How to Manage Your Medical Bills to Protect Your Credit

Few things are more frustrating than trying to remain financially stable and protecting your credit when you are staring at a stack of medical bills. When faced with a pile of medical bills, you have five main options:

  • You can work with the healthcare provider to pay the bills over time.

  • You can seek assistance from a patient advocate resource.

  • You can seek medical debt consolidation.

  • You can attempt to negotiate your bills down

  • You can file for bankruptcy.

If you know in advance that you’ll be incurring uninsured medical expenses and you don’t know whether you can afford them, speak to your service providers as soon as possible. Ask if discounts are available for underinsured/uninsured patients. Be sure to get all agreements in writing.

Apply for medical financial aid

Many hospitals provide charitable or financial aid to patients who qualify. Many clinics and doctors’ offices also consider helping those who can prove that they’re under unusual financial duress because of escalating medical bills or decreasing incomes.

However, if you decide to apply for assistance, you may be better off doing so as soon as possible because many providers have time limits on aid applications (usually 6 to 12 months). Although you have to complete a substantial amount of paperwork and supply a lot of information, you may wipe thousands of dollars off your financial ledger.

Get professional help

Help is available to consumers in the form of advocates. A number of organizations, some nonprofit, help you negotiate fees and payments or just get through the process of filling out the forms you’re likely to encounter in the bill-negotiation process.

Here are some of the advantages to using an intermediary:

  • They know the industry, the laws, and the regulations.

  • They’re not emotionally involved.

  • They’ve done this before, and you may not have.

  • They may help you identify benefits, grants, and entitlements.

  • They may have developed existing relationships that can be helpful in resolving issues more quickly.

The Patient Advocate Foundation is a national nonprofit organization that has provided mediation and arbitration services since 1996. It offers assistance to patients dealing with the effects of chronic, debilitating, or life-threatening illnesses. Its free services include resolving insurance-access issues, helping patients with employment issues, and assisting with medical-debt crises. Reach the organization at 800-532-5274 or visit their website.

You can find fee-for-service advocate organizations on the Internet but you may want to check out:

Negotiating your debt down

Believe it or not, you can negotiate medical expenses. Most providers have more than one rate for the same service or product — the insured price and the uninsured price. Because they negotiate prices in advance, many insurers get much lower prices than individuals paying out of pocket do. Asking for a discount is nothing new.

If you’re not comfortable negotiating medical charges yourself, try working with a patient advocate group that has experience in this area.

Financing your medical debt

Having one bill to deal with may be easier than keeping track of many service provider payments. Here are the two ways to consolidate your medical debts:

  • Pay with credit cards: Putting your medical debt on a credit card may seem like a way to make the problem go away, if only for a billing cycle. But what you’re really doing is borrowing money from a lender to pay a medical provider. You may be better off making a deal with the provider than with a lender if you have a hardship.

    If you opt to use plastic to cover your bills, be sure that you can afford your payments, you know what interest rate your card charges, and you’re aware of any possible issues paying with credit may cause, such as affecting your eligibility for Medicaid (medical debt on a credit card may no longer qualify as a medical expense).

  • Pay with installment loans: Another option is to get an installment loan from your bank or credit union. This type of loan has a fixed interest rate, term, and payment. Under the Fair and Accurate Credit Transactions Act (FACT Act or FACTA), lenders can’t use your medical condition against you when they decide whether to give you credit and when they establish terms.

    To help ensure enforcement of this requirement, your copy of your credit report shows the name of the creditor so you can identify the debt.

Filing for medical bankruptcy

You may hear the term medical bankruptcy touted as though it’s different from a regular bankruptcy, but technically the two are the same. Personal bankruptcies are generally either a Chapter 7 or a Chapter 13.

A Chapter 7 eliminates many but not all debts, and to qualify you have to pass a means test based on your state’s median income. A Chapter 13 bankruptcy allows you to repay what you can from current earnings, typically over a five-year period, and is not income restricted.

A medical bankruptcy is brought on by medical bills that are either so large or owed to such aggressive providers or collectors that they can’t be satisfied. In the case of overwhelming medical debts, you need to

  • Be realistic in assessing whether you’ll ever be able to repay what you owe.

  • Know the full extent of what you owe and to whom you owe it.

After you know that your bills are insurmountable and providers won’t accept reduced payments that you can afford, see an attorney to assess your legal options and plan your best strategy. To ensure that a bankruptcy is in your best interest, use an attorney who specializes in debt problems.

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