How to tackle medical bills before the debt becomes a long-lasting financial problem

Anyone who has felt burdened by medical debt may be familiar with that initial bout of panic when a big bill arrives.

What may be worse, though, is what can happen to your long-term financial picture if you disregard it. Generally speaking, that debt can end up haunting you. 

“What I’ve seen many times is a person gets a bill … and they just ignore it for six months,” said Jeff Smedsrud, co-founder of HealthCare.com. “Then they get a collections notice, and it’s only then that they deal with it.”

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Nearly two-thirds (58%) of bills that are in collections and appear on credit reports are medical bills, according to a report from the Consumer Financial Protection Bureau. Roughly 43 million credit reports show collections for medical debt, the research showed.

This can take a toll on your credit score: For instance, 52% of millennials say it harmed their credit and 48% of Gen Xers report the same, according to a survey from Healthcare.com.

And, of course, the lower your credit score, the harder it is to secure loans or other credit, or get favorable interest rates if you are approved. While some scores don’t treat medical debt as harshly as others do, lenders tend to use one that treats all debt in collections the same if it appears on your credit report. And it can remain on your report for up to seven years even if you pay it off.

There are things you can do to try avoiding this cascade of issues. The key is to deal with the debt right away — meaning as soon as the bill (or bills) arrive.

“When you get a bill, assume it’s wrong,” said Caitlin Donovan, spokeswoman for the National Patient Advocate Foundation, a nonprofit that helps patients access and pay for health care.

“We estimate half of medical mistakes on bills are because the patient was billed directly instead of [the charges] being submitted to insurance,” Donovan said

This means if you get an outsized bill, you should call the provider — the doctor, hospital, etc. — and ensure that it was submitted to your insurance.

If it was, you should also receive an explanation of benefits, or EOB as it’s called, from your insurer. As its name implies, the form shows you what your insurance plan is covering for care you’ve received.

“It’s a good tool,” Donovan said. “Once you receive it, that tells you that the provider has correctly submitted to your insurer. It also tells you how much you’re supposed to pay.”

If your share is unmanageable, it’s worth seeing if you can get it reduced. For instance, hospitals often offer financial assistance to those who meet certain eligibility requirements, which can differ among facilities and states. If you don’t qualify, you may be able to negotiate a lower amount, or enter into a payment plan agreement.

“But you have to know what you can afford per month,” Donovan said. “You don’t want to get stuck with a $500-a-month payment plan that you can’t afford.”

You also should avoid paying the debt by using a credit card. With the average interest rate on cards at 16.17%, this can mean shelling out a whole lot more than the original bill if you pay it off slowly.

“You could be turning $10,000 into $15,000,” Smedsrud said.

There also are bill-negotiating services that can advocate on your behalf for a lower bill.

“They have expertise and might see that if [the medical service] had been coded in a slightly different way, it would have resulted in less cost,” Smedsrud said.

Or, they can explain to a billing office that “you’re either going to get zero or accept a lower amount,” he said.

These services do take a portion of the savings they generate as a fee, but you should never be asked to pay up front, Smedsrud said.

If you have medical debt and are in conversation with a collection agency, it’s worth asking how much the debt cost, he added. Collection agencies often resell debt to other firms if they are unable to collect on it initially, and each time it’s sold, its value can drop.

“It behooves the consumer to ask the agency how much it paid for your debt,” Smedsrud said. “It could have started as $10,000 and then been sold and resold and not be worth that anymore.”

Meanwhile, for medical services you know are coming up, ask in advance what your share of the cost will be. If it’s prohibitive for you, you can ask for a discount.

“Don’t underestimate how willing providers are to negotiate and give discounts on the cost of procedures, particularly those that are smaller and not part of a larger system,” Smedsrud said.

You also can ask about the cash price for the service or procedure — it may be much more affordable — or if a payment plan is available.

One of the biggest causes of unexpected large medical bills historically was out-of-network providers being involved in your care without you realizing it. Then the bill would come and you’d discover that your insurance didn’t fully cover those charges, if at all.

A new federal law — the No Surprises Act — aims to minimize that happening, although consumers should still be on the lookout for such charges due to billing mistakes.

Another new federal law also could be useful to consumers who are trying to control their health-care costs. Basically, it requires hospitals’ standard charges — including the rates they negotiate with various insurance companies and their discounted cash price — to be publicly available for free (i.e., on their website). This means, in theory, that you can shop around for the best price on a service you need.

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.