Allison Martin is a writer and digital content strategist. She has spent several years traveling the country and advocating for financial literacy.
Updated September 29, 2023Health insurance is supposed to protect you from financial ruin in the event of a medical emergency. However, for millions of Americans, this definitely isn’t the case.
According to the Commonwealth Fund Biennial Health Insurance Survey, 43% of U.S. adults ages 19 to 64 were inadequately insured in 2022, as measured by high out-of-pocket costs and deductibles relative to income. Forty-five percent of that group reported struggling to pay medical bills, and 39% were making installment payments on medical debt. Among those reporting problems with medical debt, 41% received a lower credit rating as a result, 37% exhausted savings, and 26% found themselves unable to pay for basic necessities.
Medical debt is the most common collection item reported on consumer credit reports, and estimates of U.S. medical debt in collections range from $81 billion to $140 billion, according to the Consumer Financial Protection Bureau (CFPB).
One in 10 Americans owes $1,000 or more in medical debt. Roughly 58% of the bills in collections on Americans' credit reports are medical debt-related.
Consumers not saddled with medical debt may still struggle with excessive medical bills. Excluded services, out-of-network providers, and excessive copays can leave even those with health insurance coverage coping with costly bills for medical care.
Here are some tips for avoiding costly medical bills.
Before receiving services, confirm with the provider that they are in your insurance plan's provider network. For more advanced services, such as surgery, confirm that all the participating providers are also in the network.
Otherwise, you could incur hefty fees because out-of-network providers (for example, the anesthesiologist involved in your surgery) don’t have to abide by the rates negotiated by your insurer.
Each time your health insurance changes, share the updated information with your provider so that your claims are not processed using the old policy still on file. If you don’t, your claim will be rejected, and you may have to cover the cost of treatment.
While it’s fairly simple for the billing staff to resubmit the claim to your new insurance company, you could still end up in the hot seat with the collections department if you don’t get everything straightened out in time. Even worse, you might end up paying for services that should have been covered under your policy.
Medical billing specialists process thousands of claims, so mistakes are bound to happen. Various groups have provided estimates about the extent of this problem, ranging from an error rate of 7.1% for paid claims according to the American Medical Association to reports of errors on up to 80% of claims from billing review groups, as reported by CNBC.
For this reason, you should always request itemized bills and carefully review each line for duplications, services you didn’t receive, price discrepancies, and any other issues. If you spot inaccuracies, immediately reach out to your provider’s billing department to resolve any issues.
Who says you can’t shop around for medical providers? In fact, the Affordable Care Act requires hospitals to list prices for all the services they provide. Unfortunately, a patient entering hospital treatment for an emergency medical condition can't possibly know what services will be needed, much less if they're available at a lower cost elsewhere, limiting the utility of such lists as comparison shopping tools.
Only 34% of respondents in a 2021 poll even knew such lists are available, and 53% said they understood their insurance plan only somewhat, versus 33% who said they understood it completely. The same poll of the insured found that more than 4 in 10 have received an unexpected medical bill and 75% were concerned about financial hardship as a result of medical expenses.
While the U.S. healthcare system is clearly a long way from useful price transparency, the more questions about costs, coverage, and provider alternatives you ask, the less likely you will be to face a nasty surprise later. Compare the out-of-pocket costs among providers. And keep in mind that hospitals and emergency rooms tend to charge much more than outpatient centers and walk-in clinics for an identical service or procedure.
If you're struggling with medical bills, here are a few suggestions:
Payment plans can be a viable option if your medical bills are too high to be paid off by the due date. However, it’s important to make timely payments and contact the medical provider immediately if your financial situation changes.
Some hospitals and medical providers have in-house programs or are connected with organizations that provide assistance to patients in financial need. Speak with the billing department to learn more.
As a last resort, you can meet with the billing administrator and attempt to negotiate the final balance. Many hospitals and other medical providers would rather collect a partial payment than none at all.
In March 2022, the three main consumer credit reporting agencies—Equifax, Experian, and TransUnion—announced measures they said would remove nearly 70% of medical collection debt tradelines, or items, from consumer credit reports. These include:
The changes came amid renewed criticism of the medical debt burden and collection practices from the Biden administration and regulators including the CFPB. In April 2022, the Biden administration unveiled medical debt initiatives including a review of the billing and collection practices of 2,000 healthcare providers, a CFPB review of whether medical debt should ever be included on a credit report, and changes in government loan programs' underwriting standards to eliminate consideration of medical debt.
Carrying adequate health insurance coverage isn’t always enough to keep the rising costs of medical care under control. Fortunately, there are proactive steps consumers can take to understand their coverage, curb costs and safeguard their rights when it comes to medical billing and debt collections.