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Your Guide to Successfully Managing Your Medical Bills

A Consumer Guide from American Financial Solutions


Major medical bills usually come as a surprise to many people, and these days, the surprise can be a big one. Today’s tough economy has driven many Americans deeper into debt. All too often, households are forced to pay their bills with credit cards just to make ends meet, and according to the Federal Reserve, our nation’s revolving debt totals nearly $793 billion. So when unplanned medical bills come in, they can force a family budget to get out of balance.

In fact, more than half of all personal bankruptcies in the U.S. are triggered by major medical bills. But it doesn’t have to be this way – you do have options. The key is to talk to someone who knows how to help you develop a plan for paying off debt and managing your finances while reducing your stress level.

American Financial Solutions, a national non-profit credit counseling agency, can help you find options to manage your debt. Our certified credit counselors will review your financial situation and may find ways to help you reduce interest rates and fees from credit card companies and banks, and develop a plan for paying your medical debt. We help you successfully manage your entire financial picture.

American Financial Solutions is pleased to provide this consumer guide to help you learn about the choices available and the issues to consider when paying medical debt. This guide explains six tips to follow when paying medical bills. You’ll also find more details on how you can pay all of your bills, manage and protect your credit record, and reduce the worry you may be feeling about your debt.


Tip 1. Communicate

Talk with your medical provider about your situation

Financial stress can cause not only worry but also embarrassment. Many people prefer not to talk about their money problems. Unfortunately, avoidance can make those problems worse. Medical billing departments talk to people every day who have trouble paying bills. They understand what you’re going through. Rest assured the hospital staff wants to help – they simply need you to be open and honest about your situation.

An important tip for working with your medical provider is to always try to speak with the same person each time you call. Ask for the name of the person you are working with and find out if they have a direct extension that you can use. This is helpful because that person will learn about your financial needs and it will save you the frustration of having to explain your situation every time you call.

One option the hospitals may offer you is “charity care.” If you earn less than 200% of poverty level income the hospital may eliminate part or all of the debt you owe. For a family of four in 2010, 200% of the Federal Poverty level was $44,100. Some hospitals are even more generous, allowing for some level of charity care if you earn up to 300% of the poverty level.

Most large medical providers also have full-time financial counselors on staff whose job is to help you find ways to pay your bills. They will offer manageable repayment plans if you qualify. They’ll also work hard to make sure you’ve received all the coverage to which you’re entitled from your insurance company, workers’ compensation, Medicaid, and other programs that may be available.

This applies even AFTER your account has been turned over to collections. You can call your hospital billing office, financial counselor, or even the collection agency responsible for your account at any time to discuss your situation. You will find that, more often than not, they will be sensitive to your situation. After all, hospitals don’t want to burn bridges with their patients. They want you to come back the next time you need medical care.

To avoid a communications failure with your hospital, always respond to their calls and letters. Be honest about your situation, and don’t hesitate to ask if you qualify for charity care or an installment plan. You can also call American Financial Solutions for help with all of your bills.

Tip 2. Make sure you understand your bill

You may get two or three statements before your real bill arrives.

There are many reasons why medical bills are confusing. First, you may receive several bills from different providers for one medical visit. This means you’ll have one from the doctor, one from the hospital, one from the laboratory, one from the anesthesiologist – you get the picture. In addition, you may receive a few letters or statements from the hospital before you get the actual bill.

Typically, hospitals will send a statement that includes the total charges, the estimated insurance payment, and your Estimated Payment Responsibility. This statement arrives shortly after you receive treatment. This is NOT a bill. It is the hospital’s best estimate of how much they think you will owe, based on what they believe the insurance company will pay.

Shortly after the hospital sends its Estimated Payment Responsibility, your insurance company will send an Explanation of Benefits (EOB). Again, this is NOT a bill. It is the insurance company’s explanation of how much THEY paid to the hospital. Only after the EOB goes out will you receive the actual bill from the hospital.

It is important to read all correspondence from your hospital carefully. You may receive two or three statements before your real bill arrives. This final bill will state how much the insurance company paid and how much you are responsible for repaying. If you are ever confused about what you owe or how to read the bill, call your medical provider’s office and ask for help. If you need help determining how you can pay the bill or fit monthly payments into your budget, call a certified credit counselor at American Financial Solutions.

Call American Financial Solutions for a free private help session.

Tip 3. Carefully consider the benefits and costs to putting medical debt on your credit card

Putting medical bills on your credit card may relieve one debt, but can increase your debt overall.

Medical expenses tend to come in large numbers. A few tests and an overnight stay in the hospital can run into the thousands of dollars. One of the most frustrating positions to be in is when you want to pay a debt, but the only way you can afford to do so is by incurring new debt or making minimum payments. That extra burden may put you at serious risk for falling behind on debts or even for filing bankruptcy.

One thing to consider when using a credit card to pay medical bills is the amount of available credit remaining on your credit card account. A factor of your credit score is how much debt you have compared to your available credit limit. The ideal ratio is 30%. This means that at any given time you should only be using 30 % of your credit line or it will begin to negatively impact your score.

Another consideration is your monthly minimum payments on the credit card. The reason for putting medical bills on a credit account is typically to make the amount of debt more manageable to repay, so make sure that the new payment on your credit card is something you can afford. Also, be sure to make all of your payments on credit cards on time. If you do not, you may be penalized with late fees, an increased interest rate, or both. Review your budget and use an online calculator to estimate what your new payment will be. You can find a credit card calculator at under the AFS Education Resources tab.

When you are deciding whether to pay the debt with your credit card, consider what other resources you have to pay your medical bill. This may include developing a payment plan with your medical provider, requesting financial assistance, or contacting a credit counseling agency for help. When you contact our credit counseling agency, a certified credit counselor will work with you to develop a plan for repaying your debts and successfully managing your finances. The counselor’s role is to help you identify options for repaying your debts that you may not realize are available. Your AFS counselor will help you develop a plan and provide the support you need to successfully get out of debt.

Tip 4. Pay on time

If you wait too long, your lack of payment may go to a collection agency and be reported to a credit bureau.

Because many medical expenses are an unplanned, surprise expense, it can be difficult to determine how to pay the bill. This is especially true if your budget is already tight. Unfortunately, this causes many people to avoid opening the bills and to set them aside with the intent to deal with them later.

Medical providers want to help people pay their bills. They are in the business of helping people and they, just like any business, want you to be happy with their service. They also need people to pay their bills in order to cover the costs that insurance companies do not cover. The unfortunate reality is that, between copays and large deductibles, you may end up owing a large debt after insurance has paid its portion.

Generally, hospitals and medical providers will make several attempts to collect payment. If their phone calls and letters go unanswered, the next step is to send the unpaid account to a collection agency. Depending on the individual situation, the collection agency may report the debt to a credit bureau, file a lawsuit in small claims court, or take both actions.

The most important step to take when managing your bills is to contact the medical provider. Even if you cannot pay, it is important to explain your situation to them. They may have other repayment options for handling the debt that you are not aware of.

You may also contact American Financial Solutions if you are having trouble paying. Certified credit counselors will work with you to find the best answer to getting your medical bills paid. Also, if you use a debt management plan, we can work with those creditors, you place on the plan, to end collection efforts.

Contact a certified credit counselor. It’s free and confidential.

Tip 5. Don’t rob Peter to pay Paul

You aren’t robbing Peter – You’re robbing yourself!

In these difficult times, you may not have enough cash to pay all of your regular bills each month. So you pay “urgent” ones, like the water bill and the mortgage, while you let the “less urgent” bills wait.

The truth is, getting behind on any bill can bring a huge price tag – both in mental stress and in real dollars. You aren’t robbing “Peter.” You’re robbing yourself, because in the end, you usually pay high interest rates and late fees, and you may even damage your credit record. It simply isn’t worth it. If you fail to pay your credit card bills, for example, you could trigger all kinds of fees and penalties, including some that could raise your interest rates to 30% or more!

Robbing Peter to pay Paul may mean paying one bill instead of another. It can also mean sacrificing your health in order to protect your finances. Today, there are more than 130 million Americans with a chronic medical condition. Many of these conditions require consistent monitoring by a practitioner and daily medication, yet an increasing number of patients report skipping or rationing their medications and not making regular visits to their physician because of financial stress. This can not only cause serious damage to your health, it can end up raising the overall cost of your treatment. This is especially true if you end up having to visit a hospital emergency room or a specialist as a result.

To avoid robbing Peter to pay Paul, remember you do save money by paying your bills on time. If your financial resources are stretched too thin to cover everything, call American Financial Solutions to learn about your debt management options. Certified credit counselors can work with you to create a detailed plan for managing your budget and getting or staying on track with your debts. 

Tip 6. Keep your retirement money

Using your retirement savings now can leave you unprepared for your future

One of the Internal Revenue Service’s acceptable reasons for dipping into your 401k, 403b, IRA or Roth IRA is to pay medical bills. This is usually called a hardship withdrawal and, depending on your employer’s retirement plan, you can simply withdraw the money (and pay a tax penalty), or you can take a loan against your retirement funds. While paying off the debt with your retirement money can feel good, it comes at a high price. The money you place in your retirement account is for your future. In addition, that money typically increases in value as long as you have it in your retirement accounts. The interest you earn on investments and the match you receive from your employer (if applicable) make that money worth much more than it is if you take it out to pay bills. You are literally short-changing your financial future.

Take the time to discuss all of your options with a certified credit counselor. There may be repayment plans available that will make your payments to your medical provider affordable or you may have other options that will reduce the overall cost of the bill. It is important to exhaust all of your choices for paying down the debt, before deciding to use your retirement account.

Achieve Your Own Freedom from Debt

American Financial Solutions has helped thousands of people manage their debts, develop and maintain positive credit habits and end the worry about medical bills. We work with hospitals and healthcare providers across the country, as well as credit card companies and other creditors. We are a non-profit credit counseling agency certified by the Association for Independent Consumer Credit Counseling Agencies (AICCCA) and the Council on Accreditation (COA). We are also a member of the Better Business Bureau and have an A+ rating.

As a division of North Seattle Community College Foundation, American Financial Solutions offers many services designed to help people become debt free. Contact us today to learn how we can help you. Many of our services are listed below.

  • Financial Education
  • Credit Counseling
  • Debt Management
  • Medical Debt Assistance
  • Pre-bankruptcy Counseling
  • Post-bankruptcy Debtor Education
  • Pre-purchase Housing Counseling
  • Foreclosure Intervention and Assistance

Contact a certified credit counselor now.