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Overwhelmed by Medical Debt?

I am often asked what I believe is the most common cause of debt.  While there is no exact answer, medical bills always top my list.  According to a study published in the American Journal of Medicine, approximately 62.1% of all bankruptcies have a medical cause. The study goes on to say that people handle their medical debt in many different ways.  Some people attempt to pay their medical bills by mortgaging their homes, paying for the debt with their credit card, or even taking money from their retirement accounts. The unfortunate truth is that many of these attempts to manage the medical debt are in vain and people end up with their debts in collections or even worse, facing bankruptcy.

So how do you manage medical bills? There are many things to consider and there are certain steps you should always take when determining how much you owe on medical bills, how much you should pay and how you should pay.


The first bill you receive from the medical provider may include charges and fees that your insurance company is going to pay. Review the bill to determine if insurance has made a payment on your behalf. If they have made a payment, you should see an entry on the bill showing a credit for insurance. If you cannot tell whether or not insurance has made a payment on your medical debt, contact the medical provider and ask.

It is important to check for insurance payments. If you pay before insurance pays, you may end up spending more money than is necessary.

No insurance

If you do not have insurance there are several things you may do to make your medical bill more manageable. First, ask the hospital or medical provider to give you the insurance rate for the bill. The insurance rate is typically much less than what people have to pay when they do not have insurance.

Also, let your provider know that the medical debt is causing you a hardship and ask if they have any programs available to help pay the debt. Many hospitals have programs that can reduce or even eliminate your medical debt depending on your income level. To qualify, your income usually has to be at or below 200% of the federal poverty level.

Other options

Whether you have insurance or not, many medical providers will accept payments rather than demanding payment in full. The key is that you must talk to them and attempt to work out a payment arrangement. If the payments that they require are too high, it may be time to talk to a certified credit counselor to learn about your other options.

People also attempt to pay medical debt by using their credit cards. While it feels good to have the debt paid off, the reality is that it has simply been moved from one type of debt to another. Paying by credit card can result in increased debt. Interest is charged on the credit card debt and there may be additional fees added on by the credit card company.

One very sad and frustrating way of paying medical bills is by using your retirement investments. If you are considering taking money out of a 401k, 403b, IRA or Roth IRA to pay the medical debt you owe, look for help first. Your retirement is your future, by dipping into it you run the risk of having to retire at a later age, not having enough money to manage your expenses when your earning potential may be diminished due to health reasons and of paying taxes to use the money. Contact a credit counseling agency to learn what other options you may have available. Some credit counseling agencies will work with your medical providers to develop payment plans that work with your budget.

As millions of American’s have learned, medical debt can be completely debilitating. It is important that you are informed about your repayment choices and that you have support in selecting the best option for you. If you need help, are considering bankruptcy, or simply need someone to help you determine the route you should take towards paying medical bills, call the number at the top of your screen or click on the Get Started Now button.

Published Feb 13, 2012.