No matter how well you plan for your future, certain unexpected expenses can throw your budget off its track. Unanticipated medical expenses that arise because of accidents or illness can quickly add up to large balances that may leave you feeling helpless and vulnerable. While there is no foolproof way to guarantee this won't happen to you, there are ways that you can minimize the effect of medical debt once it occurs. Learning how to manage the debt and create a careful plan can help you through the process. It can also help you avoid making mistakes that may put you further in debt. Here are six helpful tips for managing medical debt.
The fundamentals of managing medical debts
- Learn how to read your bill.
As with any bill, it's important to be able to understand what you're being charged for and know how much you're paying. Often, medical bills are difficult for consumers to understand. The codes, prices and descriptions in the bill can be confusing as well as the way the numbers are added and deducted. You may need to look up some of the terms on your bill, but it's a good idea to go through each charge and make sure you understand what it's for.
- Look for errors.
Clinical and billing errors happen, and these can result in extra charges. Keep track of all charges from all bills, and look for duplicate charges. Also, watch for discrepancies between your healthcare provider's estimated total due (given before a procedure) and the final bill. This could indicate a coding error. Review your name and identification numbers to ensure they're correct. A small typo could lead to big mistakes in what you're charged.1
- Ask for a reduction in your bill.
You can now look up the fair price of a healthcare procedure through the Healthcare Bluebook website. If you receive your bill and are being charged more for a procedure than the recommended fair price, call your provider and talk to the person who handles billing. Ask if they can accept the Bluebook fair price, or ask for a discount on the original bill.2 While this can be a drawn-out process that may require approval from multiple levels of the facility's financial department, keeping a positive and friendly attitude while negotiating can help things go smoothly.
- Work out a payment plan.
Many healthcare providers will allow you to work out an interest-free payment plan. This can keep your credit score in good shape while you pay down the debt.3 Avoid the temptation to put the debt on a credit card, which may charge higher interest rates and could also needlessly use up your available credit.4
- Make payments on time.
Medical bills are treated just like any other debt, so it's important to make payments on time. Working with your healthcare provider can allow you to create a payment plan that you're comfortable with. Not making payments on time has the same repercussions as missing payments for other types of bills — they can negatively impact and have a lasting effect on your credit score. That could affect your ability to get other loans or, if you do get a loan, it could result in higher interest rates.4
- Don't worry too much.
Finally, as overwhelming as dealing with medical bills can seem, it's important to keep a level head and not take drastic action that could have a lasting, unwanted effect. Try to avoid refinancing other loans to include your medical debt, as you might end up paying additional interest on the debt. Another method to avoid is to cash out a retirement plan to pay the bill because there are usually penalties involved that will cost you money. If your retirement savings appear to be your only option for repayment, consider getting a 401(k) loan instead of withdrawing the money.5
Getting sound financial advice from a trusted outside party can be beneficial in determining your proper course of action for handling medical debt. Before making any drastic decisions that can affect your financial future, review all your options, and consider opening a savings account to set aside money for future emergencies. That's one wise way to plan for the unexpected.