Coping with an unexpected illness or accident that forces an individual into the hospital can be challenging enough, but unfortunately, even for those with some form of health insurance, the financial burdens associated with medical care can escalate rapidly.
In fact, a majority of the debt listed on American consumer credit reports can be categorized as medical debt, and, as such, it remains one of the chief causes of consumer bankruptcy in the United States.
If you can’t afford to pay your medical bills, medical bill consolidation could make sense for you. However, before committing to a medical bill consolidation plan, it’s important to consider different options. Read on to learn some tips for consolidating your medical debt.
Tips for Medical Debt Consolidation
Medical debt consolidation is one avenue to consider when crippling medical debts have accumulated to a level that is beyond your ability to pay. Before entering into a medical bill debt consolidation plan, it is important to ask whether the plan makes appropriate financial sense.
You need to determine whether the medical debt consolidation will truly lower the amount of medical debt that you owe or if it will simply prolong financial suffering that could later still result in a bankruptcy filing.
You need to determine whether you have the patience and fortitude to commit to the process, which can often take years to complete. And finally, you need to recognize that since medical debt frequently does not come with interest rates attached, that it can easily not make sense to consolidate medical debt by paying it off through proceeds generated from a personal loan, credit card, or home equity line of credit.
Managing Your Medical Debt
Given the high cost of medical care, you must make every effort possible to responsibly manage your medical debt. Medical billing is complicated and mistakes do occur. 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 doctor or hospital. Contacting your medical provider when you are not immediately paying your bill in full is a good idea, because this shows the billing office that you are not ignoring the debt. Plus, there is a 180-day waiting period before delinquent medical debt appears on credit reports to allow for sufficient time to resolve disputes with insurance companies.
How To Consolidate Medical Bills
If you can’t afford to pay your medical debt, settlement may be a viable option for you. Just as in the case with delinquent credit card debt, creditors may be willing to accept a lower payoff balance on an account that looks like it could soon turn into a non-recoverable asset for them.
A skilled and reputable credit counseling agency or debt settlement firm can help you navigate these waters by effectively negotiating with creditors. 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 significantly less incentive to settle than a hospital or doctor billing office.
Try to negotiate installment payments whenever possible and consult with a skilled professional debt settlement firm who can help negotiate further with creditors and work out a reduced payoff amount. In the majority of circumstances, paying off a settlement-reduced medical debt will result in the removal of the negative mark of collections activity from a credit profile. If medical debt settlement isn’t feasible for you, alternatives include pursuing a medical debt consolidation loan, personal bank loan, home equity loan or line of credit (HELOC), or as a last resort – paying your medical debt off with a credit card.
However, all of these alternatives will involve taking out additional debt with interest rates attached – so they can only make financial sense when you have a variety of different debts outstanding beyond the medical debt, all of which can be consolidated, some of which have higher interest rates attached than the new rate charged on your consolidation loan.
Plus, in the case of the HELOC, which is a form of secured debt, failure to repay in a timely manner could eventually lead to foreclosure on the underlying property.
Debt Management Plan
Remember, if you’re facing significant medical debt that results from an unforeseen illness or accident, there is always a way to solve the problem. Another option available to those facing a steep pile of medical debt is the debt management plan (DMP), which involves streamlining multiple monthly debt payments into one consolidated monthly payment, often resulting in a lower blended monthly interest rate and more readily managed monthly payment.
When medical debt is consolidated within a DMP, the resulting debt relief eases the aggregate burden on the debtor. Debt management plans often take three to five years to complete, so they should only be entered into with that longer-term time frame in mind. However, the unplanned nature of medical debt often makes it the debt that pushes someone over the edge financially – but with careful planning, budgeting and commitment, a DMP can be an appropriate vehicle for medical debt consolidation.
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.