The Burden of Medical Debt in America
The American healthcare system is complex and often leaves many wrestling with hefty medical bills. One issue with medical bills in the US is not just their size but the impact they can have on your credit and daily life.
It’s an unfortunate reality that millions of Americans are burdened with medical debt. A combination of high healthcare costs and unexpected medical emergencies means that many find themselves owing money for medical services.
But there are strategies to focus on, even when faced with high medical debt, and understanding those strategies is key.
What is the Minimum Monthly Payment on Medical Bills?
Unlike credit card debt or personal loans, which have minimum monthly payments, there isn’t a standard minimum monthly payment for medical bills. The amount you have to pay each month depends on the medical provider, hospital, and your insurance company.
It’s important to talk with your medical provider’s billing department as soon as you receive your medical bill. Much of the time, your medical provider will be willing to negotiate payment plans with a minimum monthly payment that fits within your budget.
5 Best Practices for Paying Down Medical Debt
- Understand Your Medical Bill: Ensure that you know what services you’re being billed for and that the charges are accurate.
- Negotiate Your Medical Bill: You have the power to negotiate the amount owed or the payment terms with your healthcare provider.
- Check for Financial Assistance Options: Some hospitals offer financial assistance programs to reduce debt for eligible individuals, like if you are experiencing financial hardship.
- Consider a Payment Plan: Your medical provider may offer a payment plan with no interest rate or a low interest rate, allowing you to pay medical bills over time.
- Get Professional Advice: Credit counselors can help you pay medical bills and find the best path forward for debt relief.
- Use a Health Savings Account (HSA): If you have an HSA with your insurance coverage, you can use the funds to pay for eligible medical expenses, reducing your out-of-pocket costs and providing tax advantages.
- Consider a Medical Credit Card: Some medical providers might offer a medical credit card. These can help pay down debt over time, often with promotional interest-free periods, but be cautious of high interest rates once the promotional period ends.
How Do Medical Bills Show Up on Your Credit Report?
Medical bills only show up on your credit report if they’re left unpaid and sent to a collections agency.
Under the Fair Credit Reporting Act (FCRA), there is a 180-day waiting period before unpaid medical debt appears on your credit report. This period allows time for insurance claims to be processed and for you to address the bill with your healthcare provider.
How Medical Bills Impact Your Credit Score
For both main credit scoring models (FICO and VantageScore), unpaid medical bills can significantly impact your credit score.
When a large medical bill goes unpaid and is sent to a collections agency, it can drop your credit score, hurting your ability to get loans, mortgages, or credit cards in the future.
Addressing medical bills right away and working out payment plans with your healthcare provider are proactive ways to protect your credit score and financial well-being.
Do Credit Bureaus Track Medical Bill Payments?
Typically, making payments on medical bills isn’t reported to credit bureaus, even if you are making a minimum monthly payment. However, once the debt is handed over to collections, it becomes part of your credit history and will show up on your credit reports.
So, keeping up with your medical bills and making the minimum monthly payment is key to preventing a negative impact on your credit score.
Who Can Help You Navigate Medical Debts?
There are nonprofit credit counselors, financial advisors, and even patient advocates who can help you understand and manage your medical bills.
Some local nonprofits and community healthcare programs might provide assistance or aid in negotiating your medical bills as well.
Two Examples of Paying Medical Bills
The Freelancer’s Journey Through a $20,000 Medical Bill
Jane, a 32-year-old freelancer, found herself in a financial crisis after an unexpected health emergency resulted in a $20,000 bill. With no consistent income, she knew she had to act fast.
After reviewing her medical bills for any inaccuracies and looking into her options, Jane directly negotiated her bill with her medical provider.
This way, she was able to secure a payment plan that broke down her debt into installments that she could tackle with a minimum monthly payment.
A Family with Chronic Health Issues and Rising Medical Debts
The Johnsons, a family of four dependent on a sole earner, dealt with chronic health issues that led to steep medical bills.
By actively seeking assistance from local charities and community programs, they received aid that helped them reduce their total medical bill amount.
Their proactive approach gave them some breathing room, allowing them to pay down their medical debt with a minimum monthly payment, and less stress in their daily lives.
Conclusion
Medical debt can significantly impact your financial well-being, but knowing your options can make all the difference.
Always communicate with healthcare providers, stay on top of your bills, and remember that resources are available to help you manage medical debt on your terms. Negotiate, research, seek assistance, and establish a plan that eliminates your medical debt little by little.
While Kikoff can’t help you pay off or resolve medical bills, we can help you track towards better credit & better financial health. Not paying medical bills on time can dock your credit—and securing a loan or payment plan to pay them off at a reasonable rate usually requires a healthy credit profile. If current or outstanding medical debt is impacting your credit score, Kikoff’s credit building tools could help stimulate credit growth while you resolve existing debt, potentially helping to limit negative impact to your credit profile.
Sources
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- Federal Trade Commission Consumer Advice. “Choosing a Credit Counselor,” https://consumer.ftc.gov/articles/choosing-credit-counselor. Accessed October 21, 2022.
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- MyFICO®. “What Are the Different Types of Bankruptcy and How Is Each Considered by My FICO® Score?” https://www.myfico.com/credit-education/faq/negative-reasons/bankruptcy-types. Accessed November 8, 2022.