We often think of spending money as a choice, which is sometimes true—like in the case of travel, entertainment and other “wants.” Or, we at least think of unavoidable costs as predictable—while you’re not choosing to buy food or pay for housing, you know you’ll need to set aside a certain amount of money regularly to cover these “needs.” This allows you to plan ahead so you can purchase them, hopefully without having to accrue debt to do so.
But what about spending that’s both unavoidable and unpredictable? This intersection is where medical debt falls. It’s something you can’t necessarily plan for ahead of time, and the final bill also tends to be a mystery until you owe it. This makes medical debt scary for people with and without health insurance coverage, and understandably so.
Medical Debt: A Financial Epidemic
Medical care can be very expensive. While the amount you pay out of pocket depends on a variety of factors, including insurance coverage, you may still find yourself facing a bill you can’t afford to cover right away. And you certainly wouldn’t be alone. According to CNBC, 68 percent of hospital bills of $500 or less were not paid off in 2016. In other words, more than two-thirds of patients aren’t paying their entire hospital bills, and “that number could increase to 95 percent by 2020,” according to the same study.
When patients are unable to pay off medical bills within a given time frame, they can go to collections. This kicks off a debt cycle, either because the outstanding charges start accruing interest or because consumers feel like their only option is to use credit cards to pay off the medical bills—but then find themselves on the hook for a high-interest balance.
What happens when consumers face insurmountable medical debt? Sometimes, they’re forced to file for bankruptcy. This decision may require them to liquidate their assets. The negative effects will also linger on their credit histories for years to come. Unfortunately, medical debt is the leading source of personal bankruptcy filings in the U.S., as USA Today reports.
Medical Debt Relief Solutions to Explore
Just like any other kind of consumer debt, there are debt relief options available for medical debt. Since medical debt falls under the classification of “unsecured,” or untethered to any particular asset, many of the solutions applicable to credit card debt also work here.
Debt consolidation is an option for those who qualify. Basically, this strategy entails taking out a personal loan to pay back higher-interest debts. This allows consumers to focus on repaying that single loan at a fixed rate over time.
Another option is debt settlement, which, if successful, allows consumers to settle with creditors for less than the full amount they originally owed. Program enrollees must deposit a certain amount of money into a dedicated account for as long as it takes to save up enough to negotiate. Then a negotiator will reach out to creditors to try to reach an agreement that’s favorable for all. As various Freedom Debt Relief reviews mention, some consumers found a program like this helpful after their medical debt became out of control.
Planning for Future Medical Debt Now
One of the trickiest aspects of medical debt is that you can’t predict it ahead of time. What you can do is start setting aside emergency funds now that may help you avoid debt in the future. After all, if you can pay off your hospital or doctor’s bills right away, you’ll save money in interest. Another option is opening a Health Savings Account, which allows you to save up money for future healthcare costs while also reaping tax advantages.
If you’re affected by the medical debt epidemic, just remember you’re not alone. You have options. The key is avoiding racking up exorbitant interest rates so you can tackle this debt once and for all.