What Happens If You Don’t Pay or Can’t Afford Medical Bills?
My Two Cents
Personal-finance columnist Charlotte Cowles asks the nosy, revealing, sometimes uncomfortable questions about money so you don’t have to.
Photo-Illustration: by The Cut; Photos: Getty Images
My 1-year-old son recently went to the ER. He’s fine — thank goodness — but his medical bill is not. We took an ambulance to the hospital and he underwent a number of tests there, some of which were not covered by our insurance. We’re still getting bills and more information, but so far it appears we owe more than $3,000.
This isn’t our first time dealing with medical debt. I had a complicated delivery when my son was born, and he had to go to the NICU for a few days, so our hospital bill was about $4,000. We put it on our credit card and we’re still paying it off. In retrospect, that was a bad idea — the hospital took our credit-card information when we checked in, so I figured that was the best way to deal with it, but I now know that it’s better to negotiate the bill first. I don’t want to make that mistake again, but I’m not sure what our options are. My husband and I both work full-time, and I don’t think we’d qualify for any low-income payment assistance. But having a child has really stretched us financially, and we can’t afford extra expenses right now, let alone this kind of bill. What happens if we can’t pay it? How much time do we have before it starts affecting our credit or worse?
Nothing further needs to be said about how infuriating our medical system is. But the results speak for themselves: Overdue medical debt plagues nearly one in five American households, and it’s the No. 1 reason why people file for personal bankruptcy. Even if you have health insurance, coverage is spotty and unpredictable. Which brings us to your situation: You’ve got a bundle of confusing and unaffordable bills and you’re not sure what to do next, especially as they keep trickling in.
Unfortunately, this is normal. “People’s out-of-pocket medical costs are routinely misaligned with their actual means,” says Allison Sesso, the CEO of Undue Medical Debt, a nonprofit that helps those with overdue medical bills. “Everyone knows this is the case; it’s expected. And that’s what makes medical debt so different from other kinds of debt, and why it should be approached differently, too.” I consulted Sesso and several other medical-debt experts to figure out the steps you can take next.
Your instinct here is correct! “Do not feel pressured to pay medical bills with a credit card or open a CareCredit account until you understand exactly what you owe and what your payment options are,” says Thomas Nitzsche, a representative of the Financial Counseling Association of America. “Once these bills go on a credit card, they’re no longer medical debt. They become consumer debt, which has higher interest rates, fewer repayment options, and a faster impact on your credit score.”
Even if you gave your credit-card information to the hospital or other provider, it usually cannot charge it without your authorization. The laws on this vary state by state, but in New York, medical providers cannot require you to share your credit-card information (or pre-authorize payment) before you receive care, so in the future, feel free to decline if you are asked.
“You usually have at least 120 days before a hospital sends an unpaid bill to collections, and often much longer, so don’t panic — you have time to figure out what to do,” says Jared Walker, the founder of Dollar For, a nonprofit that helps patients deal with medical debt.
Your bill should have a phone number on it. Put on some comfy pants, make yourself a snack, and settle in: You’ve got to call the billing department. When a person answers, you’re going to ask them about two things: charity care and more general payment assistance, which both refer to a hospital’s ability to reduce your bill.
“Charity care is a program that waives or reduces medical bills if you meet certain income requirements, and nonprofit hospitals are required to offer it to keep their tax-exempt status,” Walker explains. If you don’t meet the income requirements (i.e., you and your husband make too much money to qualify), then you can ask about other financial-assistance programs that the hospital might offer. You can also look up your eligibility for payment assistance on Dollar For’s website, which provides a tool to do so.
Nitzsche recommends applying for charity care even if you’re pretty sure you won’t get it. “Just the act of doing so can sometimes generate additional options from the hospital billing department,” he explains. He found this out firsthand when he was dealing with a large medical bill himself: “I wasn’t approved for charity care, but I did get a longer repayment period at a zero percent interest rate just because I applied.”
Finally, you can even apply for charity care retroactively. The timeline varies state by state, but all states allow patients to apply for charity care up to 240 days after they receive a bill — and get reimbursed for any money they’ve paid in the meantime.
If you’re not eligible for charity care, the hospital billing office will try to steer you toward a payment plan, but you’re not there yet! Instead, your next step is to request an itemized bill. “Sometimes even just asking for an itemized bill will result in the hospital lowering it,” says Walker. “I’ve seen it happen.”
Yes, your bill might look indecipherable, and it sucks to go over it, but it can save you a lot of money. Websites like Healthcare Bluebook and Turquoise Health can help you parse the charges and compare them with standard costs. “You can put in the CPT code from your bill and see if you were overcharged,” Walker explains. “It’s normal to find errors, duplicate charges, or overcharges, like $100 for aspirin.” A commonly cited report found that up to 80 percent of medical bills have errors in them, so it’s always worth checking yours for anything weird.
Let’s say your bill is accurate, you don’t qualify for financial assistance, and you still can’t afford to pay the full amount. Now what? “Your next step is to call the billing department and ask specifically, ‘What is the settlement amount?’ You’re asking how much the hospital is willing to take if you settle up right now,” says Walker. “Normally, it will take 20 percent off the bill if you can pay up front, but I never take that. I try to get closer to 30 to 50 percent off.” He was recently billed $1,300 for lab results, and when he called to ask for the settlement amount, it was reduced by more than 70 percent: “They were like, ‘Oh, if you pay $350 right now, we’ll wipe out the rest.”
The catch is that you do have to be ready to pay the settlement amount — you can’t then ask for a payment plan. So if you’re able to scrape together somewhere in the neighborhood of 50 to 70 percent of the bill, in cash, try to get the hospital to meet you there. Then pay it off and be done.
“Be sure to get a payment plan that’s zero interest,” says Sesso. “And don’t sign up for a medical credit card if you can possibly avoid it. You’ll save money if you work out a payment plan with the hospital directly.”
Be honest about your financial situation. Explain your income, your expenses, and what you can realistically afford to pay each month. “A good rule of thumb is to figure out a monthly amount that’s no more than 3 to 6 percent of your take-home pay,” says Sesso. “Anything more than that is going to be too burdensome, and you don’t want to fall behind.”
If the hospital won’t agree to the terms you want, hang up and try again the next week. Then try again. “At the end of the day, hospitals are trying to get you to pay whatever you can and then get the debt off their books,” says Sesso. “Something is better than nothing, and if you’re demonstrating a willingness to work with them, they’ll usually take what they can get.”
It’s scary to think about your medical debt sabotaging your credit score, but in many states it can’t — in New York, for instance, most medical debts cannot be reported to credit bureaus at all, and that’s the case in several other states as well. Nationwide, overdue medical bills under $500 cannot affect your credit score, according to a rule finalized by the Consumer Finance Protection Bureau under the Biden administration. And if you live in a state where your medical debt is big enough to affect your credit score, it usually takes about a year for that to happen, says Walker. (Remember, this only applies if you didn’t put your medical bills on a credit card — if you did, then it’s now consumer debt, not medical debt.)
Many people with overdue hospital bills wind up burying their head in the sand. Then, after at least four months (but usually longer, like more than a year, according to Walker), that debt eventually gets sold to a collector. If and when that happens, you’ll hear about it, because it’s a collector’s job to pester you until you pay. At that point, your best option is to settle with the collector for a reduced amount that you can pay up front (see option four, above). The upside to settling with a collections agency (instead of the hospital) is that it will usually settle for considerably less than the hospital was willing to take. For that reason, some patients will pursue what’s known as a “calculated default” and wait until their bill goes to collections in order to pay it off at a lower amount. (You still need to have enough cash on hand to do that, though.)
Of course, you could also ignore the collections agency, which many people do because they can’t afford to pay. However, this decision carries a major risk: The collections agency can sue you for what you owe. And if it wins, then it can garnish your wages or go after your property, like your home or your car if you have one — obviously not a great scenario.
There are a number of nonprofit services that offer help to people in your situation. One is Undue Medical Debt, and another is Dollar For; there may also be patient-advocate services in your local community. Good luck, and so sorry you’re dealing with this. Unfortunately, you’re in excellent company.
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