If you or someone you are caring for is struggling with medical debt, it is important to know that you are not alone. Many people find themselves unable to keep up with the costs of chronic or serious illness and caregiving. CaringInfo will help you get the information you need to make the best choices for your circumstances.
What Actually Is Medical Debt?
Medical debt is defined as medical costs people are unable to pay up front or after they receive care. High medical debt is defined as debt that exceeds 20% of a household’s annual income. Even with health insurance, significant debt can accumulate due to co-pays, deductibles and expenses not covered by insurance, Medicare or Medicaid.
Who Has Medical Debt?
In 2017, 19% of U.S. households had medical debt, with half owing more than $2000 (Source: United States Census Bureau). According to the U.S. Census’ Survey of Income and Program Participation conducted by the U.S. government, the breakdown of those more likely to have medical debt are:
- households with children under 18
- Black and Hispanic households,
- households in the South and Mid-west
- households less than 65 years of age,
- households with a member in fair or poor health, a disability or having been hospitalized
While only 4% of households have high medical debt, some are substantially more likely to fall into this category (Source: United States Census Bureau):
- households below the poverty level
- those unable to pay their rent or mortgage
- those with negative or zero net worth
- those with no or partial health insurance coverage
- and those with a member who is poor or fair health
Medical bills are reported to be the number one cause of U.S. bankruptcies (Source: The Balance).
How Can I Start Managing Medical Debt?
Take a moment and get organized. While this will be stressful, it is important for you to make sure that you have as accurate a picture of the Medical Debt as possible.
First you should verify that you owe the debt
- Review bills carefully. Look over your bills for accuracy and write down any questions you have about them. For example, check the date of service to be sure you had a treatment that day and that any treatments listed are accurate. For more complicated bills, contact the provider for an itemized bill so that you can see how much you were charged for each procedure. AARP has information on reading medical bills.
- Check your health insurance and make sure your doctor or provider has the correct information. This may be a time consuming process, but alerting care providers about possible errors and asking questions early can be very beneficial.
- Get and keep documentation during your review. If you need to dispute a bill, send a written notice with a copy of all supporting documents you’ve gathered to the provider. Do not send originals.
If you are a financial caregiver, make sure you have power of attorney if necessary and are authorized to speak to doctors and other providers.
Next, get help and support in understanding bills and insurance coverage
There are resources online that can help you get more of an understanding of bills and how to interpret them:
- Understanding Your Health Insurance and Medical Bills – The Balance
- Understanding Medical Bills – Medical Billing & Coding Certification
- How to Read Your Medical Bill – AARP
To talk with someone and get help, you can contact a medical bill advocate or a patient advocate specializing in medical bills. There are non-profit, state-specific services, and services that charge fees. You can learn more from these resources:
- Non-profit: The Patient Advocate Foundation, A list from Adovcate Connection
- State-specific example: California
- Fee based: Information from Healthgrades
Also know that you can talk to the doctor, the service provider, or the hospital about a payment plan. A payment plan may help reduce medical debt over time while not overly straining other financial needs during serious illness or caregiving. While talking with the provider, you can also cover the following topics:
- Will they negotiate with you over the fees?
- What is the contracted rate for the procedure or service and can that be applied to the bill?
- Can you be charged the minimum that is charged for a given procedure due to the current financial situation you are facing?
Health systems offer some assistance in paying bills, usually focused on a patient’s income or circumstances. It never hurts to ask.
What Protections Do I Have When It Comes to Medical Debt?
Over the last few years, governments and institutions finally recognized that a lot of Americans were being unfairly punished on their credit reports for medical debt. The urgent and unexpected nature of medical debt doesn’t accurately reflect someone’s true credit worthiness. A study by the CFPB showed that one in five credit reports contain medical debt that distorts the consumer’s credit position.
In 2017, the Fair Credit Reporting Act was passed that required credit reporting agencies to allow a 180-day grace period before medical debt is listed on credit reports.
Credit Reports and Medical Debt
The law gives patients a buffer period to dispute certain charges before it shows up on their credit report, as well as time to look for financial assistance for medical bills (Source: Debt.org). In addition, any unpaid medical bills on a credit report that later get paid by insurance must be removed from the report. That prevents the negative marks from lingering and lowering the credit score of whoever was billed.
The Fair Isaac Corporation newest scoring model, FICO Score 9, minimizes the impact of medical debt. The debtee’s credit score won’t be as affected as severely for paid medical debt and medical debt in collections (Source: Debt.org), as it may be with more traditional debt.
Debt Collection and Medical Debt
The Consumer Financial Protection Bureau’s new federal regulation recently took effect. The new Regulation F, which as CFPB explains is part of Fair Debt Collection Practices Act, limits the ability of debt collectors to contact people (Source: FTC.gov).
Debt collectors must disclose a reasonably simple and free method to opt out of a particular means of communication, for instance text messaging or phone calls. Additionally, they must notify a person prior to sending information to the credit bureau. They are prohibited from using social media to contact you
Some state laws – like California – offer more protections than the federal rules.
There are statutes of limitations, meaning a limited amount of time after a debt is incurred that it can be collected (Source: CFPB) , for all debts, which are usually shorter for medical debts. The exact time period varies by state. The Balance offers a state-by-state breakdown of each state’s time period.
It is important to know the laws in your state, because if a payment is made after the time limit has expired, the clock may start all over again.
The Federal Trade Commission has put together a list of frequently asked questions about our rights.
Are Loans and Credit Cards an Option When Medical Debt Is Overwhelming?
You may choose to get a personal loan, a 0% interest credit card or a medical credit card. Please be wary as each of these has pitfalls and may change medical debt to regular consumer debt.
Medical debt has certain rules and consumer protections, but regular consumer debt does not. If you cannot pay off the balance of regular consumer debt before the interest rate kicks in, it becomes very expensive. NerdWallet and Experian talk about these methods of debt consolidation further.
If you are considering loans or credit cards, discussing payment plan options with providers may be a better first step.
Is Bankruptcy an Option When Medical Debt Is Overwhelming?
There is no such thing as a medical bankruptcy, but medical debt may be handled through regular bankruptcy proceedings (Source: Experian).
Be sure that you educate yourself about the bankruptcy process before making a decision. Help can be found online via services like Upsolve or in consultation with a lawyer in your area.
To find a lawyer in your area:
- The website addresses of all state bars are available online at generalbar.com.
- Some states list the free legal help available, for example California at calbar.gov.
- Find legal help by state via LawHelp.org.
Remember to Set up Financial Power of Attorney
Whether you’re preparing for medical debt or managing existing debt, don’t forget to execute a Power of Attorney and regularly review the latest information and regulations about Financial Caregiving.