How to Outscam Your Medical Debt

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This is a photo of a large white piggy bank on a pink background. This is a concept photo related to finance and the medical hospital industry,

At just 25 years old, Shay Haberstroh is in the red. And it doesn’t look like she’s getting out any time soon.

The New Hampshire-based content creator has been on permanent disability since 2016, when she was diagnosed with Crohn’s disease, which ultimately ultimately led to the removal of her large intestine. She now lives with an ostomy bag — and around $50,000 worth of medical debt.

Her monthly out-of-pocket costs are around $1000 to $1500 for medications, ostomy supplies, and copays. She also winds up in the ER two to three times a month, often due to frequent dehydration, a difficult-to-avoid consequence of having Crohn’s and an ostomy bag. Each of these ER visits can add anywhere between $500 to $1,000 to her total.

“I’m not able to pay as much to my debt as I wish,” Haberstroh says. “I think I’m really only paying maybe one bill a month.”

Haberstroh is not the only 20-something having to cherry pick which bills to pay. A recent survey from HealthCare.com showed that younger generations are struggling to balance medical debt. In fact, one in four Gen Zers and Millennials with medical debt have missed a rent or mortgage payment because of their debt, according to the poll.

The majority of Gen Z and Millennial medical debt stems from costs related to injuries and accidents, according to HealthCare.com. But chronic disease is also becoming a more common problem among younger generations. Millennials, in particular, “are showing signs of chronic disease — and behavioral health conditions — at an earlier age than their Gen X counterparts did,” Blue Cross Blue Shield reports. In 2019, nearly 54 percent of adults aged 18 to 34 years had at least one chronic condition, and about 22 percent had more than one condition, CDC data shows.

That alone hasn’t resulted in the growing medical debt crisis, though. Inadequate insurance coverage also plays a role. In the HealthCare.com survey, 68 percent of Gen Zers who had insurance and medical debt said that their plan didn’t cover a service they needed, for instance.

The insurance issue is why medical debt is a uniquely American problem; as in, it’s virtually non-existent in other countries. Elsewhere in the world, out-of-pocket costs are more limited, and certain visits are completely free (looking at you, Netherlands), the Los Angeles Times reports. In some places, healthcare is completely free.

In the US, on the other hand, “Medical care is one of the few services that you literally have no idea what it’s going to cost you until after the services have been rendered,” says money expert and business advisor Jannese Torres, founder & CEO of Yo Quiero Dinero, a personal finance blog and podcast. “The complex system of medical insurance, billing differences between providers, and lack of transparent pricing from healthcare providers is a perfect storm that makes people feel powerless to manage medical costs in a realistic way.”

Medical debt can also carry consequences far beyond the financial. “It’s a debt that carries a lot of frustration and feelings of helplessness,” Torres says. “I’ve had clients denied mortgages, loans, and even jobs because their credit scores were hit due to defaulting on medical debt, and it’s terrible.”

In addition to the fact that this type of debt even exists, there’s a huge lack of information about how people can address medical debt once they have it. There’s this misconception that the only option you have is to pay it. But in fact, there are resources for forgiveness — and room for negotiation.

While I’d like to be an optimist and say that America’s healthcare system will suddenly stop gouging people in need, a better bet is to arm yourself with these expert-backed strategies for dealing with medical debt.

Take Your Time

When that medical bill the length of a CVS receipt arrives at your door, don’t pay it. At least not right away. While it can be upsetting to receive a huge bill and it’s preferable to pay them before they’re sent to collections, as of July 1, 2022, there’s now a yearlong waiting period before unpaid medical collections debt will appear on your credit report (an improvement from the six-month waiting period enacted in 2017). So you do have time to haggle. (More on how to deal with a bill that’s been sent to collections below.)

Once you start receiving notices that a bill will be sent to collections, you can also call the billing department of the healthcare provider that issued it, explain that you’re trying to negotiate the total, and ask for a hold to be applied to the bill for a set period.

All that to say: you shouldn’t ignore your medical bill, but don’t feel bullied into paying it off before you’ve looked into whether you can bring down the total cost.

Look For Medical Billing Errors

Mistakes happen. In fact, a 2016 analysis from Becker Hospital Review found that as many as 80% of medical bills contain incorrect charges. If something looks off about your total, ask the billing department for an itemized receipt, advises Tori Dunlap, author of the NY Times bestselling book “Financial Feminist”.

Just getting an itemized receipt may result in you seeing a smaller total. But you can also look through each charge to make sure it lines up with the care you received. Resources like the Centers for Medicare and Medicaid Services let you look up what medical codes mean, to help you spot possible errors on your bill more easily. You’re looking for things like a 15-minute preventive checkup being filed as a 25-minute diagnostic visit, which could lead to a higher charge.

If you have insurance, also make sure you understand your plan, what procedures and service providers are in or out of network, your deductible, and your out-of-pocket obligations, Torres says. You want to make sure that the billing department hasn’t charged you for using an independent or out of network provider by mistake, for example. Having this information will allow you to negotiate with as much ammunition as possible.

How to Dispute Medical Bills

Even if your bill seems accurate, you may be able to reduce the financial burden by negotiating. “If you want to negotiate a medical bill, you should start by contacting the billing department of the healthcare provider or hospital where you received treatment,” Torres says. You can usually find their contact information on the medical bill itself. “When you speak with the billing department, you can explain your situation and ask if they offer any discounts or payment plans that might help you lower your bill,” she says. You can also ask if they’re willing to negotiate the total amount owed.

You may wind up being transferred to different people or departments. That’s fine; just ask to be connected to the person who has the best chance of being able to help you, and be patient and polite, but firm.

When negotiating, it’s not always necessary to offer a specific number that you can pay upfront. But “if you have a clear idea of what you can afford, it can be helpful to communicate this to the billing department so they understand your financial situation,” Torres says.

It’s also important to remember that you can negotiate regardless of your insurance status — whether you are fully insured or underinsured. “However, those who are underinsured or have high deductible plans may have more leverage in negotiations because they are more likely to be responsible for a larger portion of the bill,” Torres adds. “In any case, it’s always worth reaching out to the billing department to see if they are willing to work with you on a payment plan or negotiate the bill.”

Tap Into Medical Debt Relief Resources, Like Charity Care

Charity care refers to hospital assistance programs that provide free or discounted medical care to “patients who do not have insurance and patients who have insurance but are underinsured,” according to the The Consumer Financial Protection Board (CFPB).

“Each hospital or healthcare system may have its own charity care program, which is often funded by donations or grants,” Torres explains. The program may provide free or discounted medical care to eligible patients based on their income level and other financial circumstances. The process for applying can be found on the CFPB website.

In an ideal world, the process would work seamlessly and everyone would be approved. But if it doesn’t, you have a few more options, Torres points out, including consumer assistance programs, designed to help those experiencing problems navigating coverage (this state map will help you find assistance in your state or territory) and Centers for Medicare & Medicaid Services, which “offers detailed information about your protections against surprise medical bills,” per Torres.

Prioritize Your Debts

Your mortgage and day-to-day care costs are going to be more important than medical debt, Torres says. That means, “if you have to delay payment on medical debt to keep a roof over your head, so be it,” she explains. Don’t feel bad for having to do so.

But if you do have to delay paying medical debt, your bill may go to collections. “If your medical bill goes to collections, it means that the healthcare provider or hospital has turned over your unpaid debt to a third-party debt collector,” Torres explains. At this point, you’ll need to work with the debt collector, instead of the healthcare provider, to resolve the debt.

The steps for handling a debt that’s in collections is similar to handling a bill before it hits the debt collector’s desk. Here’s what Torres suggests:

  • Verify the debt. Remember: mistakes happen and you want to make sure that what they’re asking for actually lines up with what you owe.
  • Negotiate a payment plan. Debt collectors are able to negotiate debt, too. If you are unable to pay the full amount owed, try to work out a lower monthly payment or a reduced settlement amount.
  • Get everything in writing. A written agreement is key to ensure that the terms of your payment plan or settlement agreement are clearly outlined.
  • Keep records. You want to make note and keep track of all communication with the debt collector, including phone calls and letters. “Sometimes, debt collectors and consumers don’t remember their conversations the same way,” the CFPB site states. “If you agree to a repayment or settlement plan, record the plan and the debt collector’s promises. Those promises may include stopping collection efforts and ending or forgiving the debt once you have completed these payments.” You want to get those agreements in writing before you make a payment.

The TLDR: medical debt can feel incredibly overwhelming, and at times more debilitating than the injury or condition you’re being charged to have treated. But having grown up a partial caretaker to a parent on permanent disability, I can say from experience that these tips above can and do work. So negotiate with confidence, fact-check those bills like hell, and demand the discounts you rightfully deserve — because no one should feel bad for taking care of their health.

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