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Negotiating Medical Debt

The United States is the only western, industrialized country who does not offer universal health care (the new healthcare laws do not go in to effect completely until 2014).   At any given time, about 20 million Americans cannot pay their medical bills.  While many of these people are able to repay the debt by taking out a loan, borrowing from family and friends, or taking a cash advance on a credit card, others are not so lucky.  Those who do not have medical insurance or cannot pay back medical debt often are forced to file bankruptcy in order to protect their assets or get sued by very aggressive collectors over trivial amounts.  About 40 percent of all personal bankruptcy files are due to medical debt and that percentage increases to 48% for those 65 and older. About one million Americans file bankruptcy every year because they cannot pay their medical bills.  Other groups disproportionately bankrupted by medical debt include single women raising children on low wages. 

Ironically, a significant percentage of people are plunged into bankruptcy with relatively little debt.  Many file for the simple reason that the medical industry collection industry is so inflexible and will not work out reasonable payment plans for those who can not pay the debt off quickly.  Instead, collection agencies rush to the courthouse to file small claim lawsuits (those less than $5,000).  In fact, many small claims courts are clogged with such suits, with medical debt lawsuits making up a large proportion of the docket.  Moreover, this trend is only going to increase as many hospitals, doctors and other medical-related businesses turn their delinquent accounts over to collection agencies in 30 or 60 days rather than waiting the traditional 150 days before doing so. 

Another trend is for medical-related businesses to sue in small claims court for very trivial amounts, say $100, rather than just write the debt off as a bad debt.  Medical collectors are accustomed to suing and obtaining easy default judgments because so many debtors don't bother to fight back.  Instead of letting this happen to you, consider the following options.

Your options for dealing with medical debt are as follows:

Option 1:  Negotiate with the hospital, clinic, doctor, etc., for an affordable repayment plan.  This might not be easy as the medical industry collection can be inflexible and aggressive.  Do not let them intimidate you into paying more than you can afford each month.  Specifically, do not let them scare you into taking out a home equity loan or second mortgage in order to pay the debt, particularly if you are on the verge of financial disaster.  Do not repay medical debt by taking out large cash advances on your credit card.  If you do this, you might disqualify yourself from qualifying for Medicaid in the future.

If you cannot pay your medical debt, then you cannot pay it, and therefore you must demand that the hospital or other medical-related business work with you so that you can repay the debt in affordable monthly payments.  When negotiating with medical creditors, it is important that you do the following:

Notify the creditor as quickly as possible that you cannot pay the debt.  Do not wait for them to refer your account to an aggressive collection agency who will likely sue you for even a minimal amount of money, as little as $100.

  • Keep meticulous records of all your dealings with the creditors, including the names and phone numbers of those you speak with, as well as date and times you spoke with them.  Whenever you speak with someone on the phone, as soon as you hang up, write down what was discussed and agreed to in the phone call.

  • Send in some sort of payment on a regular basis.  If you agreed to pay a specific amount each month, then do so, and send in your payment before the due date.  Even if you are so destitute that you cannot make regular monthly payments, try to send in some sort of amount each month to show you are making a good faith effort in paying off the debt.  Keep the creditor informed as to the reasons why you cannot make payments now and what you expect you will be able to repay in the future.

  • Negotiate with your insurance company:  Perhaps you have insurance, but your insurer refused to pay all or a portion of your medical bills.  If this is the case, take advantage of the appeals process with your insurance company.  In addition, many states have an office to resolve disputes with HMOs.  Of course, with Medicare and Medicare HMO, you are always allowed an appeals process.

Option 2:  Seek repayment assistance from government / charity programs.

There are federal and state assistance programs as well as private programs to help those who can't pay their medical bills.  These include Medicaid; Medicare Savings Programs (Qualified Medicare Beneficiary, Specified Low-Income Medicare Beneficiary and Qualified Individual Programs); charity or free care eligibility programs; and pharmacy assistance programs.  If you think you might qualify for a state, federal or charity program, start phoning organizations in your area that might help you find the right agency:  United Way, Salvation Army, etc. 

(a)  Apply for Medicaid.  Medicaid is a federal program operated by the individual states to provide health care to the poor.  If you qualify, you might be able to get medical bills you have already incurred paid by Medicaid.  Generally, the following people with low incomes or certain disabilities qualify:

  • Women who are pregnant.
  • Those under the age of 19 or who are aged 65 and older
  • Those who are blind or disabled
  • Those who are related to and are the caretaker of a deprived child (meaning that one or both parents must be absent from the home, or at least one parent must be unemployed or incapacitated)

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