Managing your personal finances can be tough even when you and your loved ones are healthy. But adding in expensive medical bills can lead to higher stress levels just at the time you need to concentrate on getting well. Today’s healthcare environment is expensive; so much so that a study published in the Journal of General Internal Medicine estimates that 137.1 million Americans face financial hardship due to medical expenses. People with health insurance count on their coverage to avoid having to shoulder big healthcare bills. Lately, due to skyrocketing costs and the maze of terms and conditions which insurance companies use to limit what they’ll pay for, people with insurance are increasingly finding themselves overwhelmed with medical debt, often to the point of declaring bankruptcy.
In fact, medical debt is the number one reason people would consider taking money out of their retirement savings accounts, according to TD Ameritrade. And approximately 50 million Americans have donated to crowdfunding campaigns to help pay for the medical bills of others – oftentimes people they don’t personally know.
What’s contributing to high medical bills
While the amounts people pay toward premium-sharing, deductibles, copays and other out of pocket fees are hard enough for many to afford, there are other costs that can add up to hundreds of thousands of dollars. Some of the big culprits are:
- Out-of-network charges. Insurance companies often don’t cover, or pay less toward services from a provider not in their network. Charges for out-of-network services add up quickly, and in the case of a hospital stay, can amount to multiple bills from multiple providers. A study released in the Journal of the American Medical Association(JAMA) found that more than 20 percent of patients were hit with out-of-network charges. The average bill amounted to over $2,000 in charges a patient was responsible for. Not surprisingly, emergency care is frequently associated with out-of-network charges because there may not be the time or ability to choose an in-network provider. But what is surprising is that the study found that even when patients chose their surgeon and hospital, out-of-network providers such as anesthesiologists or surgical assistants billed for services that the patient might not even have known were provided until they received the bill.
- Medical billing errors. Medical bills are complicated. Beginning with a dizzying array of billing codes, there’s a lot of ways a medical bill can end up containing an error. “In the complicated world of health-care billing, don’t make the assumption that a medical bill is right,” said Bridget Lipezker, with the employee benefits manager group DirectPath in a story about managing health care bills. The story goes on to say that at least 50 percent of the claims reviewed by DirectPath contain a mistake.
- Price-gouging. The hard, cold truth about medical costs in the United States is that they rise, because there’s little stopping them from going up and up. There are fewer controls on the cost of health care in this country when compared to other nations with more comprehensive healthcare systems. Costs for procedures and treatment vary widely. CT scans, for example, can cost anywhere from $250 to $1,500 depending on the location. And is it really fair or even efficient to ask an individual worried about his or her health to shop around for a bargain price?
Heavy collection tactics create more stress
Medical debt collectors can use heavy-handed tactics when seeking payment for past-due bills. Often times a hospital sells its uncollected invoices for pennies on the dollar to a medical debt collector. The debt collector counts on being able to squeeze more out of its collections than what it paid to the hospital. And in some cases, hospitals are getting out of the emergency room business altogether, and contracting out these services to private physician staffing firms who use aggressive collection practices.
In one case, Sonya Johnson, a social worker and single mother in Nashville, Tennessee, had accumulated a $2,700 debt from a trip to the emergency room when she was suffering from severe anemia. Months later, Johnson heard a knock at her apartment door. It was a county sheriff with a summons requiring her to appear in court. “It’s very scary. I mean, [I’m] thinking, what have I done? And for a medical bill?”
What to do to keep medical bills in check
It takes effort, but you can chip away at large medical debt by being a vigilant consumer and looking for support and advice from sources you trust.
- Advocacy services, especially those provided by the labor union that negotiated your health care benefits, are a good place to start because they want to make sure you’re getting what was bargained for. Your union, or someone in your company’s human resources department, may be available to help you understand the bill, check it for errors, and sometimes contact the insurance company or provider to get them fixed.
- Carefully review all medical bills. Insist on an itemized list of charges from the provider so you can verify the services you’re being charged for were indeed those you received. When you have questions, call the insurance company or provider to get answers. Sometimes your call gets them to dig a little deeper to discover errors that even you weren’t aware of. For example, could a service have been improperly coded? Or might you have been charged twice for a service? This is more likely to happen when a number of providers are involved in your care.
- Negotiate your debt. Financial counselors at hospitals and other health care providers will sometimes help navigate the complexities of medical bills. They have an incentive to find resources to help you pay their bills, so lean on them to offer a solution, including negotiating down the debt you owe. They may lower or entirely forgive the debt if you fall within the guidelines the institution uses to determine eligibility for discounted or charity care. Hospitals with nonprofit status get special tax status and in return they are supposed to provide community benefits including free or discounted care for patients who can’t afford to pay. At a minimum, ask for a payment plan that you can afford without resorting to extreme measures such as taking out loans or cashing in retirement savings.
Avoid tapping sources that can threaten future financial security
You may feel pressure to borrow against your 401(K), take out a home equity loan, or borrow against a credit card. If you consider any of these options, compare interest rates and penalties associated with accessing these funds. Borrowing against a 401(K) can be risky, cautions Dr. Carolyn McClanahan with the advisory firm Life Planning Partners in Jacksonville, Florida. If you leave or lose your job, she says, the loan balance is immediately due. Unless you qualify for an exception to the rule, withdrawing funds before age 59 1/2 incurs a 10 percent penalty as well as being taxed as ordinary income. Plus, taking money out of a retirement fund subtracts from the compounding effect that helps grow wealth for one’s golden years.
Healthcare is not a commodity
From the viewpoint of a healthcare consumer, healthcare is essentially about getting good care when needed, making it possible to live a healthy, happy life. Healthcare decisions are not similar to deciding if you can afford a bigger TV or new smart phone. The consequences of not buying a bigger TV simply don’t compare to the consequences associated with not getting the medical care that keeps us functioning and productive members of society. Dr. Marty Makary, a professor of health policy and management at Johns Hopkins School of Public Health, framed the whole healthcare picture by observing that “When someone gets treated, and they experience financial ruin, that is part of the experience. That is part of how we should evaluate, ‘Did we take care of this person when they came to us vulnerable and sick?’”