what is medical debt

What Is Medical Debt? Everything You Should Know to Avoid It



Many Americans are uninsured or underinsured and one trip to the hospital can result in medical debt. But what is medical debt?

Around 32 percent of Americans have medical debt. Of those who fall into this category, 28% owe at least $10,000.

what is medical debt

What can do you if you’re in medical debt, and how can you stay out of it if you’re already debt-free?

About Medical Debt

As the name suggests, medical debt is any type of debt that you incur from health care costs. If you have to visit the hospital, for example, and can’t afford to pay your full bill, the money you owe is considered medical debt. 

Research from the Kaiser Family Foundation reveals medical debt can stem from many sources:

  • 65% have bills from doctor visits
  • 65% have bills from diagnostic tests
  • 64% have bills from lab fees
  • 61% have bills from emergency room visits
  • 52% have bills from prescription drugs
  • 49% have bills from being hospitalized

Of those who have trouble paying medical bills, 91% have outstanding bills in more than one of the categories listed above.

How Is Medical Debt Different From Other Debt?

What most folks often don’t realize is medical debt is different from other types, such as credit card debt.

Here are the major differences:

  • You have 180 days to pay medical bills before they show up on your credit report
  • Often, medical debt does not hold the same weight as other types of debt
  • There’s more flexibility when it comes to negotiating down this type of debt

You have a little more leeway with outstanding medical bills because you often don’t know what the exact cost your treatment or medical services will be until the bill arrives. This is especially true if you have health insurance, as your insurance provider will presumably be covering at least a portion of the costs.

How Does Medical Debt Collection Work?

Because debt for healthcare treatments is more complex than other debt types, it doesn’t count against you as much as other forms of debt will. But this doesn’t mean that you’ll never find yourself facing a collections agency for your outstanding medical bills.

If you go too long without paying your bill (past the 180-day mark), your debt could get sent to collections. This can also happen if you make small payments or if your payments are late. 

There’s good news, though. Your medical debts get removed from your credit report once you’ve paid them, even if they are sent to collections. Unlike other debts, which stay on your report for seven years after being sent to collections, paid medical debt (whether it’s paid by you or your insurance company) gets taken off right away.

How to Avoid Medical Debt

If you’re currently free from medical debts and want to keep it that way, there are some steps you can take to avoid common financial mistakes and stay on top of your bills. Here are our top tips for avoiding medical debt.

1. Get Familiar with Your Insurance Coverage

The more familiar you are with your insurance coverage, the easier it’ll be to estimate how much you’ll owe after you receive certain healthcare services and treatments. This can help you to budget accordingly and avoid surprises when bills arrive.

2. Confirm Bill Accuracy Before You Pay

When you receive a bill, don’t blindly go and pay it. Go over it with first to ensure it’s accurate. If you notice any potential issues or additional charges, reach out to your healthcare provider’s administrative department to talk about it.

3. Negotiate Bills When Possible

Medical bills can sometimes be negotiated. You might be able to work out a lower payment if you talk to someone in the administrative office and explain your situation. 

4. Set Up a Health Savings Account (HSA)

To ensure you always have the funds available to cover your medical bills, consider setting up a Health Savings Account (HSA). This is a tax-free account that you can draw from to pay for your healthcare-related expenses. 

5. Check What’s In-Network and What’s Out-of-Network

Even when you’re being treated at a facility that’s covered by your insurance, individual medical practitioners may not be covered. So it’s a good idea to ask before you receive treatment so you can plan how much you’ll pay or choose another provider. If it’s a real emergency, get to the nearest treatment facility and figure out the rest once you’re better.

How to Get Out of Medical Debt

If you are in medical debt, the following strategies will help you work toward becoming debt-free:

1. Again, Negotiate

If you can’t pay your entire balance in one payment, don’t just ignore it and hope it goes away. It won’t. Instead, reach out to your doctor’s office or the hospital where you received treatment and ask if they can arrange a better deal for you, such as a payment plan.

2. Look Into Debt Relief Programs

Medical debt relief programs can also be useful if you owe more than you can afford. They can work with hospitals and doctor’s offices on your behalf and work out a plan to help you make your payments and get out of debt. 

3. Consider an Emergency Line of Credit

If you need to make a payment now and don’t have the funds to do so, an emergency loan or line of credit like what Echo Credit offers could be useful. It’ll help you make ends meet and give you some breathing room while you work out a long-term plan for your finances and avoid medical debt.

Get Control of Your Medical Debt Today

By keeping the tips listed above in mind, you can avoid medical debt or find medical debt repayment options. 

To learn more about managing your money and avoiding debt, check out this post about unexpected debts next.

Featured Image by Free-Photos from Pixabay.

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