Medical debt plagues the middle class: 4 tips to pay it off
Medical debt is a serious problem throughout the country. Researchers with a study by the Consumer Financial Bureau report that almost 60% of individuals across the nation contacted by collection agencies were contacted due to outstanding bills for medical services. This is true across a range of income levels; the lower, middle, and even upper class can find themselves facing shocking medical bills.
Options to manage medical debit
Those who find themselves in this situation may wonder how they can pay off these bills. Some tips that can help include:
- Review the bill. Make sure the charges are correct. If something looks off, push back. It is possible the healthcare facility’s billing department made a mistake and is overcharging you.
- Negotiate. Reach out to your provider and see if they could lower the bill. In some cases, you can negotiate a lower bill or payment plan directly with the provider.
- Prioritize bills. Some bills are more important than others. Mortgage payments and a new furnace may be more important than paying off medical bills or credit cards.
- Home equity. It may make sense to take out a home equity line of credit to pay off medical debt.
If these options are not enough, the next step may be a petition for relief through bankruptcy.
Medical debt and bankruptcy
If you are thinking of filing for relief through bankruptcy due to medical debt, know that you are not alone. Researchers with Harvard University found that bankruptcy rates increased dramatically at the turn of the century and that the biggest factor contributing to this increase was medical bills. The researchers found that health related expenses had contributed to a 23-fold increase in bankruptcy filings.
The study also noted that middle-class homeowners with health insurance made up the majority of those petitioning for relief through bankruptcy. The study, published in the health policy journal Health Affairs, looked at data from five federal bankruptcy courts, including the Central District of California.
Common factors that contributed to the need to seek relief through bankruptcy included:
- Loss of work. Petitioners lost at least two weeks of work due to illness or injury, further contributing to a difficulty paying bills.
- Large bill. The bills that led to bankruptcy were over $1,000.
- Mortgage. Many also attempted to mortgage a home to pay for their medical bills, leading to further financial issues as they struggled to make their mortgage payments.
The first to factors lead to a double strike, the large bill and loss of income, and can lead to financial struggles for any family. Family after family have found themselves struggling to pay off bills from an injury after an accident, cancer diagnosis, or other major illness. These families often have coverage through work or on their own and still face huge deductibles and large, debilitating bills. Even more difficult, these families often loose financial coverage due to an inability to make payments or because of pre-existing conditions further compounding their financial struggles.
If approved, the bankruptcy can essentially lead to the forgiveness of this debt. This can allow you a fresh start, an opportunity to rebuild your credit and move on with your life.