Managing Your Debt When Medical Bills Are A Large Portion of It

Guest post from Linda Richardson.

Hello there! I hope that amid the craziness of the COVID world you and your family are making it through! Our economies are gradually starting to reopen and people are returning to work, but something that may be on many people’s minds is how to pay back significant medical bills that existed before the COVID shutdown, or because of one suffering from the disease.

Thankfully, our doctors work hard to keep us healthy, but that comes at a price. Once we leave that treatment facility, there is often another battle we have to fight, a fight that often drags out for years.

You may ask why? Why did this medical bill turn into a nightmarish world?

Read the statistics about medical debts. This can help to give you some perspective on this issue.

  1. Medical bills affected approximately 1/6 of Americans’ credit scores in 2019.
  2. Banks have denied approximately 40% of mortgage applicants who have unpaid medical bills.

The problem? Banks are concerned that these people may not pay their medical bills in full, as well as not being able to pay their mortgages/rent.

Does unpaid medical debt hurt your credit score?

Definitely, yes. The hospital authority will hand over the bill to the debt collectors if you do not pay the bill in full on time. The collection agency will then report the delinquency to the credit bureaus. A report from these collection agencies to the credit bureaus can make a drop to your credit score by about 50 to 100 points.

If you’re looking to buy a house or rent a new living space, a drop like that can make your odds of approval more difficult (depending on the mortgage company, or landlord). But there are steps you can take to mitigate the effects of unpaid medical bills.

Read these following points attentively to arm yourself with the proper knowledge before this situation arises.

Make sure you understand your health insurance policy coverages so you know what is and is not covered.

Your insurance company has to deal with thousands of insurance policies regularly, so it is quite common for them to forget some details of a particular policyholder’s plan.

If you have a thorough understanding of your policy coverages, you can dispute charges that should have been covered by the insurance, but were not. The policymaker may otherwise refuse to pay off the medical bill, claiming your illness was out of the policy’s coverage. You have to ask your policymaker to review their decision and state what is correct.

Contact a medical bill advocate if you need someone who will negotiate with the hospital authorities on your behalf.

Medical bills are frequently very high when someone is hospitalized, leaving tens of thousands in charges not covered by your insurance. Consulting a medical bill advocate, in this situation, is one way you can negotiate the charges with the hospital to make your total bill more reasonable.

These advocates help you reduce your due amount by spotting where the hospital overcharged you. Apart from checking your bills, they will negotiate on your behalf directly with the hospital.

If a patient is already disturbed with the burden of huge medical cost, why would he or she agree to spend extra money on an advocate?

When there is a large amount at stake, and the opportunity to reduce that amount (if it is inaccurate), hiring an advocate would more than pay for itself.

The fees of a medical bill expert primarily depend on his or her work procedure. The advocate may charge you for an hourly, weekly, or monthly basis depending upon the nature of your medical bill. Contact a local medical bill negotiator in your area to set up a consultation.

Medical credit cards – hold its hand when you won’t get full coverage from Medicare/Medicaid or insurance

You can opt for a medical credit card if your insurance policy does not cover your total medical cost. Your healthcare provider will give you a Medical Credit Card. You can tackle expensive medical expenses by using the Medical Credit Cards.

For example, you may choose to use a CareCredit Card.

Costly procedures may be kept from delinquency in payment by using this type of card. They will often give you an interest-free offer for the first few months. Whenever you are in your financial plan, incorporate this payment into your monthly budget and plan to pay it off as soon as possible. Don’t let this bill grow because of the interest rate or because of falling behind on payments!

Can I take out a debt consolidation loan to pay off the medical debt?”

Yes, you can opt for the debt consolidation loan to repay your outstanding balance. Then use the single monthly payment option to repay the outstanding balance every month. You are saved from paying that large amount all one time if you do not have the cash available.

If your medical bills have a high-interest rate, you may also be able to do a balance transfer method to pay off your credit card debt. You may transfer your medical debt with a high-interest rate into a new credit card. The new card usually comes with a promotional offer to repay your medical debt with 0% interest rate if you transfer your outstanding balance.

The benefit can be a reduction in that high interest rate so that you can pay off the debt more quickly. You may get a 0% interest rate too while paying off your outstanding balance in the introductory period or the promotional period. Just as with a consolidation, though, don’t let the balance grow on you by delaying your plan to pay it off!

Open a medical emergency fund (because life happens)

This here is not just a philosophical sub-point, but one that is very real and practical. You can curtail your other expenses and discretionary spending, but it is sometimes impossible to cut the medical costs, especially for those with chronic conditions.

In response, you may want to consider opening a medical emergency fund. Save an amount every month in the account until you reach an amount that makes your family feel comfortable. Ultimately, you will have some protection from incurring unnecessary medical-related credit card debts.

Lack of knowledge and experience often pushes us to make serious mistakes regarding our policy coverages, as well as options for paying back medical expenses. I would like to help you learn this before the situation is thrust on you.

It is important that, especially in light of the COVID crisis, we learn how to control our spending and plan for the times that life will throw curveballs our way. Medical expenses will come at some point, and hopefully these strategies will help you weather those storms.

Best wishes!

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