Kellie Brown had rarely suffered from an ailment worse than a runny nose when she let her health insurance lapse last August. Brown, 23, had always been covered by her father's plan. But when he retired in July 2007, she lost her coverage, and "it just seemed like an expense that I didn't really need."
Big mistake. Less than two months later, Brown ended up making two financially devastating trips to the hospital: one to have her appendix removed and another, a few days later, to be treated at a different hospital for an infection resulting from the surgery. Altogether, her tab came to $40,000.
A visit to the emergency room, for yourself or a loved one, is no time to be haggling over prices or shopping around for a good deal. On the other hand, even if you're uninsured, huge medical bills don't have to bury you in debt, wreck your credit or banish you to collection hell.
When she got sick, Brown was a junior at Virginia Commonwealth University, in Richmond. She had few assets to speak of, and her parents were living overseas. When she told the hospitals about her financial situation, the hospital that had removed her appendix slashed her bill from $32,000 to less than $10,000; the hospital that treated her infection wouldn't budge on her $8,000 balance because it was below the $10,000 level that qualified for charity.
After an extended recovery, Brown had missed too much school to complete her semester at VCU. Last October she picked up an office job with a local catering company to begin paying down the remaining $18,000 of her debt. Then, in February, a group of friends organized a fund-raiser to lend a hand. The event, called "Show Some Love for Kellie Brown," brought together bands, dance groups and an art auction, and raised $6,000.
Armed with that lump sum (plus $2,000 from her parents), Brown was able to bargain with the first hospital, which agreed to settle her outstanding $10,000 balance for $8,000. She's still paying $50 a month toward the remaining $5,000 she owes the second hospital. But her monthly installments won't break the bank. And in September she'll head back to VCU to resume work on her dual degree in sociology and psychology. "It pays to have good friends," says Brown.
But you don't need a fund-raiser in your honor to slash your medical bills. There are plenty of other options if you know how the system works.
Read Your Bill
If your balance from the hospital appears out of line, give it a reality check by requesting and reading an itemized bill. Pat Pane, a specialist in medical-claims assistance in Wilmington, N.C., who helps patients interpret their bills and appeal them if necessary, says she once worked with a woman who had been billed for four hernia surgeries when she had had only one.
If you don't find any errors but your bill still seems questionable, call your insurer to make sure a paperwork snafu isn't gumming up the works. A claim filed under, say, your maiden name instead of your married name could throw a wrench into the process. So could a medical procedure or diagnosis that was coded improperly. "Say you've got bronchitis, but the doctor codes your condition as chronic fatigue," says Pane. "Chronic fatigue is an ongoing condition, so your insurance may not pay for your tests." If you find an error, "contact the provider and ask for a corrected claim to be filed," Pane says.
Know Your Insurance
If your treatment falls into a gray area that your insurance may not cover, bolster your case by submitting letters from your doctors that explain why the treatment you received was necessary. And verify that you provided the insurance company with any required referrals from your primary-care physician.
Mark Rukavina, of the Access Project, a nonprofit group that works to improve access to health care, recommends that you submit official paperwork whenever possible. "Often people call their insurer's customer-service department and get discouraged," says Rukavina. "But sometimes you just need to file an official grievance to clarify whether something should have been covered."
Similarly, if you used an out-of-network service because of a medical emergency, make sure your insurance company is treating the episode as an emergency. If that's the case, you'll more likely be charged as you would for an in-network service and the insurer will pay more of the bill. If not, file an official appeal, or submit a letter from the doctor who treated you explaining the urgent nature of your illness.
HMO participants generally have to walk a thinner line in terms of hospital care. "You may have to notify your primary-care physician within a certain time period of going to the hospital," says Tom Bridenstine, managed-care ombudsman for the state of Virginia. Or if your situation isn't immediately life-threatening, you may need to speak with a registered nurse at your HMO before heading to the hospital. Bridenstine's advice: Study up on the ins and outs of your policy.
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Shy Away From Plastic
What if four or more zeroes still stare at you from your bill? Avoid the temptation to break out the plastic. When you apply for credit, owing money on a medical debt isn't viewed as negatively as, say, splurging on a Lexus, says Gail Cunningham, of the National Foundation for Credit Counseling, because "you don't choose to get sick." But once you transfer the debt to a credit card, says Cunningham, you lose the benefit of the doubt. And don't convert your medical debt, which is unsecured, to a secured obligation by, say, paying it off with your home-equity line of credit.
If the hospital offers you a credit line from an outside lender at 0% interest, turn that down, too. That 0% rate usually jumps into the 20% to 30% range if you miss a payment. Plus, once your balance is off the hospital's books, you lose any negotiating leverage you have.
Drive a Hard Bargain
And you do have leverage. The first thing to understand about your balance is that "the total charges bear no relationship to what the provider or hospital will accept as payment in full," says Nora Johnson, who runs her own business in Caldwell, W. Va., that helps patients appeal their bills.
Hospitals bill everyone the same, from Medicare to private insurers to the uninsured. But the full tab that appears on your bill is much higher than the hospital's actual costs. That's called the hospital's charges-to-cost, or markup, ratio, and nationally the average is about three to one, says Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management. Anderson says any hospital should be able to tell you its charges-to-cost ratio, but you'll have to ask because the hospital won't necessarily volunteer the information.
Medicare traditionally compensates hospitals based on their actual costs, and private insurers that bring in many patients also have the clout to negotiate rates that are closer to a hospital's actual costs. Only patients who are uninsured or underinsured are expected to pay full freight.
But that doesn't mean you actually have to come up with the cash. You may not realize it, but unlike, say, buying a shirt at Macy's, "the health-care system is more like a bazaar where you can negotiate," Rukavina explains. You could start by asking how much Medicare would pay for a procedure similar to yours. Armed with that information, Anderson says, go straight to the hospital's chief financial officer and ask for a reduction to the hospital's actual cost, plus 25%.
Bolster your case by showing you're serious about paying. A good way to do that is to offer to pay the discounted amount immediately once you secure a sizable reduction in charges. "We've seen prompt-pay discounts of up to 50%," says Rukavina.
In 2004, Kristine Arnould landed in Mercer Medical Center in Trenton, N.J., with a pulmonary embolism. After x-rays, an MRI scan and five days on a drug drip, Arnould was presented with a bill for $37,000. A self-employed real estate agent, Arnould, 57, was uninsured at the time but earned too much to qualify for charity care.
She tried the stick-it-to-'em approach right off the bat but met a brick wall of resistance. "I called them up and said I was willing to pay fair market value or what Medicare or an insurance company would pay, but they said, 'Nope, that's your bill,'" says Arnould, who lives in Yardley, Pa. She began sending the hospital monthly checks for $25, along with letters contesting her bill, which was eventually turned over to a collection agency.
Arnould caught a break when Web research led her to the Chapman Consulting Group, an Austin, Tex., firm that helps patients determine how much they reasonably ought to pay. For a $75 fee, Chapman reviewed Arnould's situation and advised her to negotiate a bill of no more than $7,500.
A tip from a friend led Arnould to the Access Project, where she spoke with Andrew Cohen, who coached her on how to phrase her request to the hospital. When she called back in May 2007, her negotiating worked. Arnould had already paid $3,000 on her bill over the previous two years, and the hospital agreed to settle for another $3,000, provided she paid the remainder within 60 days.
Find a Hired Gun
As Arnould discovered, a medical-billing advocate or claims specialist can help you figure out a reasonable amount to pay and can also assist you in making your case. "Hospitals and doctors get their attorneys, and patients get us," says Nora Johnson.
Chris McCaughna was left with a mountain of medical debt after his brother, Eric, died in 2006. Eric had type 1 diabetes, and a five-day hospital stay in St. Petersburg, Fla., leading up to his death resulted in a $79,000 bill. The hospital reduced that to $56,000 after applying a discount for the uninsured. As the executor of Eric's estate, Chris was left with a total of $83,000 in medical obligations.
That's when he consulted Johnson. Chris requested itemized bills from all the medical providers. Then Johnson gave them the fine-tooth-comb treatment, looking for hidden duplicate charges and figuring out roughly what Medicare would have paid for the same services.
Eric's estate owed money to ten different providers, and Johnson sent a letter to each one offering a settlement based on the Medicare price. "All of them accepted the offer except for the ambulance company," Chris recalls. "That one was a couple of thousand dollars, so I just paid the total bill." Ultimately, he paid $41,000 on the original bills, plus a fee of $15,000 -- or 35% of his savings -- to Johnson.
Elizabeth Leary (née Ody) first joined Kiplinger in 2006 as a reporter, and has held various positions on staff and as a contributor in the years since. Her writing has also appeared in Barron's, BloombergBusinessweek, The Washington Post and other outlets.
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