Is Medical Debt Making You Sick?

By Dawn Handschuh, Personal Finance Writer   

Medical debt can be a serious financial burden, even for those with health insurance. In fact, nearly two-thirds of adults with medical debt problems have health insurance.

Medical issues, according to one study, were a contributing factor in half of all foreclosures in 2008, whether it involved illness or injuries (32%), unmanageable medical bills (23%), lost work due to a medical problem (27%), or caring for sick family members (14%).1

Many people are just a diagnosis away from financial disaster. While some families may be able to cope with high medical expenses incurred by injuries suffered after an isolated incident, such as a car accident, many Americans with chronic health problems are simply overwhelmed by the high out-of-pocket expenses associated with ongoing medical conditions, according to a report by The Commonwealth Fund. 

Chronic health conditions such as heart disease and diabetes are surging due to increasing obesity among an aging American population.2 Even with a 10% co-pay, costs for hospital stays, surgery, doctors' visits, and lab tests ⎯ not to mention time away from work or home renovations to accommodate a wheelchair-bound family member ⎯ can quickly balloon into unmanageable proportions.

According to the July 23, 2009 publication that reported on the financial burdens of chronically ill Americans, 39% of non-elderly adults with three or more chronic conditions had out-of-pocket expenses that exceeded 5% of their income over a two-year period; for those with a single chronic condition, 20% were burdened by out-of-pocket expenses exceeding 5% of income. Prescription drug spending represented more than half of all out-of-pocket spending.

Here's how to manage your own medical debt:

  • Understand your insurance policy and where out-of-pocket costs will come from. Know how the appeals process works.
  • Try to negotiate a discount with your doctors when paying for non-covered medical expenses. If you're having trouble paying a bill, ask to create a payment plan, which will likely contain rates lower than your credit card.
  • Many hospitals have established guidelines for charity care. You may be able to reduce the balance owed. You don't need to be at the poverty level to qualify; income eligibility varies. Inquire at the hospital business office.
  • If you're dealing with extensive or prolonged hospital care, ask to have a case manager assigned to you. Rely on that person to help decipher bills. You can also hire a medical billing advocate to review your bills and act as your liaison with healthcare providers. 
  • Review bills for accuracy. For hospital stays, request an itemized bill.
  • Remember that medical debt is unsecured debt, so don't risk your home by using a home equity loan to pay medical bills.
  • Don't use a credit card to pay medical debt; credit card interest rates are typically higher than any other kind of loan.
  • Investigate other resources ⎯ your state's insurance commission, condition-specific advocacy groups, faith-based community groups, the Patient Advocate Foundation, or reputable credit counselors. If you have a chronically ill family member, you may be eligible for Medicaid or Supplemental Security Income (SSI).

Footnotes

1 "Get Sick, Get Out: The Medical Causes of Home Foreclosures," Christopher T. Robertson, Richard Egelhof, & Michael HokeHealth Matrix 18 (2008): 65-105 

2 "Chronic Burdens: The Persistently High Out-of-Pocket Health Care Expenses Faced by Many Americans with Chronic Conditions," Peter J. Cunningham, Ph.D., The Commonwealth Fund, July 23, 2009