How to Tackle Medical Debt (Before Your Credit Gets Wrecked)

How to Tackle Medical Debt (Before Your Credit Gets Wrecked)

Got a pile of past-due medical bills? Join the debt club. About 25% of Millennials and Gen Xers owe collectors for unpaid doctor and hospital charges. In fact, adults between ages 18 and 50 have the highest percentage of medical debt of any generational group.

Whether your debt is the result of using an out-of-network doctor or you had the bad luck to get sick during a stint without insurance, the time to address your bills is now — before your credit score plunges, which can take years to recover from. The good thing is, with medical debt, there are many steps you can take to resolve it — including these.

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Check the Charges

“It’s estimated that up to 80% of medical bills contain errors,” says Thomas Nitzsche of Clearpoint, a nonprofit Atlanta-based credit counseling agency. He suggests requesting an itemized version of your bill from the health-care provider that issued it, so you can carefully review how the total amount was divvied up.

Cross-check each charge with your insurance company’s Explanation of Benefits (EOB) and make sure they line up with the coverage rules — for example, that you’ve met your deductible so the cost should be picked up by the insurer, or you received prior approval to go out-of-network and are now being hounded for a huge fee. If you get your insurance through work, your employer’s Employee Assistance Program (EAP) might provide a billing advocate to review your statement for you.

Some potential errors might be obvious, such as being double-charged for a procedure. Others require careful code-cracking skills. Plug the various codes you see on your statement into the ICD-Code Search database to make sure they correspond to what you were billed for. Spot an error? Dial the provider's billing department pronto.

Offer to Negotiate

If you do owe the amount on the bill, you still have recourse, as medical bills can often be negotiated. Nitzsche suggests consulting the Healthcare Bluebook, which lists the average prices for different services and procedures in your area, and comparing them to the fees on your bill. You can also call around to local MDs and hospitals and gather intel on what they charge — or check out Amino's cost calculator, which offers pricing information on 77 common procedures. If you can show your provider that they are charging significantly higher than the norm in your community, you might convince them to cut your bill.

Another tactic is to ask for a reduced rate. Remember, the provider wants to get paid, and something is better than nothing, says Tony Drake, CFP®, owner of Drake & Associates in Milwaukee. Or work out a deal where you make small monthly payments. With doctor’s offices, "making a good-faith effort and a regular payment can keep the account from being sent to collections," says Nitzsche.

Whether you're negotiating with an MD or a hospital, talking to administrators in the billing department can be confusing and intimidating. Drake recommends preparing a script and cooling out before calling. “Be polite; don’t raise your voice or get angry,” he advises. “If the person you’re talking with can’t help you, ask for someone else.”

Look Into Financial Aid

Hospitals don't advertise the fact that they often offer financial aid for patients who don't have the means to pay their bill. So if you’re dealing with a hospital billing department, Nitzsche recommends bringing it up. “Financial aid can result in part or even all of a bill being waived, or the balance can often be put on a 0% payment plan, making it much more affordable,” he says.

Even if you don't think you qualify, it's a smart idea to apply for financial aid anyway. The criteria is often quite liberal, he says, and simply applying could result in being offered an extended 0% repayment plan even if you don’t ultimately score a balance reduction.

Tackle What Remains

Even if you end up shaving significant coin off your bills, you’ll likely still be left owing something. Don't pretend that if you ignore the remaining balance, it'll magically disappear. Once a bill is sent to a collection agency, financial aid and in-house payment plans are no longer available.

So step on the gas and figure out a way to pay it off ASAP. Take a cold, hard look at your budget and see what you can cut back on, advises Drake. “You may have to make some sacrifices for a while, but it’s worth it to take care of that medical debt as quickly as possible,” he notes. And if you receive any unexpected windfalls (hint: this year's tax refund), skip the splurge and apply it to your medical debt.

Finally, resist the urge to pay it off with plastic. Using your credit cards will likely exacerbate your debt situation in a different way, Drake notes, since the average interest rate is a sky-high 18% for most credit cards.

RELATED: The Difference Between a Credit Score and Credit Report

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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