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What Happens When You Can't Pay Your Medical Bills

It's no secret that health care costs have been spiraling out of control for years. To fight back, your best bet is to be a well-informed consumer.
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It's no secret that health care costs have been spiraling out of control for years. To fight back, your best bet is to be a well-informed consumer: Know the true costs of medical procedures, supplies and medications so you can bargain effectively; carefully anticipate and track medical expenses; and stay on top of your bills.

But sometimes, even when you follow the rules you still can get burned.

Case in point: When our son needed a medical procedure last year, his pediatrician obtained the required pre-authorization from our insurance company. We paid the out-of-network doctor directly then submitted the claim for reimbursement. For six months thereafter the insurance company bounced the claim back and forth between departments, each denying responsibility and wasting hours of our time. Only after I sent a strongly worded letter to the CEO's office did they finally relent and pay the claim.

I've heard dozens of much more appalling stories about people -- even those with comprehensive insurance -- who have been denied benefits, over-charged, sent to collections or even forced to file for bankruptcy because they couldn't pay their medical bills.

Here are ways to cope with medical bills you've already racked up:

Look for billing errors.
Carefully review each doctor, lab or hospital bill and match it against the Explanation of Benefits statement that shows how much they were reimbursed by the insurance company. Also, watch for items that may have been charged to you by mistake such as:
  • Medications, supplies, treatments or meals you didn't receive while hospitalized or getting an outpatient procedure.
  • Duplicate charges for a single procedure (such as x-rays, MRIs and lab work), including those that had to be redone due to a technician's error.
  • Charges for a full day's hospitalization when you checked out early; or private room rates when you shared a suite.

The summary hospital bill you were sent probably doesn't contain many details, so ask for an itemized copy of your bill along with a copy of your medical chart and a pharmacy ledger showing which drugs you were given during your stay. You're entitled to these documents.

Likewise, don't automatically give up if you're denied coverage for a treatment or drug. Your medical plan document should outline what is covered and outline the dispute mechanism available to you. Ask your doctor's office or your employer's human resources department to get involved -- they're used to dealing with insurance companies.

Don't ignore bills. If you're having difficulty paying a medical bill, don't simply ignore it. Like any creditor, doctors and hospitals often turn unpaid bills over to collection agencies, which will wreak havoc with your credit score. Contact creditors as soon as possible, explain your situation and ask them to set up an installment payment plan or work out a reduced rate.

I once had a situation involving a large out-of-pocket cost. Paying it all at once would have been a hardship, so I spoke to the hospital's billing department. They were happy to have me pay installments for a year with no interest and nothing reported to the credit bureaus. That was an interest-free loan I was happy to take.

Negotiate. Many people with no insurance discover that they're often charged much higher rates than those negotiated by insurance companies, Medicare and Medicaid. Don't be afraid to ask for those lower rates and to work out a repayment plan -- just be sure to get the agreement in writing. Most doctors and hospitals would rather accept reduced payments than have to deal with collection agencies and possibly no reimbursement at all.

Assistance programs. Ask the hospital's patient liaison to review your case and see whether you qualify for financial assistance from the government, a charitable organization or the hospital itself. Most will forgive some or all bills for people whose income falls below certain amounts tied to federal poverty levels. Also pursue this avenue with your doctor or other provider -- ideally before they've begun collections.

Here a few other cost-savings tips:
  • Ask whether your employer offers flexible spending accounts, which let you pay for eligible out-of-pocket health care and/or dependent care expenses on a pre-tax basis -- that is, before federal, state and Social Security taxes are deducted from your paycheck.
  • Use price-comparison services like Healthcare Blue Book, and New Choice Health to research going rates for a variety of medical services. One report I saw found that a routine appendectomy costs anywhere from $1,529 to $182,955, depending on which facility is used.
  • Unless it's a true emergency, try to avoid emergency rooms and use an urgent care network facility affiliated with your insurance company or ask your doctor for recommendations. Research the hours and locations of these clinics ahead of time.
  • Keep track of where all your medical bills are in the payment pipeline. If you haven't received a bill from your insurance company in 30 days, check with them and the doctor/hospital to make sure they have correct billing information.
  • If your income is low, see if you qualify for Medicaid or the Children's Health Insurance Program, which provides free or low-cost health care to more than 7 million children.
  • Explore employer-sponsored wellness programs, which reward employees for losing weight, quitting smoking and other health-improvement activities. Common incentives include gift cards, discounted gym memberships and lowered insurance premiums.
  • The government's site has tools for comparing doctors, hospitals, nursing homes and other health providers.

Bottom line: Know what health services cost and don't be afraid to negotiate. You'll haggle over the price of a car -- why not your health?

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.

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