Health Care Debt: How to Avoid It, How to Get Rid of It

baitong333/Shutterstock

Whatever you think of the American healthcare system, one thing is clear:  Americans pay dearly for healthcare. Those who get insurance through their employers—only 54 percent of Americans employees in 2020—pay handsomely for that.

The many Americans who do not get health insurance through their jobs often pay even more to be covered.  As a result, there are over 31.6 million Americans who have no health insurance at all, according to the Centers For Disease Control and Prevention.

For those who do have insurance—whether through work or on their own—medical treatment still involves out-of-pocket expenses. While some simple matters may require only a small co-pay, more extensive medical care generally requires the patient to pay beyond what the insurance company is going to cover.

Worse, millions of Americans without health care insurance must pay out of pocket for every medical expense they incur.

This brings us to the crisis of health care debt.

How Extensive is Health Care Debt in The United States?

A 2022 study by the Kaiser Family Foundation (KFF) determined that 100 million Americans currently carry health care debt. For some, the debt is in the hundreds of dollars: for others, the debt is five or six digits worth of debt.

The 2020 U.S. Census revealed that 17 percent of American citizens have medical debt. Analyzing the census data further, KFF found that almost 1 in 10 Americans owe more than $250 in medical debt.  Americans owe at least $195 million for medical services.

Americans attempt to pay off these debts in a variety of ways: payment plans, putting the debt on a credit card, taking out loans, using home equity or even second mortgages. More than half a million Americans file for bankruptcy annually in order to deal with medical debt.

Let’s look at the issue for two different audiences: those who currently have medical debt and want to eliminate it, and those who do not yet have medical debt and want to avoid it.

How to Eliminate Medical Debt

For the most part, eliminating medical debt is the same as eliminating any other kind of debt. You increase personal revenue and decrease expenses in order to have more funds to direct toward the debt. Consolidating debt, selling valuables, obtaining a loan, using home equity, and, unfortunately, bankruptcy are ways to reduce any debt, including overdue medical bills

However, there are moves you can make that are directly related to your medical debt.

• Contact your insurer. Anyone who has undergone a serious medical procedure knows the insurance process is slow and cumbersome. Payments come sporadically, and not all at once. Make sure your insurance company has paid all that it is supposed to pay, before looking for other payment options.
• Examine your bill.  Are you being charged properly for the services provided?  Are you being charged for a service you did not receive? Mistakes in medical billing happen all of the time (some question whether they are actually “mistakes”). Billing firms may bill you for out-of-network service incorrectly. They may use the wrong code for a procedure, charging you for a more expensive service.  And if a provider “balance bills,” you may not have to pay. 
• Can I use a payment plan? This is really no different than a payment plan you have for a mortgage or automobile. Medical providers often offer very low interest, low penalty plans in order to get the money they are owed. A payment plan would at least reduce some of the stress associated with your debt. Some medical providers will offer a payment plan with no interest charged. Unlike credit card companies or loan issuers who profit through interest charges, medical providers are not so inclined.
• Can I use my retirement fund savings without penalty? If you are under the age of 59.5, you can take a distribution from a retirement account, without penalty, to pay for medical expenses. However, those expenses must be more than 10 percent of your adjusted gross income.  That means your medical bill has to be extremely high for this to work in your favor.
• Discuss a negotiated settlement. Unlike credit card companies, medical providers are often willing to discuss your outstanding debt. They may reduce your total debt if there is an amount you are more able to pay. Medical companies do not like sending overdue bills for collection. It costs them money. A negotiated settlement of costs is not only possible but is a common practice.
• Contact a medical debt counselor. If you are not having success negotiating with your medical provider, hire a professional. You will be charged for the services of the medical debt counselor, but that charge will be mitigated by the lower total bill. In fact, make certain when talking to a counselor that you will NOT be charged more than you save in the mediation. There are non-profit organizations that aggregate the names of counselors and verify their practices so you know you are working with a respected counselor.
• Check your credit score for medical bill assessments.  As of July 1, 2022, overdue medical bills or bills that have been sent to collection may not be counted against your credit score. If a medical bill is showing up on your credit report, it should be removed.
• Your health insurance company may be willing to negotiate for you. If you believe you are being billed unfairly or incorrectly, ask your insurance company to reach out to the provider.

Avoiding Medical Debt

Avoiding medical debt may be impossible. But there are measures you can take to prevent acquiring medical debt, or lowering the amount you will owe.

• Find out what is covered. Before any medical procedure, check with your insurance to see if the cost is completely covered, or what percentage is covered. This requires that you get a detailed list from your doctor as to what procedures are going to take place. If you don’t ask, doctors will seldom volunteer those detail in advance.
• If you discover that the cost is not covered by insurance, or only partially covered, discuss the cost of the procedure with the doctor’s billing department. The medical provider may be willing to drop the cost of the procedure before it takes place—and before you are billed for it.
• Discuss your finances with your doctor before undergoing any examination. Some doctors run tests routinely and without concern over their cost to the patient. If you have a concern about the cost of testing, ask your doctor if there is an alternative test or if a certain routine test can be skipped.
• Go over your bill in detail, promptly. Contact the doctor’s billing department and discuss with them the specific costs for each procedure. Ask if that amount can be adjusted. It can’t hurt to do so.
• Avoid the emergency room, unless you have a real emergency. The cost of emergency service is significant. Speak to someone at your doctor’s office first; there may be a nurse on call who can assist you. Research your illness before jumping into the car to go to the ER.
• For those people with insurance, stick to in-network providers if possible.
• Be proactive: take care of your health. Take advantage of preventative care offered to you through your insurance, including wellness programs or health club memberships.

Once you have exhausted the above steps, if you do end up with medical debt, go back to the “how to eliminate medical debt” steps.

You Are Not Alone!

As with almost all financial situations, you are not the first to have to deal with medical debt. Any effort you make to avoid or reduce debt has been made by others, often successfully.

And, since medical debt is so prevalent, there is no embarrassment in having to deal with it. Half of Americans are already doing so.  Talk with friends or co-workers to see how they have handled the situation. Find out what has worked for others, and apply those methods to your situation. In the meantime, try to stay well.

The Epoch Times Copyright © 2022 The views and opinions expressed are only those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.