It may come as no surprise that Americans are stressed about medical debt and the rise of healthcare costs. With the average family insurance premium growing 54% in the past ten years, one-third of Americans are concerned about paying their medical bills. Unfortunately, close to one-third of workers already carry some form of medical debt.
Luckily, there are some options for the millions of Americans struggling with medical debt, as well as some solutions to help avoid future medical debt.
How Much Do Americans Spend on Healthcare Each Year?
US healthcare spending increased 4.6% to reach $3.6 trillion, or $11,172 per person in 2018, according to Centers for Medicare & Medicaid Services . While this data only highlights the national expenditures for health care, it only takes into account those who are covered by some type of insurance.
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According to recent data from the Kaiser Family Foundation (KFF) , about 158 million Americans, or around 49% of the country’s total population, have employer-sponsored health insurance (also called group health insurance).
For 2019, the average annual dollar amounts covered workers contributed were $1,242 for single coverage and $6,015 for family coverage, according to the 2019 Employer Health Benefits Survey . Typically, employers pay a portion of health insurance costs, so employees don’t pay the full cost of their health care.
How Many Americans Struggle With Medical Debt?
Despite employer-sponsored health plans covering some of the costs, some Americans struggle to pay their medical bills.
In fact, approximately 137.1 million adults reported medical financial hardship in the past year according to the Prevalence and Correlates of Medical Financial Hardship in the USA study . This is especially true for adults ages 18 to 64 years old and for those not covered by health insurance.
Although the number of families having problems paying medical bills in the past 12 months decreased from 19.7% in 2011 to 14.2% in 2018 . PDF File, medical debt continues to be a problem for many Americans.
What Happens If Medical Debt Is Not Paid?
Even with an overwhelming amount of medical debt, the worst thing to do is ignore it. Depending on the state, a medical provider might charge a late fee for bills not paid on time. Also, the provider may even charge interest on those bills if payments aren’t made at all.
The provider may charge interest on bills if payments aren’t made at all.
If medical bills go unpaid, after a few months the provider might pass the debt over to a debt collection agency.
If the medical provider does decide to give the debt to a debt collection agency, the debt might immediately appear on the debtor’s credit report and affect their credit score.
The debt collector will take steps to collect the bill. If the debt is not collected, the provider may take it even further and take legal action.
While US laws don’t allow debtors to be imprisoned for unpaid debts, they could face another consequence, such as wage garnishment. If the case goes to court and a judge rules in favor of the medical service provider, there’s a chance the debtor’s wages could be garnished.
In simple terms, this means that payment will be taken out of their paycheck and sent to the provider.
Medical Debt Relief Options
Fortunately, even if medical debt is plaguing a person’s finances, there are solutions to help them either ease the financial burden of the debt or get rid of it for good. But medical debt is often a very sensitive topic and the suggested solutions may not be a good fit for everyone’s circumstances.
Since everyone has a unique financial situation, it’s wise to contact a professional before taking action. With this in mind, here are a few suggestions to help get a handle on medical debt.
1. Medical Debt Payment Plans
Because healthcare services are often costly, contacting medical providers to ask if they offer payment plans might be one plan of action to consider.
Some medical providers may offer payment plans to pay off debt in installments instead of paying it off all at once, which might make the debt more manageable.
Reaching out to the hospital or medical office can help determine if there are payment plans available. However, not all medical providers may offer this solution. Some providers may even require full payment at the time of service.
Others may request a payment plan be set up before a service, and if this option isn’t considered in advance, the offer might not be available later.
Also, the medical provider may set up a payment plan that’s too expensive for a person’s monthly budget. If this is the case, a payment plan may not help with their current medical debt situation.
2. Negotiating Medical Debt
It may feel counterintuitive or inappropriate to negotiate medical bills, but some providers actually expect it. While it may seem awkward at first, negotiating medical bills can help make them more manageable. Additionally, negotiating may even help avoid a credit score ding, or worse, getting sued.
For starters, reaching out to the provider’s billing department directly to see if negotiation is possible might be an option to start with. Many providers have financial departments that can determine if patients qualify for discounts or reductions.
Remember, when negotiating, try to be as polite as possible. But it can be helpful to be persistent, too. Being rude to the provider probably won’t work very well. Taking the high road can help make the negotiating process a lot more manageable.
Another point to remember is that providers may favor cash. So those who can afford to make a lump sum payment might consider asking if the provider offers a discount for a cash payment.
3. Working With a Nonprofit Advocate
If the medical bills keep piling up, it may be worthwhile to consider finding a nonprofit advocate or reputable credit counseling organization that offers assistance with managing money and debts, creating a budget, and providing resources to help consumers pay off the debt that’s dogging them.
Certified counselors that have been trained to help individuals create a plan to solve financial concerns can be found through the US Department of Justice . These organizations offer counseling and debt management plans and services.
One solution credit counselors may suggest is a debt management plan.
One solution credit counselors may suggest is a debt management plan. These plans may help the borrowers get their debt under control.
With one type of debt management plan, the borrower makes a lump sum payment to the credit organization, and then the organization pays the creditor in installment payments.
If deciding to go this route, make sure not to confuse a credit counseling nonprofit organization with a debt settlement company. In contrast to credit counseling nonprofits, debt settlement companies are profit-driven.
A debt settlement company negotiates with creditors to reduce the debt owed and accept a settlement—a lump sum—that’s less than the original debt. However, these companies can charge a 15% to 25% fee on top of the debt settled. While some of these companies are legitimate, consumers are cautioned to be wary of scams related to debt settlement.
Some deceptive practices include guarantees that all of a person’s debts will be settled for a small amount of money, that debtors should stop paying their debts without explaining the consequences of such actions, or collection of fees for services before reviewing a person’s financial situation. Researching a company’s reputation can be done through the state attorney general’s office or the state consumer protection agency .
4. Using a Personal Loan
A personal loan might also be a solution for tackling medical debt and may offer lower interest rates and more flexibility than resorting to credit card debt.
Using an unsecured personal loan to pay off medical debt is similar to other uses for personal loans, like home improvement costs or credit card consolidation.
Similar to other financing options, lenders will review an applicant’s credit history and financial health (among other factors) when determining eligibility and the interest rate qualified for. The amount of money borrowed is paid back in installment payments over the terms agreed upon between the lender and the borrower.
Personal loans may help consolidate all of a person’s medical debt via a medical loan—which can be used to pay off multiple medical providers. At that point, the borrower would just be responsible for paying back the personal loan, which may help simplify the repayment process because there won’t be multiple bills to pay every month.
Taking the Next Steps
If an unsecured personal loan seems like a viable option for your financial situation, comparing lenders is a good first step. Some lenders may charge an origination fee, a prepayment fee, or other fees. Reviewing potential interest rates and terms to see which lender is more advantageous and makes financial sense for your situation is also important.
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