How to Handle Costly Medical Bills — Smartly

Medical debt might seem as though it’s a problem limited largely to people who lack adequate health insurance coverage.

But even those who have a health plan could find themselves struggling to pay bills.

According to a 2023 study from health care advocacy organization The Commonwealth Fund, 30% of adults with employer coverage were paying off debt from medical or dental care, as were 33% of those with Medicare, 33% of those with an individual or Affordable Care Act marketplace plan, and 21% with Medicaid.

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Cutbacks to Medicaid funding in the One Big Beautiful Bill Act, which became law over the summer, have raised concerns that more people will find themselves immersed in medical debt.

“It’s such a common burden because of the complexity and lack of affordability in our health care system, even if you have insurance,” says Ruth Landé, vice president of provider relations at Undue Medical Debt, a nonprofit organization working to alleviate the burden of medical debt.

If you rack up big bills while you’re still subject to your health plan’s annual deductible, you might be on the hook for thousands of dollars before your insurance coverage starts — especially if you have a high-deductible plan.

Even after insurance kicks in, the out-of-pocket costs for co-payments, co-insurance, or charges for out-of-network care can stack up.

Hospital stays and surgeries or serious illnesses that require inpatient care, such as appendicitis or a heart attack, often have hefty costs for patients. Bills for room charges, surgeons, anesthesia, or imaging can quickly accumulate.

Emergency room visits are also a driver of medical debt, although thanks to the federal No Surprises Act, patients can’t be billed more than the in-network rate for emergency care, even at an out-of-network hospital or if some of the providers are in network and some are out of network.

Treatment for chronic illness is another common culprit. Conditions such as diabetes, cancer, heart disease, asthma and autoimmune disorders require regular care, tests and medications, and ongoing expenses for treatments such as insulin, chemotherapy and dialysis can add up.

Insurance plans might cover only certain treatments, medications or specialists. Some newer or specialized drugs or therapies might be only partially covered — or receive no coverage at all — and the specialists you prefer to visit might not participate in your insurer’s network, resulting in substantial out-of-pocket expenses for you.

Costly medical bills might feel insurmountable, but the worst move you can make is to ignore them or forgo care that you need out of fear of going into debt.

According to the Commonwealth survey, nearly two in five working-age adults had delayed or skipped needed health care or a prescription drug in the past year because they couldn’t afford it. If you’ve received a medical bill that you can’t pay, or if you’re already in debt, you can take action to get some relief.

Confirm that the charges are accurate

Make sure that you truly owe the charges you’re being asked to pay. Review copies of your bills, explanations of benefits (EOBs) and other communication from your insurance company and health care providers as soon as you get them.

Insurance companies typically send EOBs in the mail, but you can also usually find them by logging in to your account on the insurer’s online portal. If you can’t locate an EOB for a medical service you received, call your health care provider to be sure it has your insurance information and that it billed the insurance company.

Look for problems such as duplicate charges, charges for services you didn’t receive, incorrect information about you and any medical conditions you might have, and billing for an out-of-network provider when you visited an in-network one.

If you notice that your insurance company paid for a service you didn’t receive, you should point that out, too; even though you might not owe any money, incorrect billing can still be a problem for you because it could cause denials of future claims if the insurance company thinks you already had certain treatments.

Keep in mind that if you get a bill long after you received a medical service, it might be because of ongoing disputes between health care providers and insurance companies, says Landé.

Reach out to the provider or insurance company as soon as possible if anything looks out of place or you don’t understand your charges — and consider doing so by e-mail to keep a paper trail. If your insurance company is denying coverage that you believe you deserve, you can appeal it.

If your health care provider or insurance company fails to resolve inaccurate bills, you can file a complaint with your state’s department of health (find its website at www.usa.gov/state-health), its department of insurance (https://content.naic.org/state-insurance-departments) or, sometimes, its attorney general (www.naag.org/find-my-ag).

These entities can review your complaint, and they might contact the provider or insurer to investigate, though the extent to which they take action to help you will vary by state.

For example, the Illinois Department of Insurance reviews complaints about insurance billing and can take corrective action if necessary, as does the New York State Attorney General’s Health Care Bureau.

Create a payment plan

Once you establish that you’re responsible for a bill, the next step is to figure out a plan to pay it. If you can’t afford it up front, make that clear to the health care provider.

“Providers often just don’t know the economic circumstances of folks. But if they do, they can classify your care as charitable care or offer financial assistance,” says Landé.

Even if you have health insurance, you might qualify for assistance. They might forgive a portion of your bill or, in some cases, the entire amount. Most providers also allow patients to set up zero-interest payment plans.

If you need some extra guidance, consider reaching out to a nonprofit organization such as Dollar For, which offers free help navigating medical financial-assistance applications.

Although it might be tempting to pay a medical bill with a credit card — especially if the bill is unexpectedly large and you don’t have money readily available to pay it — avoid doing so at all costs, says Landé.

If you carry a balance from month to month on your card, you’ll likely pay interest on that debt at a steep rate — an average of 20%, according to Bankrate.

Manage a debt in collection

If you don’t work out a plan to pay a medical bill, the provider might eventually turn the debt over to a collection agency. In some cases, a collection agency might track you down and legally require you to pay under the threat of being sued. Sometimes debt collectors also threaten wage garnishment, meaning your employer could withhold some of your pay to cover the debt.

If you have a medical debt in collection, pay only what you can afford. Don't stop taking medications, visiting your doctor, or paying for housing and utilities. A good general rule is to spend no more than 3% to 6% of your gross income on out-of-pocket medical bills, says Landé.

Debt-collection agencies can work with you to create a payment plan. You might also want to get help from a credit counselor. To connect with one, go to the website of the National Foundation for Credit Counseling.

If a debt-collection lawsuit is filed against you, respond either personally or through an attorney by the date specified in the court papers.

To preserve your rights and the chance to fight a court order, respond promptly. Consider enlisting the help of a legal aid organization such as the Legal Aid Justice Center.

Know your rights

Your state could offer legal protections when it comes to the collection of medical debt. Many states restrict health care providers’ ability to sue patients for their medical debt, often by regulating whether or how they can send debt to collection agencies.

On the federal level, the Fair Debt Collection Practices Act bans debt collectors from using abusive, unfair or deceptive methods.

In recent years, both policymakers and the credit industry have made efforts to lessen the impact that medical debt has on your credit.

Some states (California, Colorado, Connecticut, Illinois, Maryland, Minnesota, New Jersey, New York, Rhode Island, Vermont, Virginia and Washington) have laws in place that prevent or restrict the reporting of the debt to the credit-reporting companies (Equifax, Experian and TransUnion).

In January, under the Biden administration, the Consumer Financial Protection Bureau finalized a rule that banned the inclusion of medical debts on credit reports and prevented lenders from using medical information in credit decisions.

The rule was supposed to go into effect in March. But under the Trump administration, the CFPB no longer supports the rule, and it faces legal challenges from credit-industry groups.

Still, the credit-reporting companies have made policy changes that limit how medical debt might appear on credit reports. Credit reports no longer list medical debts that have been paid, unpaid medical debt that is less than a year old, or medical collections of less than $500.

Major credit-scoring models have altered their formulas to lessen medical debt’s negative effects on the scores. Unpaid medical debt has a smaller impact on FICO scores than other unpaid debt, for example. (Note that if you paid a medical bill with your credit card, that debt is typically not classified as medical debt.)

Make a plan now to avoid debt later

If you have solid health insurance, you can make moves to help you avoid falling into debt in the first place. Preventive care, such as regular check-ups, can ward off expensive health issues. Most health insurance plans must cover certain preventive-care services at no cost.

“Take advantage of your annual wellness visit or annual physical and get to know your preventive benefits,” says Tatiana Fassieux, education and training specialist for California Health Advocates.

Get to know your family history, too, says Fassieux. Even if you’re healthy now, being aware of whether certain medical conditions run in your family may help you assess your risk for future needed care, she says. The U.S. Surgeon General’s “My Family Health Portrait” tool can help you gather information about your family health history and learn about your risks.

If you anticipate that your health care needs might increase in the coming years, consider how your insurance plan would cover you. Compare premiums and deductibles to find the balance of monthly costs and maximum out-of-pocket expenses that will work for your budget.

If you expect to use health care services frequently, you may want to steer clear of a high-deductible health plan unless you have enough money in savings to fully cover the deductible. HDHPs have been associated with statistically significant lower use of evidence-based clinic visits, laboratory tests and prescription drugs for individuals with chronic illnesses, according to a recent study by the Journal of the American Medical Association.

For planned medical services, you should familiarize yourself with the up-front costs — and that starts with knowing the ins and outs of your insurance coverage. Before you receive a treatment, verify that all the providers involved are in-network under your plan. It’s not uncommon for one provider, such as your primary care doctor or surgeon, to be in-network, while others, such as the anesthesiologist or radiologist, are not.

Reviewing coverage in advance with a provider who will be on your care team may help you avoid unexpected costs.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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