What to Do About Medical Bills You Can’t Pay

There's a big hole in the advice personal finance experts hand out. A really big hole. Oh, sure, we all know we’re supposed to argue with medical providers and get them to cut their fees. But many of us are not in any kind of physical or mental shape to argue. Meanwhile, if we have been lucky enough to get medical care without being forced to pay with cash or a credit card before we even saw the doctor, the bills pour in, and the phone calls start. Each provider or bill collector wants us to pay in full, and forget about paying anyone else or even having enough money to eat that month.

Here’s the basic scenario if you have health insurance or even if you don't:

1. Ask the provider to write off your portion of the bill after your insurance company has paid its share. Sometimes they will, if they’ve gotten enough from your insurer. Sometimes they will even if they’ve gotten nothing.
2. Negotiate the bill lower. Whether you have insurance or not, your goal is to pay between 5 and 50 percent of what you owe, max. Start your offer at 5 percent and let them negotiate you up. The main argument if you have insurance is they’ve already been paid a reasonable amount. The main argument if you don’t have insurance is they have billed you the utter maximum, and you want the bill to be cut to the remaining portion an insured person would be billed. Ideally, lower.
3. You don't have the money. By now they know you seriously care about the bill you owe, since you've called repeatedly trying to do something about paying it. They also know you can't pay it now. If they haven’t offered already, ask to make interest-free payments, stretched over a very long time. A year or more. These payments should give you space to recover first. Perhaps you can arrange to pay them a token fee now, or perhaps not. Then in six months, when you have regained your health, you’ll start making small monthly payments. Don't agree to a schedule that starts right now if you have no hope of meeting it. Try for delayed payments. Six months or a year later, if you still don’t have the money, try the scenario from the top, asking them to forgo payment entirely.

***UPDATE***

4. If you know you can never pay a medical bill---for instance, a hospital stay in the tens of thousands of dollars---present a written request on your own or ask to fill out their paperwork for being granted charity status. This is better than having a bill written off, which might produce tax consequences as supposedly "earned" income. When you know you can never pay, charity status is the way to go. You'll have to document why you are a plausible charity case, but most people who are in this situation have plenty of paperwork proving it already, and little shame or embarrassment about admitting that they're out of money. If one medical supplier grants you charity status, include a copy of that supplier's grant letter in your application for charity status to the next supplier. There are zero tax consequences to being granted charity status.

*****

The major goal of all this work is to stop the provider from putting you into collection or initiating a lawsuit against you. Your financial goal is to pay the very minimum amount you can wrestle out of the provider, and to only agree to a payment schedule you have a chance of meeting. By the way, if you like writing letters or aren’t afraid to ask your doctor directly, that’s a very effective method of asking for your bill to be drastically reduced or even entirely forgiven. The boss can do what the workers can’t.


***2ND UPDATE***

5. If bill collectors do start calling, you have rights. The Federal Trade Commission has a great Consumer Information page that details the major rules under the Fair Debt Collection Practices Act. Best of all, you have the right to tell bill collectors to stop calling you. Check out the FTC page so you'll be aware of what debt collection practices are not allowed. Your state may have specific collection laws as well. Hopefully, they'll be in your favor. Most important, don't yield to the pressure that bill collectors exert. You know your financial and medical situation best, so don't agree to what they demand just to try to get them to stop calling. Use the method the law provides.

6. If you do get a notice that you're being sued over a medical bill, don't ignore it. Then you'll lose your chance to fight. You likely don't have the money to hire a lawyer, but you can call your local bar association to get the name of an attorney who will work for you pro bono--free. They do exist and it's not a big deal to find one. You qualify based on your lack of income or other circumstances. The important thing is to get legal representation, so a judge doesn't just take the medical provider's word for what you owe. After all, many medical bills are inflated, or duplications, or just plain wrong. If you miss your date in court, you automatically lose your case. And by the way, even at this stage you can try to get charity status from the very same company that is suing you.

*****  

But what if you've tried the basic scenario and aren't getting anywhere? Or what if you have insurance but worry it might not be enough? What if you are young and stupid and think you're invincible? The reality is that without insurance, any health blip can become a financial disaster. Although the new healthcare law will change some of these situations, here are some steps you can take, both before, during, and after the catastrophe:


1. Supplemental insurance. If you know you won’t have money to pay the remaining owed portion if you get seriously ill, buy insurance to pay that part. You’ve seen those TV ads for supplemental insurance; this is what they’re all about. When 80 percent coverage isn’t enough, there is a way to be insured to cover the other 20 percent. If you’ve got serious ongoing health problems such as heart disease or cancer, that additional coverage could be crucial. Those cheapie “we’ll pay you cash every day you’re in the hospital” policies may also help you out, but they’re unlikely to cover the multiple expenses that can be incurred in just a one-day visit to an emergency room or the ICU.
2. Catastrophic health coverage. This is cheap, it only covers you well for big surprise medical problems, but it’ll keep you from losing your shirt (or your credit rating) over a major medical crisis. You’ll have to pony up the first $5,000 or $10,000 before its benefits kick in, but you won’t have to pay $100,000 for a surprise stint in ICU or unexpected open heart surgery. It doesn’t cover pre-existing conditions, and you usually can’t buy it for a period longer than one year, and it may max out before your extremely expensive medical problems are solved. But it takes much of the risk out of not having conventional health insurance. Even after a medical catastrophe, if you think nothing else can go wrong, you’re mistaken. So get one of these plans if you can’t get any other kind of coverage.
3. State-funded health insurance plan based on your income or diagnosis. These vary by state, and some states aren’t generous. (A good reason to consider where you live based on state politics and resources.) These plans may have a “buy down” feature that allows you to pay a higher premium and be covered for a pre-existing condition. Some subsidize lower premiums based on your income. They also may have completely free coverage for certain diseases, such as HIV/AIDS, or breast cancer.
4. Your state’s administration of Medicaid. You may not qualify by reason of age or income until a medical catastrophe strikes. Then you probably will. The tough part to this is sitting at the state office for hours to apply, being treated like a deadbeat, and their various offices losing your papers. Persist. Your tax dollars are paying for this program. If nothing seems to be moving, call your state congressional representatives for help. It works.
5. Social Security, either Disability or Supplemental. Either one will qualify you for a health insurance program (Medicare or Medicaid), but they aren’t easy to get. Disability is almost always an automatic rejection. There are companies and lawyers who will help you. Use them, as it takes years otherwise. The Social Security Administration posted a goal a while back of giving a first reply within 270 days. That’s a goal, not a track record.
6. Medical Billing Advocate. There aren’t a lot of these people around, but they’re pros at making sure you aren’t being overbilled by hospitals, labs, and doctors. They can bargain with your medical creditors to settle your medical bills for far lower than the invoiced amount.
7. Social Worker. There is a persistent myth that social workers actually exist who can help you and who want to help. Maybe when you’re trying to get public assistance, there actually will be a sympathetic social worker who wants to keep you from becoming homeless. Maybe not. Maybe there will be a hospital social worker who makes an effort to help you. Maybe not. At least while you’re waiting to see this probably overworked and burnt-out professional, you’re not at home stewing over bills you can’t pay, and you’re in a heated or air conditioned building, too, something that you might not have at home anymore.
8. Statute of Limitations. Perhaps you haven’t been able to access any of the prior listed methods of paying your medical bills. Each state has a statute of limitations on past due bills, and sometimes that’s only three years. Collectors are supposed to stop calling once you speak to them and ask them in writing to stop, but examples abound of collectors not acting in a legal manner. Put a stop to it. Three years of being called by bill collectors is probably enough purgatory for anyone. Tell any bill collector you no longer are legally liable to pay, and they must drop the case and stop calling. If they overstep their legal authority—which is a constant problem with bill collectors—report them promptly to the state agency that regulates them.

Of course the real answer to the problem of medical bills you can’t pay is to change our health care system at the core. Which leads to my

****3RD UPDATE****

Sometimes the issue may be that a medical bill is incorrect, either for a large amount of money or for a smaller sum. As Jay Lake has discovered, some medical billing issues go around and around because the low-level employees of the medical providers and the low-level employees of the health insurance companies keep denying that they have any responsibility to resolve an error. They simply keep passing the buck. They'd rather you just paid what you do NOT owe than fix the error. Bill collectors often say the same thing: "Why don't you just pay it?" When that happens, it's time to tell your story to the local action line, time to file a complaint at the state level, and definitely time to contact your local legislative representatives and get some help. Nobody should pressure you to pay a bill you don't even owe.  



SEE MY OTHER UPDATE: http://hopefullily.blogspot.com/2012/09/how-to-deal-with-medical-bills-update.