other action before the debt impacts your credit.
Taking Control of Medical Debt
Ignoring medical debt is virtually always a serious mistake. Instead, take advantage of your window of opportunity to:
- Carefully review your insurance records and make sure that the company has paid its share
- Find out whether the hospital has an assistance program you may qualify for, and get your application in
- Attempt to negotiate a monthly payment arrangement with the provider
- If your account goes to collections, make contact immediately and attempt to negotiate a payment plan
If you’ve exhausted your options and can’t reach a resolution, talk to an experienced consumer protection lawyer. Learn more about how we can help.