When Amanda Griffith welcomed her third child in May 2014, she was expecting to pay some out-of-pocket costs.
After all, she had a high-risk pregnancy, which required additional monitoring and tests that wouldn’t be totally covered by her health insurance.
Even so, she and her husband weren’t prepared for the nearly $3,000 bill she would receive less than a month after giving birth.
“And that was just for the hospital,” says Griffith, 38, of Norton, Mass. “You also get separate bills from the anesthesiologist, from the doctor’s office, and for the lab work.”
She couldn’t take care of the bill all at once, so her only option was to figure out a repayment plan. “I don’t remember having a bill that was this high [for my previous two kids],” Griffith adds. “I had never asked for a payment plan before, so I was nervous about doing it.”
Fortunately, the hospital told her she had up to two years to take care of the balance. And so she’s paying her bill down, little by little, contributing $115 per month.
Many Americans, at some point in their lives, find themselves in the same predicament of having to manage medical debt.
In fact, nearly 20% of U.S. consumers—almost 43 million people—have overdue medical bills on their credit reports, according to the Consumer Financial Protection Bureau.
And 15 million of those consumers have only health-related debt as a strike against them—indicating that, apart from medical costs, they are likely meeting other debt obligations.
Despite those telling statistics, there has been little discussion about how to deal with medical debt—like what to do if you can’t pony up a big lump sum, how to work with doctors or hospitals on payment strategies, or even whether there are ways to potentially reduce the balance that you owe.
Exacerbating the issue is that even if you upgraded your insurance coverage this year—or plan to do so before open enrollment season ends in a few days—there are many factors at play when it comes to health care costs that it’s nearly impossible to predict what your expenses (or debt) could add up to.
Why Medical Costs Are Taking a Bite Out of Budgets
Regardless of which side of the health care political aisle you’re on, there’s one thing that isn’t up for debate: Medical expenditures are on the rise.
In only the second year of the Affordable Care Act, the average premium for individual health plans bought on the open market rose by 5.4% to $389 per month, according to data from Pricewaterhouse Coopers.
And those who had job-based coverage didn’t escape the bite, either. The Kaiser Family Foundation reports that premiums for employer-sponsored health plans have increased by 26% over the past five years, while the average employee deductible has risen 47% since 2009.
“For a while, employers were really willing to absorb rising health care costs year after year,” says Jeff Wood, vice president of product management for Navicure, a provider of cloud-based technology that helps manage medical claims. “But prior to the Affordable Care Act taking effect, employers started passing off many of those costs to consumers in the form of higher deductibles and higher copays—even if their premiums didn’t go up a lot.”
Adding fuel to the frustration is that there isn’t a lot of transparency or consistency when it comes to pricing for medical care.
For instance, according to government data, a hospital in New Jersey, on average, might charge nearly $33,000 to treat chest pain. In Maryland, that same condition may cost only $5,700—which means that consumers who happen to live in areas where health care providers charge more could end up paying much more out-of-pocket than their counterparts across the country.
Perhaps unsurprisingly, the combination of all this cost creep is contributing to a health care pinch: People are having a harder time covering big medical costs, and in many cases, find they must finance bills from doctors’ offices and hospitals.
“And a lot of consumers are having to go with a much higher deductible than they used to, or they’re getting underinsured [to save money],” says Pat Palmer, founder of Medical Recovery Services, a firm that helps consumers analyze their health care bills for inaccuracies. “A family may have to get a $10,000 deductible just to afford their premiums, but they’re stuck with the bill [if something bad happens].”
In addition, health care providers may be less willing to show grace when it comes to that big invoice.
“What we’re seeing is some hospitals aren’t allowing people the same types of payment plans that they used to [allow],” Palmer says. “If you aren’t able to pay them in 60 to 90 days, they may be more inclined to send you to collections.”
So figuring out a way to settle your debt early on becomes all the more important for the sake of your finances—and your credit score.
7 Expert Tips for Managing Medical Debt
Although it may feel like there are few options when it comes to coping with a mountain of past-due invoices from doctors, hospitals, specialists and laboratories, there are moves you can consider making to help ease the pain—like these seven tips from health care and finance pros.
1. Request line items on your invoice. Eight out of the 10 times that Palmer sees a bill, she finds charges that shouldn’t be included.
“The first and foremost piece of advice I would give everyone is to get a detailed statement that has every cost line itemized,” Palmer says. You might find, for example, that you were charged twice for use of the same piece of surgical equipment—or charged for the use of a ventilator in the ICU, when it should have been bundled into the ICU room’s charge.
If you don’t understand what you’re being charged for, ask the provider. “Medical facilities are required to explain what items are in layman’s terms,” she says.
2. Negotiate a realistic payment plan. Unpaid medical bills are a major problem across the health care industry, so a hospital or doctor’s office is probably willing to work with you on a long-term plan if it ensures payment.
“Typically, they’ll negotiate at a low or 0% interest rate,” says Kimberly Foss, CFP® and founder of Empyrion Wealth Management and author of “Wealthy by Design: A 5-Step Plan for Financial Security.”
“You can say, ‘We can’t afford this,’ ” she says. “So negotiate as low as you can afford, and maybe go in even lower.” Hospitals are used to negotiating costs with insurance companies, so this is not new territory for them.
3. Ask about cash discounts. Even in the medical industry, getting cash up front is appreciated—and could be rewarded.
“A lot of [health care providers] may offer discounts if you can pay the bill quickly, rather than paying it off in two or three years,” Palmer says.
Foss had a client that got a discount this way. “She had a $5,000 bill, and offered to pay $2,000 right away to cover the entire bill—and the hospital took it.”
4. Put your payments on autopilot. A growing number of health care providers are offering online and automated payments, says Wood, adding that this allows money to be deducted from an account, so people don’t have to stress about missing a payment and having it sent to collections.
“It used to be that practices would just passively hope patients would pay their bills,” Wood says. “[Automatic withdrawals] are much more consumer-friendly. It’s a much easier solution for many patients to have a certain amount taken out every month.”
5. Set up a Health Savings Account for future expenses. If you’re eligible to set up an HSA because you have a high-deductible insurance plan, take advantage of the tax-deferred savings these accounts can offer, says Foss.
Not only can you use this account to help cover unexpected medical expenses, but “if you don’t use the money [for health care], you can take it out for retirement,” because the money you put in grows with interest, Foss adds.
6. Call your credit card’s hardship department. If you end up charging your medical bills to plastic, call your card issuer’s hardship department—you may be able to negotiate a better interest rate or lower minimum monthly payment on that debt.
7. Get an estimate in advance. One of the things that makes medical debt so stressful is the fact that insurers can be vague about what they’ll cover—and their coverage rules are always changing.
Fortunately, a growing number of medical practices and hospitals are equipped with patient-bill estimation technology, so consumers have a better idea if they’re facing a $200 or a $2,000 charge, based on their current policy, Wood says.
While this won’t cut the cost, it could help you prepare for the potential sticker shock. “It can really diffuse some of those tense issues about getting a big bill months later,” Wood says.