Medical debt and what to do about it

Medical debt is a leading contributor to household financial distress in countries where healthcare is charged, and it has features that make it more negotiable than most other debt.

Why it is different

Several respects.

It is generally unplanned and not the result of discretionary spending.

Billing errors are common, which means the amount claimed is frequently not the amount owed.

Providers, particularly non-profit hospitals, frequently operate financial assistance policies that are not advertised.

Prices are not fixed — the same treatment is billed at very different amounts to insurers, self-pay patients and assistance programmes.

And several jurisdictions have reformed how medical debt appears on credit reports, with some removing paid medical debt and small balances.

The first steps

In order.

Do not pay immediately, since bills are frequently issued before insurance processing and adjustments.

Request an itemised bill with codes, which reveals duplicate charges, services not received, quantity errors and unbundling.

Compare it with any insurance statement line by line.

Query anything unexplained, in writing.

Ask about financial assistance and charity care before agreeing to any payment plan.

And ask for the bill to be held while an assistance application is processed, which is generally granted if requested.

Financial assistance

The most under-used route.

Many hospitals operate policies providing free or discounted care based on income, frequently extending well above the poverty line.

Non-profit hospitals in some jurisdictions have obligations to provide it.

Applications require proof of income and take time, and are frequently approved for people who assumed they would not qualify.

Request the written policy rather than relying on a verbal answer at a billing desk.

Apply even if you have insurance, since assistance can cover the patient responsibility portion.

And appeal a refusal, since decisions are frequently reversed with additional documentation.

Negotiating

Which works more often than expected.

Self-pay patients are frequently billed the highest rates, and providers discount substantially.

Ask what the cash-pay or negotiated rate is.

Offer a lump sum settlement if you can, since providers frequently accept a proportion for immediate payment.

Request an interest-free payment plan, which is generally available and is preferable to putting medical debt on a credit card.

Get any agreement in writing before paying anything.

And be persistent and polite, since billing departments have discretion and use it.

If it goes to collections

What to know.

You can dispute the debt in writing and request validation, and the collector must generally provide documentation.

Do not ignore correspondence, since the position worsens and options narrow.

Do not acknowledge a debt you have not verified.

Check whether the amount matches what the provider billed, since errors persist through transfer.

Understand the rules on credit reporting in your jurisdiction, which have changed in several places.

And know that debt collectors are regulated, with rules on contact frequency, timing and conduct that can be enforced.

Free help

Which should be the first call rather than the last.

Free debt advice services exist in most countries, are regulated, and are considerably better informed than any individual.

Patient advocacy services help with billing disputes and with navigating assistance programmes.

Condition-specific charities frequently provide welfare rights advice and sometimes grants.

Hospital social workers and welfare rights staff exist in many places.

And anyone charging a fee to negotiate medical debt should be approached with caution, since equivalent help is available free.

Prioritising debts

Where instinct is wrong.

The pressure comes from whoever contacts you most aggressively, which is not the same as the debt with the worst consequences.

Priority debts are generally those where non-payment risks losing your home, your energy supply or your liberty — rent, mortgage, energy, local taxes and court fines.

Medical debt in most jurisdictions is unsecured and non-priority, which means it should be addressed after the priorities rather than before.

Free debt advice services will produce a proper prioritised plan, which is the single most useful thing to obtain.

Preventing it

Where possible.

Ask for cost estimates before planned treatment.

Confirm every provider involved is in network, including anaesthetists, radiologists and pathologists who bill separately.

Confirm pre-authorisation in writing.

Ask whether a procedure can be done at a lower-cost site of care.

Understand your policy's out-of-pocket maximum, which is the term that limits exposure.

Know whether surprise billing protections apply in your jurisdiction.

And keep records of every conversation with names, dates and reference numbers, which is the single most useful practice in any dispute.

General information only, not financial or legal advice. Contact a free regulated debt advice service — equivalent help is available without charge.