Health care makes many miracles possible for families in the United States, but that often comes at a steep price. About 6% of Americans carry more than $1,000 in medical debt, according to the Kaiser Family Foundation, with 1% of people carrying more than $10,000 in medical debt.
The good news is there are many ways to deal with medical debt. It can be confusing to sort out all these options, especially given some of the fine print and special provisions in the way medical debt is handled in the U.S. We’ll help you put together a plan for how to deal with your medical bills so you can focus instead on recovering and living a healthy life.
Medical debt and credit scores
When you’re sorting through your potential options for how to pay off medical debt, a key thing to know is that medical debt is treated very differently than other types of debt when it comes to your credit.
Medical debt is such a pervasive problem for many Americans and isn’t necessarily an indicator of your creditworthiness (as opposed to other types of debt), so credit bureaus handle it in a way that works to your advantage:
- Medical debts under $500 in collections won’t be listed on your credit report at all.
- Unpaid medical bills are only listed on your credit report after they’re past due by 12 months or more.
- Medical debts are removed from your credit report as soon as you pay them in full, instead of staying there for the normal seven-year time span.
This is important to know when you’re considering your options for ways to pay off your debt. In order to receive this special treatment and preserve your credit score, your debt has to remain a medical debt, such as by working with your doctor’s office on a payment plan.
If you pay off your medical bills with a non-medical type of debt, such as a credit card, home equity loan, or personal loan, it may not be possible for the credit bureaus to tell that you used the funds for healthcare, and your credit score may be unfairly — and negatively — impacted.
8 Ways to pay off medical debt
There are two main approaches to getting debt relief for your medical bills. First, there are many ways to lower your medical bill, even after you’ve already received treatment. Once you land on the final amount that you must pay, you’ll have several options to choose from for how to pay off medical debt.
Check for billing errors
When you receive a bill, you expect it to be accurate — but unfortunately, that’s not always the case, especially when it comes to something as convoluted as health care. Over half (53%) of people with medical debts reported getting at least one medical bill with an error on it within the past five years, according to the Kaiser Family Foundation.
Ask for an itemized bill from your healthcare provider before you pay for expensive services, and make sure everything looks correct. If you’re not comfortable reading through your bills, or if you’re facing a lot of bills (such as if you have an expensive, chronic condition), enlisting the services of a medical billing advocate can be worth the expense.
Try negotiating your bills
Finance departments for healthcare providers are no strangers to haggling over prices. It’s what insurance companies do to lower the cost, but here’s a secret: you can do it too, even if your insurance has already paid out.
Explain your situation and ask if they can work with you at a reduced price. You may be able to offer a lump sum in exchange for a lowered rate, for example. Healthcare offices may even be willing to offer medical debt forgiveness for people on a fixed income through established charity care programs, which are required by law in some states.
Ask for a repayment plan
If your healthcare provider isn’t willing to lower your price, consider asking for a payment plan. There are no standards for what healthcare providers must offer, but they’ll generally work within your budget on a monthly payment that you can afford. Often, these plans are even offered interest-free.
Paying back your debt directly to your healthcare provider via a repayment plan also ensures that your debt stays classified as a “medical debt,” thereby preserving the advantages available to you in regard to your credit score. If you use another type of debt to pay your medical bills, as noted above, it could negatively impact your score a lot faster.
Seek medical debt assistance
In addition to the charity care programs offered through your healthcare provider, there are many charities elsewhere that recognize the problem of medical debts and work to help you. Many nonprofits offer financial assistance to people with specific expensive-to-treat or rare conditions. The Patient Advocacy Network maintains a good directory of these funds.
Don’t be afraid to spend some time researching medical bill financial support programs available for you. Here are some resources to get you started:
Increase your income
Not everyone with medical bills can ramp up their income. If you are in a position to do so, looking for ways to earn extra money can help you get out of medical debt sooner, as well as improve your overall financial situation. Here are some ideas:
- Start a side gig
- Get a part-time job
- Rent out a room in your home
- Start a small side hustle business
- Sell old items you’re no longer using
- Ask for additional hours at your current job
Apply for a credit card with a special financing offer
Charging your medical bills to your credit card isn’t generally recommended, especially if you won’t be paying off those charges immediately to avoid paying interest. However, there are a few cases where applying for a new credit card can help you afford your medical bills, if you’re careful.
Many healthcare providers offer “deferred-interest credit cards,” which allow you to pay off new charges for medical treatments with no interest for several months. The catch is that you need to pay off the charges entirely before the zero-interest period ends, otherwise all of the interest you avoided will be charged onto your card all at once. These cards charge much higher rates, too, making this an easy-to-make, but pricey, error.
Alternatively, opening a new 0% intro APR credit card offers the same advantage of an interest-free runway for a limited period. Unlike a deferred-interest credit card, however, a 0% APR card doesn’t back-charge the interest if you still have a balance remaining when the interest-free period ends.
Use a debt consolidation loan
If you’ve already taken out multiple debts or credit cards to pay for medical bills or anything else, it may be worth considering taking out a debt consolidation loan. A debt consolidation loan simplifies your repayment by rolling all of your debt together into one fixed-rate personal loan. This gives you a steady payment amount over time, often at a cheaper rate.
Before you take out a medical debt consolidation loan, however, check your budget to make sure you’ll actually be benefiting from it, whether through saving money on your total interest costs, your monthly payment amount, or paying off your debt more quickly.
Tap into existing assets
Another option is to borrow against the assets you’ve already been accumulating, whether that’s equity in your home, money saved at a bank, or even your investments.
This is something to consider very carefully, especially if you’re in a situation where you’re recovering from treatment or dealing with a chronic illness. You’ll be required to make monthly payments, and if you’re not able to do that because you’re sick, you could lose those assets. If you used your home as collateral, for example, that could mean foreclosure.
Here are some options for using your existing assets to help out with medical debt:
- 401(k) loan: If you have a 401(k), you can borrow against your retirement savings. You’ll pay interest to yourself, but the rates are typically lower than what you’d earn through investments — and if you lose your job, you’ll be required to pay it all back at once.
- Home equity loan: A lump sum can help you pay off many medical debts at once, or be taken out in advance to help you prepare for a major operation or treatment.
- Home equity investment (HEI): An HEI offers a lump sum of funds, that requires no monthly payments, has easier qualifications, and is repaid with a balloon payment any time during a 10-30 year term.
- Home equity line of credit (HELOC): A line of credit taken out against your home at a variable interest rate. This can be particularly useful for smaller ongoing costs, such as frequent treatments.
Final thoughts
Medical debt works a lot differently from most other forms of debt in the U.S. You can use this to your advantage by first looking for ways to lower or eliminate your medical bills, and then choosing carefully from a variety of options to pay back any remaining amount.
Make sure to consider your ability to repay any debts you take on, as well as what type of debt you use, particularly if you’re trying to build your credit or use your assets as collateral to secure a loan.
If you choose the right options and strategies, you can alleviate untold amounts of stress and can instead focus on recovering both your health and your wealth.
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