Dealing With Medical Debt 

Medical debt is one of the most common financial challenges American families face. Unlike other kinds of debt, medical bills often arrive unexpectedly, in confusing formats and in amounts that don’t always reflect what you’ll actually owe after insurance. Navigating medical debt can be stressful and takes some know-how. Fortunately, you often have more options than the bills suggest. 

How medical debt is different 

Medical debt doesn’t work quite like credit card or loan debt. A few things make it distinctive: 

• Bills are often estimates that change after insurance processes the claim 

• Providers and hospitals frequently have financial assistance programs that aren’t advertised on the bill 

• Medical debt has different credit reporting rules than most other types of debt 

• Many providers will negotiate balances and payment plans without involving a collections agency 

Understanding these differences opens up options that many people don’t know to ask for. 

Start by verifying the bill 

Before paying any medical bill, verify that it’s accurate. Billing errors are surprisingly common in healthcare. Request an itemized bill—a line-by-line breakdown of every charge—and review it carefully. 

Common errors include duplicate charges, charges for services not received, incorrect billing codes and amounts that don’t match your explanation of benefits (EOB) from your insurer. If something looks wrong, contact both the provider’s billing department and your insurance company. 

Don’t rush. Most providers give you 30 to 90 days to pay before any collections action, and many will work with you on timing while you sort out questions. 

Ask about financial assistance 

Hospitals and health systems are required by the IRS to offer financial assistance programs. These programs, sometimes called charity care, can significantly reduce or eliminate your bill based on your income. 

You typically won’t hear about these programs unless you ask. Contact the billing department directly and ask whether you qualify for financial assistance or a charity care program. Many providers use a sliding scale based on income. 

Some states have additional protections. In Washington, for example, hospitals are required to offer free or reduced-cost care to patients below certain income thresholds. Check with your state’s hospital association or consumer protection office for state-specific rules. 

Negotiate your balance 

Medical bills are often negotiable, more so than most people realize. Providers frequently accept less than the billed amount, particularly for patients paying out of pocket or facing financial hardship. 

A few approaches that work: 

• Ask for the ‘cash pay’ or uninsured rate, which is sometimes significantly lower than the standard billed rate 

• Offer a lump-sum settlement at a reduced amount if you can pay something upfront 

• Ask whether the provider will match what they accept from Medicare or Medicaid for the same service 

Get any agreed-upon amount in writing before making a payment. 

Set up a payment plan 

If you can’t pay the full balance, most providers will work out a payment plan. Many hospitals offer interest-free payment plans for patients who ask. Some have formal programs; others will simply agree to a monthly amount over the phone. 

When setting up a plan, make sure: 

• The monthly payment fits comfortably within your budget 

• The plan is interest-free, or understand the rate if it isn’t 

• You get confirmation of the agreement in writing 

How medical debt affects your credit 

Recently, medical debt has been treated differently in credit reporting than other types of debt. As of 2023, the following medical debts no longer appear on credit reports for Equifax, Experian and TransUnion: 

• Paid medical debts 

• Unpaid medical collections less than 12 months old  

• Unpaid medical debts under $500 

For unpaid medical debt over $500, there’s now a 12-month grace period before it can be reported to the bureaus—giving you time to resolve billing disputes or arrange payment before your credit is affected. In general, if you pay your medical bills promptly, they shouldn’t show up on your credit report.  

These changes reflect a broader recognition that medical debt is often involuntary and works differently than consumer debt. That said, rules around medical debt reporting continue to evolve. You can keep up with the latest guidance from the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov. 

What if the bill goes to collections? 

If a medical bill goes to a collections agency, you still have options. Under the Fair Debt Collection Practices Act (FDCPA), you have the right to request written verification of the debt and to dispute inaccuracies. Collections agencies must stop collection activity while a dispute is under investigation. 

Many medical collection accounts can still be negotiated, often at a significant discount. A nonprofit credit counseling agency can also help if medical debt has become part of a larger financial challenge. 

GreenPath financial counseling 

Horizon partners with GreenPath Financial Wellness to provide free financial counseling to members. If medical bills have created a cash flow crunch or debt challenge in your life, consider reviewing your situation with a certified counselor to determine the best path forward. 

This content is for education purposes only and does not constitute financial, legal or investment advice.