How to Get Out of Medical Debt

Of the Americans with health insurance, approximately 20 percent of those under 65 reported difficulty paying medical bills according to a survey conducted by the Kaiser Family Foundation. That number more than doubles to 53 percent of those without health insurance. Staggering medical debt is not an isolated problem in this country.

Although recently-conducted studies confirm that crippling medical debt has become less of a widespread problem since the Affordable Care Act became law, the fear of unmanageable medical bills is more real today than the fear of being ill.


of those under 65 reported difficulty paying medical bills.

of those under 65 without medical insurance reported difficulty paying medical bills.

Knowing the options available for assistance with mounting medical bills is helpful even if you are currently in good health. There are governmental programs available for those who qualify. If you already face mounting medical bills, there are a variety of paths that might be open to you, depending on specific circumstances.

Some or all of the following can help:

A payment plan

Medical cards

Medical loans

Unsecured credit options

Tapping into retirement funds

Home equity

Unfortunately, substantial debt can become a reality, whether it stems from the cost of treating an illness or injury for yourself, your spouse, or is related to caring for a family member with chronic disease. Ongoing bills related to senior care also constitute a financial burden, either for the individuals or for caregivers and family members.

Get Organized and Have a Plan

It is important to have documentation of medical procedures and charges for ongoing medical care. Especially if it involves hospitalization, specialized treatment, or expensive medication.

Start a Chronological file
Keep every piece of communication from your medical provider. This includes things like documenting dates and recommendations, physician referrals, prescription charges, bills received, payments made, and written demands for payment. Document discussions about payment plans or requests for debt relief. Refer to your insurance plan if you have one and keep all records together.
Read, Review, Repeat
Prior to any medical treatment, thoroughly review any written materials and recommendations. Make certain you understand potential charges. As a patient, except in emergency situations, you have the right to choose alternatives. You can ask, in advance, the anticipated cost of treatment. Being prepared is better than being surprised.
Hold Your Health Insurance Provider Accountable
If you have insurance, as more than 90 percent of Americans have today, know the limits and provisions of your coverage. It is never wrong to investigate a bill, or to demand an explanation for a charge that is disallowed. Remember, it never hurts to ask.

Tips for Dealing with Medical Bills

When faced with staggering debt that might lead to bankruptcy, foreclosure, or other personal hardship, it is important to act quickly. Further, take a pro-active stance to protect yourself and your existing assets. A 2016 Kaiser Family Foundation study noted that more than half of all debt collection actions were initiated for medical debts. Moreover, medical bills were a factor in half of American bankruptcy filings.

The first step toward resolution of unpaid medical debt is to identify the charges. Average cost of a hospital stay can currently be upwards of $5,000 a day! Bills escalate quickly, so the faster you act, the better off you will be. Seek outside help. Consult with your medical professionals and insurance provider, then take every opportunity to negotiate for relief.

Explore All Your Options

Although in hindsight you may wish you had made better choices beforehand, deciding how to pay off medical debt fast is not only an exercise in persistence but also in ingenuity. Among the options that are available to you are:

If your physician, clinic, or alternative healthcare provider does not offer a plan to pay medical bills over time, talk to your bank or credit union. Hardship repayment plans are frequently available to those with previously acceptable credit standing and identifiable assets. If you owe large sums, you or your financial adviser might ask that late fees and accrued interest charges be waived or reduced. Keep in mind you will most likely need to submit a detailed budget plan, but demonstrating a willingness to pay over time is a point in your favor.

A medical credit card can offer peace of mind while allowing you to pay off large bills over time. Essentially, it’s an unsecured loan used to finance a medical procedure such as lasik eye surgery, bariatric procedures, or major dental work. There are a number of providers, and you should shop in advance for a plan that suits your needs. Some “bad credit” medical payment cards are available at low interest rates. It’s important to read the fine print before agreeing to the terms.

If you have a personal line of credit, you can use it to pay medical bills. Personal loans for medical expenses can be an option for a planned procedure or to consolidate medical bills. But they are expensive, with interest rates ranging from six to 36 percent. If you are planning cosmetic surgery or facing expensive elective surgery, it is wise to explore options such as provider payment plans or medical credit cards before considering such a loan. The lower interest rates are available only to those with excellent credit history. Varying terms are available from different companies, but all include some type of origination or qualification fee and a detailed application, much like a home mortgage. A zero interest credit card, if you can qualify for that introductory rate, can be a possible source of funds. But you’ll want to pay it off before interest charges are levied, usually within six or 12 months.

Hardship withdrawals are permitted from a 401K for medical expenses. But the amount may be limited only to what you, as an employee, have contributed. Under some plans, however, employers allow you to request a loan from your retirement account and it’s not necessary to specify a reason. For payment of medical debt, dipping into retirement funds can be a viable option. It’s important to remember that early withdrawals, even under the hardship provision, are still considered income. This means they will be subject to state and local taxation, and an additional IRS penalty of 10 percent. There are other legal stipulations and requirements that you will want to check before you dip into your 401K.

Pulling funds out of other types of IRA accounts is permissible under certain circumstances. In general, if medical expenses total more than 7.5 percent of adjusted gross income, the 10 percent early withdrawal penalty does not apply, even if you are under age 59 1/2. Medical expense exemptions apply if you are temporarily unemployed and need funds to pay for continuing medical insurance, or if an illness or injury results in permanent disability. Check all the rules to evaluate the pros and cons of raiding retirement funds.

A Home Equity Line of Credit (HELOC) is a resource for paying unexpected medical debt in a lump sum. This gives you time to repay the secured loan over time and under reasonable terms. These terms can be based on the amount of equity you have built up and overall financial stability. A HELOC is, in effect, a second mortgage on your home. So using funds to pay off medical debt might jeopardize your home security without a solid budget plan to repay the loan. Also consider required closing costs and the effective interest rate charged.

Medical Bills and Your Home

Different states have differing regulations regarding property seizure and varied rules governing liens on property. There is little direct action that a doctor or hospital can initiate that would result in loss of your home for non-payment. Homestead laws in many states serve as additional safeguards for your property. But that doesn’t mean that a judgment against you won’t affect your ability to remain in your home. With serious medical debt, your creditworthiness will be affected, and poor health can lead to other difficulties.

Take Action

The best advice available for dealing with medical bills and mounting debt is to act immediately. Check all billings carefully, negotiate when possible to reduce the total amount due, hold your insurance company accountable for extraordinary charges, and consult with a medical bill advocate if warranted.

Medical debt can place a devastating burden on any budget, and the options available for payment solutions are sometimes tough to find. Advocacy groups exist, and direct negotiation is often effective as a way to reduce total charges.

If you need to pay off medical debt fast, one way might be to sell your home fast, for cash, with HomeGo. This can alleviate stress and allow you to regroup and move on to a better debt-free lifestyle.

Schedule a no-obligation home tour, or talk to a HomeGo agent today.

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Check out more of our information on medical bills.

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