Managing medical debt and how to avoid it

Medical debt is a significant burden for many Americans, contributing to two-thirds of all bankruptcies in the U.S. In this country, it's a necessity to learn how to avoid high medical costs and to manage any debt you have.

In 2018, Americans collectively borrowed around $88 billion to pay for healthcare, and almost half of respondents to a 2019 West Health-Gallup survey reported fear that medical costs will drive them into bankruptcy. A quarter reported that cost forced them to forego treatment.

How to avoid high healthcare costs

The first line of defense against medical bills is avoiding them in the first place. The second is arming yourself with knowledge. Here are some ideas.

1. Stay as healthy as possible

They say an ounce of prevention is worth a pound of cure, and the same principle applies to costs.

"If you do not put yourself in the medical system, you cannot get a bill," says AnnMarie Quintaglie McIlwain, CEO of Patient Advocators LLC. "A lot of the things that bring us to the hospital are largely avoidable through diet and exercise."

If you do get sick, look for home tests for common ailments, and opt for primary care and urgent care centers over the emergency room.

2. Get a decent policy and understand it

If possible, get a policy that has a reasonable deductible and robust coverage. Read the fine print, especially on short-term policies, which are usually insufficient.

"The people who have gotten into the deepest doo-doo financially are the ones that have the short-term policies," Quintaglie McIlwain says. "We can't stand them."

Many policies don't cover things that people assume they will, such as rides in ambulances and specific providers, even at in-network facilities.

3. Advocate for yourself

Avoid high and unnecessary costs by being an active and discerning consumer. Ask about the price of services and whether each provider is in your network.

"Believe it or not, you can shop around, and you probably need to," Quintaglie McIlwain says.

Whenever possible, get preapprovals in writing before receiving care. And push back on doing tests that don't seem necessary or that you've already done recently.

4. Review your bills carefully

Make sure you understand what you're being charged. Get an itemized bill and check it for accuracy.

"Oftentimes, you're being charged with quite expensive things that aren't real," Quintaglie McIlwain says. Once you have checked each item, ensure they match the terms of your insurance policy.

Handling your medical debt

You can handle medical debt in a variety of ways—many of which you may not be aware of. Consider the following.

• Charity and aid programs: Consumers who demonstrate financial need can often get forgiveness of their bills through charity programs. Some low-income people may not realize they are eligible for Medicaid, which some states allow to be applied retroactively to cover certain treatments.
• Negotiating cost and timing: Ask your hospital or provider to set up a monthly payment plan, which they'll usually offer with little or no interest. Bring financial documentation to make it clear you aren't able to pay right away. It's often possible to negotiate directly with the provider for a reduction in your bill. Nonprofit hospitals are required by federal law to offer eligible patients options like free or discounted care. Medical advocates may be able to get at least 30% knocked off of a bill.
• Medical credit cards: Hospitals, doctors, and other providers may offer special cards with low- or no-interest deals to pay for qualifying healthcare costs.
• Crowdfunding: You can raise money for medical bills on a variety of crowdfunding sites, including GoFundMe, FundRazr, GiveForward, and Plumfund.
• Tapping assets: You can use your home equity or retirement savings to pay down medical debt, but these options carry high risks and costs.

Tackling, or avoiding, medical debt takes knowledge and perseverance—and sometimes some professional help.

"We've created a very complex health insurance system," Quintaglie McIlwain says. "Even we who specialize in decoding it for people struggle with it sometimes."