Confronting Medical Debt: A Personal Experience
Recently, my one-year-old son had a visit to the ER. Thankfully, he’s fine, but his medical bills are a different story. We had to take an ambulance, and he underwent several tests, some of which insurance won’t cover. So far, we’re looking at over $3,000 in bills.
This isn’t my first encounter with medical debt. When my son was born, there were complications that led to a NICU stay for a few days, resulting in a hefty $4,000 bill. We ended up charging it to our credit card, which, in hindsight, wasn’t the smartest move. I thought it was the easiest solution at the time, especially since the hospital had our credit card info. Now, I realize it’s probably better to negotiate upfront. I really don’t want to make that mistake again, but I’m unsure about my options now. My husband and I both work full-time and likely don’t qualify for any low-income assistance. Plus, having kids has really taken a toll on our finances. What if I can’t pay? How long before it affects our credit score or gets worse?
There’s no need to elaborate on how broken our healthcare system is. The reality speaks volumes: nearly one in five American households faces medical debt, and it’s a leading reason people file for bankruptcy. Even with health insurance, the coverage can be inconsistent, leaving many stranded with bills that feel unmanageable.
Unfortunately, this situation is all too common. “People’s out-of-pocket expenses often don’t align with what they can afford,” says Allison Sesso, the CEO of UNDUE Medical Debt, a nonprofit that helps those with medical debt. “It’s widely recognized, and that’s why this kind of debt requires a unique approach.” After talking to Sesso and some other experts, I wanted to find out what steps I could take next.
Trust your instincts here! “Don’t rush to pay medical bills with a credit card or open a CareCredit account until you fully understand your borrowing and payment options,” emphasizes Thomas Nitzsche, president of the American Association of Financial Counseling. “Once these bills hit your credit card, they transform into consumer debt, which carries higher interest and fewer repayment options, impacting your credit score faster.”
Even if you share your credit card details with a healthcare provider, it’s not standard practice for them to charge you without your consent. In New York, for instance, there’s no requirement to disclose credit card info before treatment, so it’s completely fine to decline if you’re asked.
Typically, you’ll have at least 120 days before unpaid bills go to collections, sometimes even longer. You’ve got some time to figure things out.
When you get that bill, prepare to make a call to the billing department. It’s advisable to be settled in, perhaps with a snack, and to inquire about two key things: charity care and general financial assistance. Both options can potentially help reduce your bills.
“Charity care is a program that reduces or alleviates medical expenses for those who meet certain income guidelines,” Walker explains. Nonprofit hospitals must offer this to maintain their tax-exempt status. If you think you might not qualify due to income, ask about other financial aid services they may have. There are also tools available that can help you assess your eligibility.
Interestingly, applying for charity care, even if you believe you won’t qualify, can yield positive results. Nitzsche shares that simply applying can open up more options regarding payment terms. He experienced longer repayment periods with zero interest just from applying, even though he didn’t qualify for charity care.
You’re also allowed to apply for charity care retroactively; timelines vary by state, but you typically have up to 240 days after receiving your bill to do this, potentially leading to refunds on what you’ve already paid.
If charity care isn’t an option, the billing department will probably help you set up a payment plan—but you want to tread carefully. Your next move should probably be to request an itemized bill. “Often, simply asking for one can lead to a bill reduction,” Walker advises. “I’ve seen it happen.”
Yes, those bills can look like a jumble of codes, but reviewing them is worth it. Websites like Healthcare Bluebook and Turquoise Health can provide insight and allow you to compare with standard costs. You can even look up specific codes to check for overcharges, as errors can be alarmingly common in medical billing.
If somehow your bill checks out, and you still can’t pay it all, your next step is to contact the billing department and ask, “What will you settle for?” It’s a smart move to directly inquire about how much the hospital would accept as a full payment. Usually, if you can pay upfront, you might get a discount of around 20%. Ideally, aim for around 30-50%. Once, I called to negotiate a $1,300 bill and got a reduction of over 70%.
But here’s the catch: You’ll need the cash ready to pay that settlement amount right away. If you can scrape together somewhere between 50-70% of the bill, that could be a good route. After that, you’re all set.
“Aim for a zero-interest payment plan,” Sesso suggests. If you can avoid it, steer clear of medical credit cards. Going through the hospital directly will save you money long-term.
Being open about your financial situation is crucial. Share your income and expenses, and provide a feasible monthly payment that works for you. “A good rule of thumb is to keep monthly payments at around 3-6% of your take-home pay,” says Sesso. Anything more could stretch you too thin.
If the hospital doesn’t agree to your terms, don’t be discouraged. Hang up and call back the following week. “Hospitals want you to pay as much as possible before they write off the debt,” Sesso notes. If you show you’re willing to negotiate, they generally come to the table.
It’s worrying to think how medical debt impacts credit scores, but in many states like New York, most medical debts can’t even be reported to credit bureaus. Authoritative figures indicate that medical expenses under $500 generally won’t harm your credit either. If you do end up with medical debt that could affect your score, it usually takes about a year for it to make an impact—provided you haven’t charged those expenses to a credit card. In that case, they shift into consumer debt territory.
Many individuals try to ignore unpaid hospital bills, but often, after several months or even a year, those debts end up with a collection agency. And when that happens, you’ll certainly know it. Collectors are persistent. If you reach that point, settling with them can often result in paying significantly less compared to dealing with the hospital. Some people decide to wait for their bills to go to collections, though you’ll need enough cash set aside to make this option work.
I should also mention that avoiding collection calls is an option for some folks, but that carries a lot of risks. A collection agency could take legal action, which could lead to wage garnishments or claims against any assets you own.
Be aware that several nonprofit services exist to assist those in similar circumstances. Organizations dedicated to addressing excessive medical debt and local patient advocacy groups can be valuable resources. Best of luck! It’s unfortunate to find ourselves in such a common predicament.
Email your money challenges: mytwocents@nymag.com
