Overspending and poor money management have been cited as major causes of bankruptcy for Americans, but there is yet another condition that is quickly gaining in popularity as a financial stressor. Some 28% of Americans report having difficulty paying medical bills, and about 57% of bankruptcy filers claim medical bills are a cause. Three quarters of those filing bankruptcy because of unmanageable medical bills are college-educated homeowners with private health insurance that just happened to contract a serious illness.
While medical insurance is vital, co-payments, deductibles and uncovered services create gaps in the coverage that become the insured individual’s responsibility. Catastrophic illnesses can cost a person his or her job, and often times this also results in the loss of private insurance coverage. The remaining medical expenses shift from the insurance company’s responsibility to that of the newly uninsured. Out-of-pocket expenses average up to nearly $17,750 for individuals who at least started out with insurance, and can grow to as much as $27,000 for those without private insurance coverage from the beginning of the illness.
Americans are all too often turning to the wrong resources to handle excessive medical bills. Balances are being transferred to high interest credit cards, which can make an already tight monthly budget nearly impossible to maintain. Many hospitals have recently begun offering credit card services to their patients with accounts that start at low interest rates. More times than not, however, the interest rate will double or even triple within a short period of time, making monthly payments difficult to come up with. Defaulting on credit card payments has a more significant effect on a credit report, so unless the balance can be paid in full in one to two months, a credit card is not an advisable solution for medical bills.
Another resource Americans tap into to help resolve medical bills is the equity in their homes. Home equity debt consolidation loans use a person’s primary residence as collateral against a loan that combines several of the homeowner’s outstanding accounts, such as credit cards, personal loans and medical bills. Consolidation loans can help lower monthly bills and make a budget more manageable, but risking one’s home to pay medical bills is a scary proposition. If the illness returns or another crisis arises creating a financial burden, the loan might not be repaid in accordance with the original terms and the homeowner could loose their home.
So what is a person with medical bills to do? Although it sounds tedious, each bill should be carefully examined to ensure that every line item is valid. Errors in billing are more common than hospitals care to admit and if a patient simply accepts a bill without inspection, the insurance company will unsuspectingly pay the bill. This can result in higher insurance costs and a larger patient balance because of coinsurance liabilities or denied claims. Denials should also be checked to make sure they are justifiable. In some instances, negotiating with insurance companies can result in a change of decision, which can decreases the patient’s financial responsibility.
Although it can be a daunting task, there is help available for people who need to contact hospitals or insurance companies about their bills. Companies that specialize in the field can negotiate medical expenses for the patient, decreasing both the account balance and the stress associated with the debt. Individuals should look for experienced professionals that are apprised of the proper methods of medical debt reduction to realize the most reasonable and appropriate medical costs.