How to Handle and Pay Off Medical Debt

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There are at least two situations in which you can be saddled by large medical debts. The first and most obvious is when you have medical procedures but you have no health insurance. The second is when you have health insurance, but you end up having to pay a large amount of the expense out-of-pocket,…

There are at least two situations in which you can be saddled by large medical debts. The first and most obvious is when you have medical procedures but you have no health insurance. The second is when you have health insurance, but you end up having to pay a large amount of the expense out-of-pocket, either because of deductibles and coinsurance payments, or because the procedure was excluded by your policy.

Whatever the reason for the medical debt, you will have to be prepared to make arrangements to settle the debt. Fortunately, medical debts tend to be easier to work out than most other types of debt. Here are some ways that you can reduce or even completely eliminate your medical related debts.

1. Check your health insurance and medical bills for errors.

Make sure the hospital’s billing department doesn’t charge you for services you didn’t receive.

Anytime you have a significant amount of medical debt, the first order of business is to go back to the paperwork and make sure that everything is in order.

You first want to look at the medical bills themselves. Here you’ll look for duplicate charges, or charges being made by parties or services that may not have been involved in your treatment. Even if a hospital is an excellent facility, the billing office can still be quite disorganized and errors are more common than we think.

If you discover that any of your charges were either inflated or added erroneously, you’ll need to contact the healthcare provider to make your case. This may involve comparing the bill to any documents you received during or before your treatment. It may also require that you contact the parties involved in your treatment directly to determine what services were provided, and which ones might be suspicious. If they are, dispute them immediately.

Still another possibility is that your health insurance company may have made a mistake in excluding a certain treatment from coverage. You will have to dig deep into your insurance policy in order to determine if that is the case. However, since most health insurance policies have a limited amount of time on appeals, you should begin this process as soon as you discover an error.

Never assume that either the bill from the medical provider or the coverage allowed by your health insurance company are entirely correct. At the extreme, you may have to consider hiring an attorney to level the playing field a bit. If the discrepancy is big enough, this may be the best approach.

2. Set up a payment plan that you can easily afford.

If the amount of money that you owe is completely legitimate – meaning that the bill is correct and so is the health insurance coverage – the next best step is to contact the medical provider billing department to set up a payment plan.

With the increase in medical bills, as well as reduced payments by insurance companies, payment plans have become standard throughout the industry. You will generally find that medical providers are quite cooperative in arranging one. Many will not even include interest charges on the payment plan.

You should approach the medical provider with an offer to make the lowest monthly payment possible. There are at least two reasons for doing this:

  1. It will give you more breathing room in the event that the provider counters with a higher monthly payment, and
  2. the payment will be less disruptive to your overall budget.

If you want to pay off the debt sooner, you can always make a larger payment. But if the payment plan has a low minimum payment, making a higher one will be an option, and not a requirement.

3. Offer to settle the debt for less than the full amount.

Another possibility is to settle the debt for less than the amount that you owe, and this is another arrangement that is not at all uncommon when it comes to medical debt. Medical providers often want to clear the books of old or uncollectible debt, and will often settle the accounts for less than the full amount.

Sometimes this can work with a new debt. Let’s say that you owe a provider $5,000; you offer them $2,500 in full payment of the debt. The provider might accept your offer, or they may counter with a higher number. Either way, you will pay less on the debt than you would if you had not made the offer. And generally speaking, the settlement will not have a negative effect on your credit report.

Even if you have already established a payment plan with a medical provider, you may still be able to settle the balance of the debt for less than the full amount. Let’s say that you have a medical debt that has been outstanding for over a year. The original balance was $5,000, but you still owe $4,000 – the provider might accept $2,000 in full settlement of the balance. That will enable them to get a reduced payment immediately, rather than having to wait several years for full payment.

Any time you enter negotiations to settle, you should never begin by making your best offer. There is a give-and-take process that happens with settlements, and you will need to be fully prepared to increase your offer in order to make it happen.

4. Request hardship consideration.

If you are in a particularly tough financial position, you should not hesitate to request hardship consideration from the medical provider. Some providers will either deeply discount the debt or even write it off completely if you can prove that you are experiencing a financial hardship.

This may require that you supply income, asset, expense, and credit documentation to support your case. The provider may adjust the debt based on your financial information, realizing that you are in no position to make good on the debt anyway.

Have you had any success settling medical debts using any of the above strategies? Leave a comment!

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About Kevin Mercadante

Kevin Mercadante is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry. He lives in Atlanta with his wife and two teenage kids and can be followed on Twitter at @OutOfYourRut.

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