How to Deal With Medical Debt

What to Do About Unpaid Medical Bills

A patient looks over her medical bills.

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If you're plagued with medical debt, you're not alone. A 2019 study conducted by the American Cancer Society found that around 137.1 million adults had experienced medical financial hardship in the past year. Medical bills can strain your finances whether you have health insurance or not, too.

Fortunately, there are several options for dealing with your medical debt, including requesting a discount or working out a repayment plan. Exploring these options early can protect your credit and keep you from filing bankruptcy.

Negotiate Your Medical Bills

You may be surprised to learn that medical service providers have varying pricing structures for services. This gives you some ability to negotiate your medical bill by reducing the amount you owe or working out a repayment plan.

If you aren't healthy enough or feel uncomfortable negotiating, consider working with a debt relief company that can negotiate for you. Beware of debt settlement companies who may encourage you to default on payments so you can negotiate a settlement. A credit counseling agency, on the other hand, can work with you to review your finances, figure out how much you can afford to pay towards your medical bills, and work out a repayment plan with your biller. Credit counselors are usually non-profit organizations but charge a small fee for their services.

Make Payment Arrangements

Contact the number listed on your billing statement if you don’t plan to pay your bill in full upfront. This is important even if you plan to follow up with the insurance company; the billing department needs to be aware that you aren’t ignoring the bill.

The credit bureaus will remove a medical collection paid by your insurance company if they receive verification from the collection agency.

Working with your insurance provider to ensure they've paid their share is important, too. If you're ultimately responsible for the balance, ask for a payment plan that gives you more flexibility to pay your balance over time. Review your budget to figure out what you can afford so you're prepared to negotiate an arrangement that suits your finances.

As with any other bill, make your payments on time each month or contact the billing department with payment concerns. Otherwise, your account may be sent to a collection agency despite your previous payments.

Apply for Medicaid

Medicaid is health insurance for low-income residents who can’t afford their medical care expenses. Qualification criteria vary by state, so you must contact your state Medicaid office to find out if you qualify.

Your child may be eligible for Medicaid even if you are not. Medicaid can be used to pay for medical expenses you’ve already incurred up to three months before you applied. It's important to apply as soon as possible after receiving a medical bill to receive retroactive coverage.

Consider a Low-Interest or Medical Credit Card

A credit card with a low or zero-interest credit card could be a good option for medical debt because it allows you to pay off your balance over time without incurring a large interest expense. You'll typically need good to excellent credit to qualify, which is more incentive to handle your medical bills before they hit your credit card.

Credit card approvals can happen immediately after you apply but it can take up to 10 days for your card to arrive.

Your physician’s office may suggest a medical credit card. Before you choose this option, compare to other credit card options available. Medical credit cards may offer no-interest financing for six months or more, but you'll need to pay your full balance before the promotional period ends or the issuer will retroactively add the full amount of interest to your balance. Be sure you can afford to pay off the balance before interest is added.

Ask for Help

Dealing with medical debt on your own can be a little intimidating. Fortunately, there are organizations that can offer assistance. Credit counselors can help you come up with a plan to pay off the debt and strengthen your credit. Similar to credit counselors, medical billing advocates can help review your bills, look for errors, and appeal high costs on your behalf.

File for Bankruptcy

As a last resort, you may have to get help through bankruptcy court. Medical debt can be completely discharged if you qualify for Chapter 7 bankruptcy or you can pay it off over three to five years (in most cases) through a Chapter 13 repayment plan. 

Be aware that a bankruptcy will be reported to the credit bureaus for up to 10 years, affecting your credit score and ability to qualify for credit cards and loans in the future.

Don’t Ignore Medical Bills

While you may not want to deal with medical bills, handling them sooner rather than later can lessen their impact on your finances. Your medical bills won't show up on any of your credit reports until they're 180 days past due. That gives you six months to work out arrangements for the bills before your credit is impacted, but you must take action.

Medical service providers may escalate collection efforts if you ignore the bill, even if you're waiting for your insurance company to pay. After a while, the bill may be sent to a third-party debt collector, an action that can affect your credit score and future chances of borrowing money for a house or car. Once a medical bill has been placed with a collection agency, you face the risk of being sued for the debt, which could result in a judgment, bank levy, or wage garnishment.

How medical bills affect your credit varies depending on the credit scoring model and whether your credit report reflects a paid status for the bill.