It could happen to anyone at anytime. A trip to the emergency room or bad news from your doctor could result in thousands of dollars in medical bills. Even with medical insurance, you may end up with catastrophic debt as a result of your illness. To make matters worse, many health care providers have unfair billing practices that only add to the financial issues faced by patients. Except for a few billionaires, every American is just one major illness away from bankruptcy. In this article we outline this issue and show you what you can do to avoid medical bill nightmares.
Medical debt issues impact us all, whether you have insurance or not. Here are some startling statistics:
Uninsured patients – Over 45 million Americans (15% of the population) don’t have health insurance. Nearly half of people without medical insurance currently have outstanding medical debts, averaging $9,000 per person.
Insured patients – Over 60% of families who report having medical debt problems are covered by medical insurance. In fact, 75% of people who filed for bankruptcy because of medical debts had health insurance.
A recent report from the National Consumer Law Center highlighted the growing problem of abusive medical debt collection practices. According to their report, hospitals use the following tactics:
Not offering charity care – Hospital are often officially registered as non-profits on the basis that they provide free or discounted health services to qualified patients. However, it has been shown that more than 70% of patients with medical debts are never offered financial assistance from their providers. In fact, uninsured and poor patients are routinely charged much higher prices for their treatment than others.
Suing patients and their spouses – Health care providers can send medical debts to collections, file judgments, garnish wages, obtain home liens, and even take patients to court over medical bills that they cannot afford to pay. In many cases, the spouses of patients are pursued for payment even if they don’t live in a common law state.
Offering expensive credit to patients – If you have medical bills you are unable to pay, health care providers may offer you expensive credit cards or loans as a solution. For example, Kaiser offers a credit card with a 9.9% introductory rate that quickly increases to 24.24%. Some of these accounts are so expensive that your debt will actually increase as you pay each month.
Using collections and credit to coerce patients – Debt issues can lead to serious credit score damage. When health care providers sell debts to collections, file judgments, and obtain liens, they are damaging the patient’s credit profile. According to the Federal Reserve, over 50% of collection records and 20% of lawsuits that appear on credit reports are related to medical debts.
Denying future care to debtors – Some health care providers have strict policies in place that deny healthcare to patients who owe money for previous treatments. In rural areas, there may be few health care alternatives available for people who are ill and unable to pay their debts.
Altogether, these abusive debt practices can lead consumers with health problems to destroy their credit, lose their homes, or file for bankruptcy. Without an understanding of their rights, a secure financial standing, and a willingness to negotiate, many patients are stuck facing a financial crisis at the same time as a health crisis.
If you find yourself unable to repay medical bills or in the hospital without insurance, there are a few things you can do to avoid being stuck with an unmanageable amount of debt:
Know your options – Evaluate all the insurance, Medicaid, and charity options available to you. The time it takes to investigate possible alternatives to high medical bills is well worth it. Don’t be afraid to ask the medical billing office questions about your options. Keep asking if there is something you don’t understand about your insurance or financing choices.
Review your bills closely – It’s is very common to find double billings and errors on health care invoices. Take the time to closely review each of your bills and challenge any costs that you feel are incorrect. When you are challenging bills, however, be sure that the medical office is not selling your debts to collections while they are in dispute.
Pay with credit card – Use your own low APR credit card to pay for medical bills instead of opening a new account through the hospital. If possible, choose a credit card with a long 0% introductory rate and a low APR after that period expires.
Avoid financial traps – Pay your most important bills (such as your mortgage) first, before you pay medical bills. Never use a home equity loan to pay expensive medical bills. This type of loan can put your home at risk if you are unable to pay.
Increased attention has recently been paid to the issue of unfair medical billing practices. With recent reports by The Access Fund, Harvard University, and the NCLC, the dramatic issues that patients face are coming to light. The following regulations are recommended in order to improve patient’s rights and control abusive medical billings:
Regulate charity care programs – Health care providers should have clear standards to follow in regards to providing free or reduced care to patients. Patients should be given a full disclosure of their financing and assistance options.
Set clear income discount policies – Sliding scale billing should be instituted to ensure that the poorest patients aren’t paying the most for their health care. The same discounts that insurance companies receive on medical bills should be applied to consumers.
Establish reasonable payment programs – Medical offices could actually increase their billing returns by establishing longer repayment periods with monthly minimums tied to the patient’s income. Just as student loans are set with low interest rates and low monthly payments, medical debt repayment should be affordable.
Restrict the sale of debts to collections – Medical debts should not be sold to collection agencies until payment negotiations have been completed and a set amount of time has passed. Also, the use of wage garnishment, property liens, and judgments for medical bill collection should be restricted.
Cap medical prices for low income patients – Healthcare providers should not collect more than the actual costs of services from patients who are low-income or uninsured. Currently, these patients often pay inflated “sticker prices” for their medical care.
Protect spouses from medical debts – Restrict health care providers from using common law doctrines to collect medical debts from spouses of patients, especially when these spouses are elderly or low-income.
Some of these reforms are already in place in certain areas. For example, California, Massachusetts and Texas require healthcare providers to account for their charity care spending. Connecticut currently has laws in place that prohibit charity care hospitals from suing a patient for debts until it is determined that the debtor is not eligible for free or reduced costs services.