Paying off a ton of medical debt can be a very daunting task, especially if you're living on a limited income. The thing that really stinks about medical debt is, unlike consumer debt, it can't always be prevented.
Sure, you can do your best to live a healthy lifestyle to prevent large medical bills in the first place. But even with good prevention, it's still possible that at some point you'll incur medical bills that could potentially add up to tens, or even hundreds of thousands of dollars.
In today's post, I'll show you how to deal with your medical debt. You'll learn what to do, and what not to do, so you don't end up in the poor house over your hospital bills.
Over $100,000 in Medical Bills
Just 3 weeks before writing this post, I had a heart attack at the age of 45. I have no family history and keep myself in great shape, so this was totally unexpected. Most of the bills are not in yet, but the cost is very likely to exceed $100,000. Thank God we have great insurance that should cover most of the cost!
But these huge bills got me thinking, “What about those people that end up in huge amounts of medical debt and don't know how to deal with it?” That's what inspired me to write this post.
What Not to Do
First, let's talk about what NOT to do when you have a large amount of medical debt:
Don't Ignore It
It can be really easy to shut down emotionally and just ignore the fact that the bills are rolling in. It can be emotionally taxing to deal with on top of the medical problems you're already going through.
But you have to realize that this debt is not going to magically go away if you ignore it. The quicker you contact the hospital and start making a plan to pay off the debt, the better off you'll be. Take control of the situation.
Don't Put Medical Debt on a Credit Card
The interest rate on most cards is high and can cost you a ton of money in interest while you try to get the debt paid off. However, even if you put your medical debt on a zero interest credit card, it's still not a wise move.
If you run into trouble paying off the debt, it's much more difficult to deal with a credit card company than it is to deal with a hospital to work out a settlement.
Don't Take Out a Loan
Again, you'll be charged interest on the balance that can cost you hundreds, or even thousands of dollars. A hospital typically doesn't charge interest on your balance unless you have been sent to collections. Hospitals are also easier to deal with than a bank or other lender if you can't pay off the balance.
Don't EVER Take Money Out of Retirement Accounts
The collection coordinator for the hospital may suggest taking money from your retirement accounts as an option to get your bill paid. But seriously, is it wise to compromise your future to pay off bills in the present? I don't think so! If you take money out of these accounts, you'll pay your normal tax rate on your withdrawal, plus a 10% penalty on top of that.
For example: If you were to take $10,000 out of your 401k or IRA to pay off your medical debt, you would pay $2,500 or so in taxes (Depending on your tax bracket), plus an additional $1,000 in penalties. That means you will only have $6,500 to put toward the debt. Not a smart way to use your money!
Use Common Sense
These options may sound good at the time when you're deep in debt and desperate to pay the hospital off. But thinking with a clear head and using some good ole' common sense will help to ensure that you don't exchange one kind of debt for worse kinds of debt that can be even harder to overcome.
There are so many ways to make your situation with medical debt much worse if you don't know all the facts or are not thinking with a clear head because you're stressed out and worried.
Avoiding these four mistakes can save you some serious money and stress when you're having a health problem, and dealing with the mountain of medical debt that goes along with it.
What You SHOULD Do When Paying Off Medical Debt
Medical debt tends to be much different than other types of debt. You don't get medical debt because of irresponsible spending.
Sometimes you incur medical debt through no fault of your own due to an accident or an unexpected emergency like mine. Either way, it can have devastating effects on your finances, especially if you have no insurance.
7 Tips For Paying Off Medical Debt
I've done the research and come up with 7 commonsense tips and tricks you can use to pay off hospital bills in the shortest time possible, with the least amount of stress possible.
Don't Ignore It
It's easy to shut down emotionally and just ignore the huge pile of medical bills rolling in. Dealing with medical bills on top of the health issues you're already having is emotionally taxing. But you have to realize this debt is not magically going away if you shut down and ignore it.
The quicker you contact the hospital and start making a plan to pay off the debt, the better off you'll be. If you let the balance go to collections because take no action, then collection fees and interest will be added to the balance, causing things to get even worse.
Take control of the situation!
Get a Detailed Accounting of Every Charge
Many medical bills have mistakes that cost you a lot of money if you don't catch them. Get a detailed accounting of every charge. Then determine if there are any incorrect charges, which could save you some serious money.
If you have no idea what you're looking at when it comes to your medical bill, you can hire a medical billing advocate to help you out who only gets paid if they save you money.
Know How Much You're Able to Pay
Sit down, put pen to paper, and figure out how much cash you have available (hopefully from a fully funded emergency fund). Figure out how much you can afford to pay every month if you need to work out a payment plan with the hospital.
Go into the process with as much knowledge possible about what you can and can't do financially. This can only help your situation when you're negotiating your debt with the hospital.
Negotiate
Hospitals are used to dealing with people who have large medical bills. Often, they're willing to cut you a deal on the total amount owed if you agree to a payment plan.
Also, if you have a lump sum of cash you might be able to negotiate a much larger discount. It may be possible to negotiate it down to as little as 50 cents or less on the dollar (or have it forgiven completely) depending on your circumstances.
Ask About Assistance Programs
Most hospitals have some sort of assistance program set up to help people pay their medical debt. It may be tied to how much you make, or whether or not you have insurance coverage, and you may have to provide detailed financial records to see if you qualify.
You may be able to get some or all of the debt forgiven through one of these programs, especially if you have a low income and few assets. You should also check out assistance programs through your state and local governments that also offer assistance.
Have an Emergency Fund
If you incurred a large medical debt and you had no emergency fund, it makes it much tougher because you weren't financially prepared for an emergency.
If you have an emergency fund in place, awesome! You're way ahead of most people. If not, start one now. Emergencies happen to everybody sooner or later. When you're prepared for the inevitable, the inevitable will be much easier to deal with when it comes.
Find Ways to Make Extra Money to Pay Off the Debt Quicker
There are always ways to earn extra money that'll help you accelerate the time getting your medical debt paid off. I won't go into specifics in this post about what you can do, but here are links to a couple of my articles that can give you a few ideas.
5 Ways to Make Extra Money, Even in a Tough Economy
Another 5 Ways to Make Extra Money, Even in a Tough Economy
10 Creative Ways to Make Money on the Side, Even in a Bad Economy
Know What You Should Do
Whatever your situation is when it comes to medical debt, you should always remember to never let the billing department at the hospital talk you into doing something unwise and not right for your situation.
Most of these people are usually very helpful and compassionate and strive to help you find the best way to fix your financial situation as easily as possible. But it's up to you to know what you should and shouldn't do so you can keep a pile of medical debt from overwhelming you financially.
Until next time…
Question: Have you had any experience paying down huge medical bills? Any tips of your own to help other readers pay theirs off? Please share in the comments.
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Indeed we have been through the experience of being left with enormous medical debt after insurance paid. The amount we had to pay to various Doctors, hospitals and labs amounted to a roughly $70,000. One thing I did was carefully review each bill for accuracy and keep each bill and the record of payments made. More than once we were double billed or insurance had not been billed. I had a notebook where all the medical bills were kept so I could easily access them and a master sheet showing the amount of each debt and to whom it was owed. After the bill was paid in full I noted the paid status and date. Saved me a lot of hunting and headaches in trying to gain control of a mountain of paperwork.
Awesome! Sounds like you were very organized and made sure to keep track of every detail. That’s what you need to do when you have to deal with all those bills and EOB’s coming in. The more you’re able to stay on top of it, the better you’ll be able to find discrepancies and save some money. Glad to see you were able to get it paid in full!
Great point Kevin. I’m currently experiencing that situation as we speak. Insurance is denying benefits, so I have to go through a grievance process to get it covered. Thanks for the comment!
Get a copy of your health insurance policy handbook and get to know the ins and outs. Many time medical debt is assigned as your responsibility, when the insurance carrier really needs to make payment. Also, many practices bill for out of network charges when they should be accepting the contract rate.