An unexpected illness that forces a hospital stay is challenging enough, but unfortunately, even for those with health insurance, the financial burdens associated with medical care can escalate quickly. Medical debt is especially difficult to deal with because there wasn’t any “fun” involved in accumulating it – the debtor didn’t choose to get sick – and a growing pile of medical debt is the last thing that someone struggling with a serious health problem wants to think about.
Even when someone has insurance, a relatively brief hospital stay can result in a shockingly high debt load. Things only get worse when an individual suddenly becomes unemployed. Unfortunately, the COVID-19 pandemic has forced many people into this exact predicament – with lost jobs and layoffs impacting those burdened by medical debt. Managing medical debt can be difficult, especially while unemployed. Visit us online to check out our tips for managing medical debt during trying times.
How to Manage Medical Debt
For those facing a serious health problem, high levels of medical debt only compound the misery. Unfortunately, this is incredibly common in the United States today. In fact, just over half of the debt that appears on consumer credit reports can be attributed to medical debt, and it is one of the primary causes of consumer bankruptcy in the nation. However, there are steps you can take, and you must make every effort possible to responsibly manage your medical debt.
Since medical billing is complicated, know that mistakes do occur. Therefore, examine all bills closely for possible overcharges or billings for services that did not occur. Follow up with your insurance company regarding charges that were not covered and get clear explanations as to why you are being held financially responsible. For those charges not covered, you can attempt to negotiate and work out a payment plan with your medical provider.
Contacting your provider when you are not immediately paying your bill in full is always a good idea, as this shows the billing office that you are not ignoring the debt. Additionally, there is a 180 day waiting period before delinquent medical debt possibly appears on credit reports – this is to allow for sufficient time to resolve disputes with insurance companies.
However, once the 180 days are up, the medical provider is likely to turn your account over to a collections agency that is likely to be persistent in its attempts to collect while operating within the confines of the Fair Debt Collection Practices Act. For information on how to deal with collections agencies, consult the Consumer Financial Protection Bureau website to learn more about your rights and the rules governing collection agency behavior.
Medical Debt Consolidation
Medical debt consolidation is an avenue to consider when crippling medical debts coincide with unemployment. However, before entering into a medical debt consolidation plan, it is important to understand whether the plan even makes financial sense. You need to determine whether the medical debt consolidation will actually lower the amount of medical debt – or if it will simply lead to prolonging financial suffering that could still eventually result in filing for bankruptcy.
Then, you also need to ascertain whether you possess the patience and discipline to commit to the process, which often takes years to complete. Finally, you need to recognize that since medical debt frequently does not come with interest rates attached, it can just as easily not make sense to consolidate medical debt by paying it off through the proceeds generated from a personal loan, credit card or home equity line of credit.
Medical Debt Settlement
If you are carrying high levels of medical debt and are unemployed, medical debt settlement may be a viable option. Just as is the case with delinquent unsecured credit card debt, creditors may be willing to accept a lower payoff on a medical debt balance if it looks like the account may soon turn into a non-recoverable asset. A skilled, reputable debt settlement firm can help you by effectively negotiating with your medical creditors.
Contact us here at United Settlement for more information about your medical debt situation. Ideally, you should initiate the settlement process as early as possible, prior to your medical provider turning your account over to a collections agency who will have less incentive to settle with you than a hospital or doctor billing office.
Regardless, doing nothing really isn’t an option. Unpaid medical bills can remain on a credit report for up to seven years and in some cases lower a credit score by as much as 100 points. However, in the majority of circumstances, paying off a settlement-reduced medical debt will lead to the removal of any negative marks of collections activity from a credit profile.
Even though medical debt settlement is a viable solution for many people, if medical debt settlement isn’t feasible for you, alternatives include pursuing a medical debt consolidation loan, personal bank loan, home equity loan or home equity line of credit. As an absolute last resort, there also is the possibility of paying your medical debt off with a credit card.
However, all of these alternatives involve taking down additional debt with interest rates attached. Since most medical debt doesn’t come with high interest rates, these options can only make financial sense when someone has a variety of debts outstanding beyond medical debt that can also be consolidated, and some of the debts must have higher interest rates than the interest rate on the new consolidation loan – regardless of the form of loan that takes.
Finally, some medical providers may consider unemployment as a form of extreme financial hardship that could result in medical debt forgiveness. Submitting tax returns to your medical provider along with written documentation indicating that there are no means with which to pay the medical debt will be required as part of the process.
About the Author: Steven Brachman
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.