8 ways to sidestep high-cost medical debt


If you are diagnosed with a serious illness, medical bills might be high on your list of worries, but taking action early instead of later can keep your finances in the pink. 

A health crisis can lead to overwhelming medical debt, even if you have good insurance, according to the Kaiser Family Foundation, a nonprofit organization that focuses on national health issues. And according to the Consumer Financial Protection Bureau, more than half of bad debts weighing down credit reports are medical debts.

If you're insured, the Affordable Care Act limits your yearly out-of-pocket costs for in-network care to $6,600 in 2015. Still, "That's a whole lot more than most Americans have," says Karen Pollitz, a senior fellow at the Kaiser Family Foundation. And debt can completely spiral out of control if you lack insurance, Pollitz says.

8 ways to sidestep high-cost medical debt

That's what happened to Houston resident Vannessa Wade a few years ago after she woke up unable to move due to a flare up of sickle cell anemia, a serious blood disorder. She was flown by helicopter to a major hospital, stayed in the intensive care unit for 11 days, then got hit with more than $40,000 in bills.

Because she was between jobs, she had no insurance. However, by applying for the hospital's charity care program, Wade was able to reduce her debt to $3,000 and get on a payment plan. "I instantly felt better," Wade says.

She recommends that while it's important to focus on getting well, reducing the stress of medical bills can help you get further down that road more quickly. "Create a plan to protect your pocketbook," she says.

If you or a loved one is facing a serious illness, here are eight ways to avoid getting deep in debt:

1. Talk to your doctor. Tell your doctor you're concerned about treatment cost, says Saundra Dalton-Smith, M.D., an internist, author and founder of "Your doctor is your best resource," Dalton-Smith says, adding that doctors typically maintain lists of national and local programs that offer help to patients. For example, your doctor can ask a social worker to help you apply for a pharmaceutical company patient assistance program that offers free or discounted medications. Or, she can refer you to a community group that pays for drugs or medical equipment. "A lot of these resources aren't listed online or in the phone book," Dalton-Smith says.

2. Negotiate if necessary. If you're uninsured, or if your insurance doesn't cover a certain treatment, talk to your health care provider about price upfront, says Michelle Katz, a licensed practical nurse and author of "Healthcare Made Easy." She says: "It's much easier than trying to negotiate afterward." Many hospitals and doctors will give a discount of about 40 percent to uninsured patients, says medical billing expert Christine Kraft, owner of MedReview Solutions. Also, ask if the hospital or provider has a charity care program, Kraft recommends, adding that the hospital likely will ask you for tax returns, pay stubs and bank statements to see if you qualify. "They might write off a lot of the bill," she says.

3. Check your coverage. If you're insured, look at the summary of benefits for your plan. "It's amazing how many people have no idea what their deductibles are or what's covered," Dalton-Smith says. If you need surgery or a test such as an MRI, your insurer might require precertification, which confirms your eligibility, beforehand. For example, Aetna requires precertification for all inpatient and some other procedures. "It's usually for big-dollar items, but every insurance policy is different," Kraft says. Your doctor must get the precertification, but make sure it's been done or you could be stuck with the entire bill, Kraft says. Get the pre-certification number from your doctor, she recommends. "I call the insurance company, too, because I've seen so many snafus," she says.

It's amazing how many people have no idea what their deductibles are or what's covered.

-- Saundra Dalton-Smith
Internist, author, founder,

4. Stay in network. Make sure each of your doctors is part of the network of providers for your insurance plan, Kraft says. If you go out of network, you typically have to pay a higher percentage of the bill and meet a separate deductible for out-of-network care, she says. Be careful: it's easy to inadvertently go out of network if you land in the hospital or need surgery, Pollitz says. The anesthesiologist who sedates you, the radiologist who reads your X-rays, the pathologist who looks at your slides and the critical care specialist who stops by your bedside might all be out-of- network. "Then you're just kind of stuck," Pollitz says. However, if you had no choice -- for example, you were rushed to an out-of-network emergency room by ambulance -- you can appeal an out-of-network claim and ask your insurer to treat it as in-network, patient medical billing advocate Beth Morgan says.

5. Stay on top of your bills. Even if you feel unwell, don't ignore your statements. After about 90 days of nonpayment, many hospitals or doctors will turn your account over to a collection agency, Pollitz says. "That can hurt your credit for years," she says. Medical collections carry less weight in the new FICO scoring model, but some lenders use other models, and collections still mar your credit report. It can be tough to deal with paperwork when you're sick, though, says Pollitz, who had breast cancer. "I was so sick that I used to let my mail pile up in shopping bags," she says. In that case, ask a close friend or family member to open envelopes, call the providers and ask them to put your accounts on hold until you feel better, Pollitz says. On the upside, new rules put forth by the credit bureaus Equifax, Experian and TransUnion, will keep unpaid medical bills off your report for a 180-day waiting period in order to let insurance payments roll in.

6. Look for mistakes. Before you pay your bills, check them for accuracy. "I've found there are always mistakes," says Katz, who negotiated bills after her ex-husband suffered a cardiac arrest and after she was hit by a car in a crosswalk. For example, she says her ex-husband was overcharged for a medication because the dosage was entered incorrectly. Ask for an itemized bill and compare it with your insurance company's explanation of benefits form, matching them up by dates of service, Kraft says. Katz recommends also cross-checking against your medical records. Make sure you're not being "balance billed," which is when the care provider bills you for the difference between the rate your insurer pays and their standard rate, Kraft says.

7. Enlist help.  If you're overwhelmed by piles of complicated bills and can't handle checking for mistakes or negotiating, there are several ways to get assistance. First, the Affordable Care Act provides funding for consumer assistance programs to help policyholders navigate health insurance problems, Pollitz says. If your state has a program, and most do, your insurer is required to put the phone number on your statements. Or a friend or family member could do the job, Morgan says. "You want someone who's calm, cool and collected," she says. If neither of those options works, you can hire a medical billing advocate, Morgan says. To find one, check with the Alliance of Professional Health Advocates.

8. Avoid using plastic. Whatever you do, don't pay your medical bills with a credit card, Morgan says. "You have the high interest rates, plus you might max out the card paying medical debt, then find you need it for an emergency," she says. Also, many hospitals that offer payment plans don't charge interest, Kraft says. However, the hospital may ask for your personal financial information before agreeing to a plan, Kraft says. "If you've got the money to pay, they want it now," she says. If you do have money in the bank, you can offer to settle the debt by paying a lump sum that's less than you owe, Kraft says. She recommends you start by offering half of the total amount. Having cash in hand gives you leverage, she says: "That's a great bargaining tool."

Being sick can cause a major strain on your wallet. But following these steps can give you a head start toward financial recovery.

See related: How unpaid medical debt affects credit scores, Can you negotiate medical debt with collectors?

Updated: April 12, 2015

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