Medical debt resources

In this article:

• Understanding medical debt
• Factors contributing to medical debt
• Impact of medical debt on individuals and families
• Strategies to manage medical debt
• Resources to help with medical debt
• Medical debt payoff options
• Filing for bankruptcy
• Medical debt FAQ

Navigating the financial challenges of medical expenses is an unavoidable aspect of life for many individuals. Unlike most spending, medical debt can arise unexpectedly and is not a matter of choice. If you are living with medical debt, you’re not alone—approximately 1 in 5 families carry medical debt in some form.

Today’s rising costs of medical care can easily lead to an overwhelming amount of medical debt, creating stressful situations where repayment becomes difficult or even impossible. This guide provides a brief overview of what medical debt entails and essential information that consumers need to manage it effectively.

Understanding medical debt

You may accrue medical debt from a wide range of healthcare costs, such as general healthcare appointments, hospital bills, specialist visits, prescription medications, and medical procedures, treatments, or surgeries. Additionally, medical debt can impact anyone, regardless of background or the quality of health insurance coverage.

The compounding nature of medical debt becomes apparent when one bill leads to another, creating a snowball effect that can be overwhelming when financial resources are limited. Understanding these common circumstances is crucial for effectively addressing and managing medical debt.

The prevalence of medical debt in the United States

Today, more people have health insurance coverage than ever before because of the passage of the Affordable Care Act. However, a substantial percentage of the population still lacks sufficient health insurance and the necessary out-of-pocket funds to cover medical expenses.

A 2021 study found an estimated $220 billion of medical debt in the United States spread across 20 million people.

The reality of medical debt for the average American is highlighted even more through the following statistics:

• Around 16 million people in the United States have more than $1,000 in medical debt.
• About 3 million people owe over $10,000 in medical debt.
• 12% of adults in the 50 to 64 age bracket have significant medical debt compared to older individuals.
• 13% of adults who went without health insurance for six months or more accumulated a large amount of medical debt.
• People with poor health had greater medical debt than healthy individuals.
• People living with disabilities are more likely to have medical debt over $250.

Factors contributing to medical debt

Health insurance coverage has evolved in ways that contribute to medical debt. High medical costs, inadequate health insurance, and medical emergencies are some factors that relate to medical debt.

High cost of healthcare

The cost of healthcare has grown faster than the cost of inflation. Some of the reasons for this are advancements in technology, administrative complexity, and the consolidation of hospitals, which has reduced competition.

While high-deductible health plans have become a popular form of health insurance for some people, they leave many consumers unable to pay the deductibles and out-of-pocket costs. Individuals who can’t afford or access a good health plan resort to limited, short-term duration health plans or health sharing plans known as “skinny plans.” Such plans eliminate or limit important coverages.

Additionally, some states have not taken advantage of Medicaid expansion, reducing the percentage of people who qualify for the program.

Lack of insurance coverage

Insufficient health insurance coverage means you shoulder a larger portion of your medical expenses. People who lack health insurance coverage may seek medical attention less often than required to avoid acquiring more medical debt, which can lead to worsening health. In fact, one study showed that 22% of continuously uninsured people experienced a major decline in their self-reported health. Of course, as a person’s health continues to decline, conditions can exacerbate, contributing to a rise in medical expenses.

Medical emergencies

Medical emergencies can swiftly escalate medical debt through unexpected and high-cost bills. Emergency medical situations don’t leave you with much time to decide on your options for care. Although emergency rooms cannot refuse to treat someone because of inability to pay, emergency room visits, ambulance services, and urgent medical interventions can lead to substantial financial burdens later. Additionally, the aftermath of a medical emergency often involves ongoing treatments, compounding the strain on finances.

The average emergency room visit costs around $1,200, and a study from the Kaiser Family Foundation (KFF) found about half of people surveyed reported that emergency care contributed to their medical debt.

Impact of medical debt on individuals and families

The inability to pay for medical debt can take a deep emotional toll on individuals and families, impacting their mental health and well-being. Medical debt can cause them to prioritize paying for medical debts over other necessities.

Mental health impact of medical debt

People experiencing medical debt are three times more likely to experience negative mental health effects such as stress, anxiety, and depression. In turn, poor mental health can negatively impact your ability to focus on your physical health and other areas of your life.

Implications on credit and future financial stability

The effects of medical debt often extend beyond immediate financial strain and can negatively impact your credit and future financial stability. Unpaid medical bills can cause long-term damage to your credit score, making it challenging to obtain loans for major life events in the future.

KFF research shows the following:

• About 40% of people used most of their savings to pay for medical bills.
• Many individuals said they skipped other bills to pay medical debt.
• Some people in the study modified other major life decisions regarding housing, education, and moving to help pay past-due medical debts.
• Adults with medical debt were two times more likely to forgo getting health services until they could pay existing debts.
• Almost 1 in 5 adults believe they’ll never be able to pay off their medical debts.

Medical debt can impact your credit report, although three credit bureaus now remove unpaid medical collections with a balance of less than $500.

Strategies to manage medical debt

Comprehensive healthcare coverage is a good start to preventing or reducing medical debt, but there are additional steps you can take, such as budgeting for medical services, negotiating costs, and applying for financial aid.

Creating a budget

A carefully written budget that prioritizes medical debt repayment is a key strategy for managing your financial well-being. Defining financial priorities and allocating money specifically meant for repayment will give you confidence in reaching repayment eventually.

You can navigate your financial landscape with greater confidence and foresight by clearly delineating financial priorities and allocating resources specifically for medical debt repayment. Moreover, a well-thought-out budget helps you identify areas where you can adjust your discretionary spending, ensuring that you allocate funds judiciously toward settling medical debts, thereby contributing to long-term financial stability and peace of mind.

Individuals with employer-sponsored health plans can open health savings accounts (HSAs) or flexible spending accounts (FSAs). Depositing a percentage of your income into these accounts during each pay period not only facilitates the payment of medical expenses but also gives you the potential benefit of employer contributions. An added advantage of this budgeting approach is the ability to deposit and withdraw funds tax-free. It’s important to note that adhering to the rules and guidelines for HSAs or FSAs is crucial to avoid potential financial losses at the end of the year.

Monitoring insurance claims

If you have insurance, don’t assume that every bill your provider has processed is correct. Regularly check statements and invoices from healthcare providers to ensure charges match the services you received. Identifying errors allows for corrections and prevents them from turning into significant medical debt. If you find discrepancies, take proactive steps like appealing mistakes with the insurance company to address billing issues and potentially save yourself from unnecessary financial burdens.

Negotiating with healthcare providers

Healthcare providers are often open to negotiating fees for people who can’t pay their medical bills. Providers are inclined to receive partial payment sooner by reducing their costs, as opposed to having debts prolonged for an extended period. As the patient, you need to take the initiative in requesting negotiations, and if you reach an agreement, you may need to settle the debt in a lump sum.

Applying for financial aid

Federal law requires nonprofit hospitals to offer financial assistance to patients who can’t afford medical services. Your state may also have charity care laws that require hospitals to provide reduced fees or free care to patients who meet certain criteria. Eligibility may be based on your income.

You can apply for financial assistance even if your debt was sent to a collection agency or the provider has sued to collect the debt. You can ask the provider to stop collection agency activity until your financial assistance application is approved, though this is not always possible for your provider to do.

When applying for financial assistance, be sure to read the provider’s policy carefully and fill out the application accurately.

Resources to help with medical debt

Resources are available to help you get your medical debt under control, including charity care programs and medical debt relief programs. Some states offer medical debt relief assistance directly.

Nonprofit organizations

The following nonprofit organizations provide services to help patients get reduced or free health services or prescriptions.

• Dollar For: A medical advocate service
• FindHelp: A social care network and online database of services
• HealthWell Foundation: Financial assistance for medical bills and prescriptions
• Pan Foundation: Financial assistance for out-of-pocket medical expenses
• National Association of Free & Charitable Clinics: A database of free or charitable clinics
• Rx Assist: A directory of pharmaceutical companies that provide free medications
• GoFundMe: A crowdfunding site to raise money for any cause

This list is far from exhaustive, and there are many other organizations and resources that may offer you support in a variety of ways.

Medical debt relief programs

The federal government has several programs to assist people with hospital bills and other medical debt. Additionally, your state and local human services departments are good places to start for identifying federal, state, and local assistance with medical debt.

Here are several ways to find medical debt relief programs.

• RIP Medical Debt: This nonprofit organization focuses on buying and forgiving medical debt to help relieve some of the burden on individuals facing financial hardship due to medical bills.
• Charity Care Programs at Hospitals: Many hospitals have their own charity care programs designed to help individuals with medical bills. Contact your local hospital’s financial assistance or billing department for available programs.
• Patient Advocate Foundation: This organization offers case management services and financial assistance to individuals dealing with chronic, life-threatening, or debilitating diseases.
• National Foundation for Credit Counseling (NFCC): While not exclusively focused on medical debt, NFCC is a nonprofit organization that provides financial counseling and education. They may help individuals manage various types of debt, including medical bills.
• Healthcare Cost and Utilization Project (HCUP): HCUP provides information on state and community-based programs that offer financial assistance with medical bills.
• Local nonprofit organizations: Many local nonprofits and charities, such as medical clinics or community health centers, may have programs to assist with medical debt relief. Check with organizations in your community.

Medical debt payoff options

Whether you anticipate medical debt or not, it’s always good practice to ensure your medical bills are correct, reduce them if possible, and establish a payment plan.

Payment plans

There are various ways to manage medical debt over time. Firstly, you can negotiate a payment plan directly with your healthcare provider, allowing for a structured repayment schedule. Alternatively, leveraging a “buy now pay later” app provides a flexible method to spread out your financial burden. Another option is securing a personal loan, offering a lump sum to cover medical expenses with a manageable repayment plan. Additionally, exploring the possibility of a debt consolidation loan can streamline multiple debts into a single payment, simplifying the process of repaying your medical costs over an extended period.

Examine and understand your medical bills

Medical billing can be intricate, and errors are not uncommon, making it crucial to review every medical bill you receive. A simple typo in a billing code can result in your insurer denying your entire claim.

Charges can be confusing, so reading your medical bills carefully is important. Make sure you understand what the bill is for, how much you owe, what each charge is for, and what portion of the bill your insurance paid, if applicable. Contact the bill issuer with any questions before you pay.

Bills should explicitly detail the following information.

• Total charges
• Allowed amounts
• Adjustments
• Insurance payments
• Patient balance

Do not hesitate to seek clarification if any aspect appears unclear or raises questions. Addressing queries may reveal discrepancies, ensuring you are not obligated to pay more than necessary.

Work with a medical debt advocate

Medical debt advocates work on behalf of patients to reduce and eliminate medical debt. They are experts at analyzing and detecting errors in medical bills and insurance claims. Advocates may also assist with appeals for claim denials. Medical debt advocates may charge an hourly rate or a percentage of the amount they save you.

Medical credit cards

Created specifically to help you manage medical debt, medical credit cards operate much like regular credit cards but temporarily defer interest for a limited time to give you a buffer for settling medical expenses.

It’s important to note that failure to pay off medical credit cards promptly can mean you accrue late fees and high-interest charges. Exercise caution to avoid potential financial pitfalls associated with these cards.

Bankruptcy

The term “medical bankruptcy” can be misleading as it is the same as regular bankruptcy. It’s vital to recognize that bankruptcy (whether Chapter 7 or Chapter 13)  should be a last resort when you’re paying medical debt. With Chapter 7, you can liquidate property to pay medical debts. With Chapter 13, the court will give you a three- to five-year repayment plan.

Filing for bankruptcy

Anyone considering medical bankruptcy should research the impact of taking such action as it carries consequences in the future.

Pros and cons of bankruptcy

Pros

• Erases or reduces medical debt
• Allows you to clear nonmedical debts
• Can prevent legal action
• Collection agencies may hold off during bankruptcy proceedings
• May allow you to keep some assets

Cons

• Your credit score may drop
• Can remain on your credit history for up to 10 years
• Requires bankruptcy filing fees
• Process is lengthy
• Bankruptcies are public
• Difficult to get credit in the future
• Can’t be undone

It’s crucial to be honest about your finances and assets during bankruptcy, as it is a legal process that carries punishment if abused.

How to file for medical bankruptcy

You’ll benefit by retaining a bankruptcy attorney who can walk you through the bankruptcy process. Here are some things you’ll need to do when filing for bankruptcy:

• Get your financial documents in order.
• Fill out the official bankruptcy forms.
• Complete an approved credit counseling course.
• File the documents in the proper court.
• Submit the required documents.
• Attend a meeting with the court-appointed trustee.

It’s important to keep making payments on your debts until the bankruptcy process is complete.

Medical debt FAQ

Q: How will filing for medical bankruptcy impact my credit score? 

A: Filing for medical bankruptcy is likely to harm your credit score. While it may reduce your overall debt, resulting in a slight increase in your score, the bankruptcy itself will significantly lower your creditworthiness. Bankruptcies remain on credit reports for up to 10 years, making it challenging to secure loans or credit for major life events. It is crucial to consider the long-term consequences and explore alternative options before opting for medical bankruptcy, as its effects on credit are substantial and can hinder financial opportunities in the future.

Q: Does medical debt show up on my credit score?

A: Medical debt can appear on your credit score, especially if it has been sent to collections. However, there is a recent change in policy among three major credit bureaus that remove unpaid medical collections of less than $500 from credit reports. While this adjustment provides some relief for smaller medical debts, larger unpaid amounts may still impact your credit score negatively.

Q: Do debt collectors have the right to contact me anytime?

A: Debt collectors must not contact you via email, text, or social media if you ask them to stop. They can’t call you at work if this is not allowed at your workplace, and they can’t call more than seven times within a week. They are limited to calling between 8 a.m. and 9 p.m.