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Debt Consolidation Facts

1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair Isaac).

2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% - 30%!

3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.

Mounting Medical Debt Needs a Solution

There is much rationale as to how you might end up with mounting medical debt.  As federal statistics show, around 47 million have no health insurance. No medical insurance is the primary basis most people end up with medical debt.  You need medical care, but you have no medical insurance, so you are held personally responsible for those costs. 

Video: Bills & Medical Expenses (Livestrong)

On the flip side, if you do have insurance and your insurance company does not pay your debt, then you will be sought after for payment.  There are those who are fighting their insurance companies today, because their insurance companies have not yet rendered payment due to some conflict yet to be resolved.  You are held personally responsible for your own medical bills, even though you may have been treated for services covered by your own insurance policy.

medical debtThere are others who do have medical insurance, but the coverage is so minimal that more out-of-pocket expenses are required for more complex medical care – e.g., unexpected illness like cancer, emergency room visits, expensive surgical treatment, etc.  Medical care, itself, is becoming much more expense.  Medical costs don’t decrease, in fact, they increase every year.

Actuaries, who calculate insurance rates for insurance companies, are raising insurance rates higher and higher every year based on dynamic data gathered from claims.  Even people with medical insurance have to pay more for their company-sponsored medical insurance, along with higher co-pays for office visits, emergency room visits, prescriptions, outpatient care and other medical care.  These increased medical-related costs cause a greater financial burden, and sometimes result in more out-of-pocket expenses than you can afford.  Even those on Medicare/Medicaid are not immune to the debilitating costs of medical care.  In fact, they are a large part of the population not able to afford the medical care they need.  For many, the result of this snowball effect of increased medical costs results in mounting medical debt.

Medical Debt Collection

Before you can manage your medical debt, you must understand some underlying principles regarding the nature of medical debt.  Medical bills are considered unsecured debt, which means none of your tangible assets are attached to this debt.  For the most part, nothing you have can be taken to satisfy your medical bills should collection activities commence against you.  The exception would be if a judgment is filed against you in court, then the collection agency can begin garnishments against you – e.g., checking account, paycheck.

What actually happens when medical bills are not paid? 

When a medical bill lapses for a period of time without payment, the account is typically turned over to a collection agency.  The collection agency usually reports the account delinquent to the three major credit reporting bureaus.  Unless you monitor your credit reporting, you are, most likely, not aware when this happens.  If you pay off the debt, the negative mark(s) on your credit reports may or may not reflect the account paid in full.  Sometimes these negative marks stay on your credit report for years where they negatively impact your ability to obtain new medical insurance or even future credit.  You may even be denied medical care based on the negative marks in your credit report.

Video: Medical Debt - How to Organize Your Finances

Managing Medical Debt

Now that you understand the kind of action that can commence against you for unpaid medical bills, you should understand what recourse you have to work your way out of the debt.  There are actual debt solutions tailored specifically to address and cure medical debt.  Some of your options are as follows:

  • Payment Plan – Talk to your doctor’s office to see if you can negotiate a payment plan to resolve your debt.  Many now offer this option. 
  • Medical Debt Consolidation – This can be done either through a loan you take out to cover all your medical expenses, or by using credit counseling services or a debt management company. 
  • Settle Medical Debt – You may also want to try to settle your medical debt.  Oftentimes, it is easier to settle medical debt than regular unsecured debt.  First of all, doctors don’t want to go to the effort and expense of suing you.  They want you to be a return customer.  They simply provided you with their services.  Typically, no product was provided in exchange for their bill.  Their loss is more in time spent with you that they could have spent with a paying patient.  You’ll find that they usually will be willing to settle your medical debt for far less than the original bill, sometimes up to 50%.
  • Government Assistance – There are medical debt programs available from local, county or state governments that assist low income patients.  Hospital and doctor’s billing departments are aware of these programs, and will work with the patient to determine eligibility.

The credit counseling or debt management companies can negotiate with your medical service provider(s) to resolve the debt.  The debt will be negotiated to either be paid in full or at a significantly reduced amount, and a single, affordable monthly payment will be determined between all parties.

medical debt solution

Now What?

There are several steps you can take to ensure this does not ever happen to you, again.  See the list below for some suggestions:

  • Educate – Educate yourself on what coverage you actually have.  Read your insurance policies. 
  • Communicate– Keep in contact with your doctor’s office.  If you are unable to pay the full amount or your insurance company is taking too long to pay the debt, negotiate a payment schedule with your doctor’s office to pay on the debt. 
  • Negotiate – Get everything that you can in writing, and note any verbal agreements, along with individuals you spoke to.  If it goes into collection, whether you settle or pay the entire amount, require the collecting agency to report the account as “paid in full” upon receipt of the agreed upon amount.

You deserve better in life than to be bogged down and discouraged by medical debt.  Take charge and take steps to arrive at a working solution.  If you do, you’ll be ready to rise to the occasion on your road to recovery and success.