Nearly half of Americans with medical debt say it lowered their credit score: survey

American adults with unpaid health care bills experience a number of financial ramifications, according to a new survey. (iStock)

Healthcare costs in the United States can be prohibitive for patients undergoing essential medical procedures, leading many consumers to borrow money to pay hospital bills. This medical debt comes with heavy financial consequences for those who bear it, according to a new investigation from Healthcare.com.

Nearly half (48%) of American adults with medical debt said it hurt their credit score. About the same proportion (46%) have had overdue medical bills sent to debt collectors, which can lead to wage garnishment and often lead to bankruptcy.

How Medical Debt Affects Americans

Many patients were caught off guard by surprise medical bills, with 44% saying their health insurance did not cover the service they received. As a result, one-fifth (20%) of adults with medical debt skipped rent or mortgage payments.

Keep reading to learn more about the impact of healthcare debt, as well as how you can get out of debt by negotiating medical bills. You can also consider your other debt relief options, such as medical credit cards and debt consolidation loans. You can visit Credible to compare debt consolidation products, such as fixed rate personal loans.

HOW TO GET RID OF MEDICAL DEBT WITHOUT DAMAGING YOUR CREDIT

The financial consequences of unpaid medical bills

About one-fifth of American adults have medical debt in collection, according to a recent study by the Journal of the American Medical Association (JAMA). From there, debt collectors can report patients as delinquents to credit bureaus, which can have a lasting negative impact on credit rating.

After long periods of non-payment, collection agencies may eventually sue debtors to collect overdue medical debt. This is an expensive legal process, and the courts can garnish your wages, claim your assets, and even withdraw money from your bank account to pay off the debt.

To avoid medical debt collectors, many consumers are turning to urgent action like bankruptcy. Medical debt is the leading cause of bankruptcy in America, found the National Consumer Law Center (NCLC). More than half of bankrupt filers have unpaid medical bills as part of their discharge.

If you are considering filing for bankruptcy for unpaid medical bills, you may consider hiring a nonprofit credit counseling agency. Credit counselors can help you determine the best way to manage your debt, and they may even be able to negotiate with creditors on your behalf.

HOSPITAL PRICE TRANSPARENCY RULE TAKES EFFECT TO REDUCE SURPRISE MEDICAL BILLS

How to pay off medical debt

Unpaid medical bills can have serious financial ramifications, so it’s important to find ways to pay off medical debt before it’s sent to collections. Here are some strategies for paying hospital bills:

Learn more in the sections below.

Negotiate with the medical provider

The Affordable Care Act requires nonprofit hospitals to offer financial hardship assistance to low-income patients, NCLC reports. This debt relief can come in the form of discounted care, zero rate payment plans, or medical debt forgiveness. However, not all patients will meet the income thresholds to be eligible for financial assistance programs, and this federal law does not apply to private medical providers.

If you don’t qualify for financial assistance from your healthcare provider, you can always lower your medical bills or enroll in a payment plan. Here’s how to negotiate your medical debt:

  • Request an itemized bill from the medical provider and check for errors, such as double billing and incorrect coding. Contact your health insurer to request an explanation of benefits (EOB) and a summary of benefits and coverage (SBC) to better understand your insurance coverage.
  • Find the average price of the medical service you received using a cost comparison tool like blue book on health. This can support your claims during negotiations and can help you determine if you have been overcharged for health care services.
  • Contact the hospital’s billing department – the phone number should be on your bill. You can ask them for a discount on your medical bill or see if you can sign up for an interest-free payment plan. Take detailed notes and get any financial agreements in writing.

Finally, you can contact your state insurance commissioner if you believe there has been a medical billing error that you cannot resolve.

9 OF THE BEST DEBT CONSOLIDATION COMPANIES

Consider your credit card options

Some healthcare providers offer financing options through medical credit cards such as CareCredit. This can allow you to split your medical bill into smaller monthly installments with little or no interest.

However, the reduced interest rate options offered by CareCredit are not very competitive, with rates as high as 17.90% APR for long-term payment plans. And if you miss a payment, you could end up paying deferred interest at the regular purchase rate of 26.99%.

As an alternative, applicants with very good or excellent credit might consider opening a new credit card with a 0% APR introductory period. These promotional offers usually last up to 18 months, which can give you plenty of time to pay off the balance without incurring interest charges. Read the entire card agreement to get an idea of ​​annual fees or borrowing limits.

You can compare zero rate card offers for free by visiting Credible.

HOW TO REDUCE YOUR CREDIT CARD PAYMENTS BY CONSOLIDATING INTO A PERSONAL LOAN

Borrow a debt consolidation loan

A debt consolidation loan is a type of unsecured personal loan that is repaid in fixed monthly installments over a set period of time, usually a few years. Interest rates are currently at historic lows, according to the Federal Reserve, which means you may be able to pay off your medical debt at a competitive fixed rate.

Since personal loans don’t require collateral, lenders determine your interest rate and eligibility based on your credit history and debt-to-income ratio (DTI). Borrowers with good credit and low debts will be eligible for the best possible loan deals, while those with bad credit may not meet the eligibility criteria.

Personal loan rate by credit score

BEST PERSONAL LOANS FOR VETERANS AND MILITARY MEMBERS

Medical debt consolidation can give you the ability to pay off overdue medical bills over a longer period of time with a predictable payment plan. If you are approved, the lender can deposit the funding directly into your bank account the next business day.

You can compare debt consolidation loan interest rates on Credible for free without affecting your credit score. Then, use a personal loan calculator to estimate your monthly payments and repayment terms.

CREDIT CARD DEBT CONSOLIDATION CAN SAVE YOU THOUSANDS AS PERSONAL LOAN RATES ARE AT RECORD LOWS

Do you have a financial question, but you don’t know who to contact? Email the Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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