Stretching Your Dollar: How to Approach Medical Debt

<div class="block">Seeking medical care can obviously treat a physical ailment but when it comes time to pay for those services, the bills can become overwhelming. Andrea Woroch, budgeting expert, joined &#39;Stretching Your Dollar&#39; to provide some tips on approaching mounting medical debt.</div>

Stretching Your Dollar

So it's probably something a lot of us maybe don't think about, but most of us will likely have to deal with it in our lifetimes. That's the dreaded medical debt. Well, you may not have it now, but an emergency can set you back, but you don't want to stress because we have an expert to help us walk through the twist and turns. Joining me now is Andrea War, a budgeting expert, Andrea. It's great to see you this morning. So let's just get started. How many Americans according to data have medical debt and what's the average amount? Thanks for having me on. Yes, there's nearly one in five household American households that have medical debt and on average, these households are, are, are carrying $4600 in medical debt and that's clearly a very big bill and can cause a lot of financial stress. So it's definitely important and you know, it's not just uninsured individuals who owe medical debt, almost two thirds of adults with past to medical debt, um had insurance. So there's a lot of things at play here and a lot of planning that to be done. What's the best way to plan for this because unfortunately, it's not something where you can just kind of price compare on Google shopping for instance. Yeah, there's definitely a couple of steps here. Number one is budgeting for emergencies and that would include medical emergencies. Obviously, we don't know when we're going to get sick or come down with a condition that's going to add added monthly costs for us. And so having some cash set aside can give you peace of mind that you can care for yourself and not take on debt or put it on a credit card. I would recommend that 3 to 6 months of living expenses set aside, that will buy you time to then build up more savings or you know, if you have to take on bigger costs in the future. So that just gives you that extra cash cushion, but it's also equally important to understand your health care plan because a lot of people just look at their monthly premium that they owe and overlook those out of pocket costs that they all have to take on and that can really cause the debt, right? That's why these insured individuals to take on debt. Ok. So if you are among the 20% of Americans, according to the data, Andrea that you shared with us, who do have medical debt, what are some of the first steps in getting a handle on this number one? And this is going to be a bit surprising is to review your bill for potential errors. Studies show that 80% of medical bills contain one or more errors. And this could just be improperly added, coding, insurance, coding. It could be unauthorized charges, just plain errors done by clerical staff. So you need to go through those bills. Now, they're confusing. So you might want to call the health care provider office to go through it, call your insurance company. This will be the steps that you need to take to figure out if there were any errors. There's even a service called COPA that will help you do that and they even negotiate your bills for you. A couple other things you could do is negotiate costs before treatment. Some studies show that people have had success in negotiating afterwards, but I would definitely try to do that before and then inquire about income driven hardship payment plans. This could be, you know, maybe a portion of your bill forgiven, maybe the rest divided up into an affordable payment plan with no interest. So I think a question that people might have Andrea is if they need to put it on a credit card, is that a good option for them? That's a really good question. And generally it's not advised to put medical debt on a credit card unless you know, you can pay it off in full. And chances are that's not happening if you're looking to use a credit card to pay your medical debt. The reason is because credit cards have really high interest rates and that alternatively, you can request a payment plan through your provider, which would have either low interest or no interest. And so that would be your better option. Um Now there are medical credit cards that could come in useful. You can find them online or through your provider and they may offer 0% APR for 6 to 24 months. Now, depending on how much you're putting on that card, you want to just make sure you could pay it off in full before that promo period is up. Other wise, the interest is deferred on those cards, which is means you will then be on the hook to pay interest for the full amount you originally charged and then we know interest is charged on the interest and obviously you get into deeper debt, it can be a mess. So open enrollment actually probably is on the horizon for many people, something to think about within these next few months or so, when they consider their insurance options knowing this on dr what would you recommend to them? Yes. So don't just look at what you're going to owe on a monthly basis. Look at what your deductible is. High deductible plans are actually a big reason why people get into debt because they end up having to put this big bill before they even meet their deductible. So look at that. Look at the co insurance. Look at what co payments are co payments as well as for prescription drugs. Make sure that you have vision and dental care if that's something that you need for your family because all of that can add to your medical debt, Andrea war uh joining us remotely Andrea. Always a pleasure. Thank you.