If you find yourself facing an enormous hospital bill that you can’t afford, don’t panic. There are a few things you can do to get medical debt relief, at least partially.
The first step is to call up your hospital’s billing department or health provider’s office and let them know that you can’t afford it. More often than not, they will give you options to pay back such as applying for government assistance or other financial help. You can also work with them to set up a plan for repayment over several months.
However, as much as you should be exploring your options, there are certain things you should avoid doing when it comes to paying off medical debt because they may cause your financial situation to deteriorate even further. Here are 5 medical debt mistakes you should avoid:
Failing to Check for Errors
Medical bills are notorious for errors, so the biggest mistake you can make is taking them at face value. Make sure to ask your hospital or doctor’s office for an itemized bill so you can go through the charges one by one. Your hospital is obligated to provide one when a patient makes the request.
If anything seems to be amiss, don’t hesitate to pick up the phone or pay your health provider a visit. Things to look for include duplicate charges, charges that should have been covered by your insurance provider, charges that seem unnecessarily big, etc. Since there are so many “cooks” involved in the process of drawing up a hospital bill, such mistakes are common; but also, fortunately, easily rectifiable.
Using Your Retirement Fund to Pay Medical Debt
Proving a medical hardship may help you avoid the 10% penalty normally levied on early withdrawal from a 401(k) or IRA, but there are so many other options and resources available that you can explore to help pay back medical debt before taking money from your retirement fund.
Your retirement fund is sacred, it is the investment you make into your future – therefore you should avoid tapping into it unless absolutely necessary. Your retirement fund is protected from creditors even in the case of bankruptcy. Plus, you could lose out on so many potential future earnings. For instance, if you withdraw $10,000 from a Roth IRA to pay off medical debt, assuming average annual returns of 6%, that means you would have lost out on nearly $58,000 by the time you’re 65!
Using Your Credit Card to Pay
It’s no secret that credit cards come with an interest of typically 15% or even higher, so it’s far better to negotiate a payment plan directly with your hospital or doctor’s office. Given that medical bills generally don’t accrue interest, it makes more sense to avoid credit cards. Even credit cards with zero-interest inductor periods will eventually start charging, and your health provider is much more likely to be flexible with late payments or adjustments to the payment plan.
Applying for a Medical Credit Card
Your health provider may mention a medical credit card as one of the options you can use to pay back your hospital bills, but be sure to read the fine print before signing up. The most attractive thing about a medical credit card is the interest-free period it comes with.
However, companies don’t advertise the fact that failing to settle the full amount within this period will mean having to pay interest on the entire amount – which can end up being more than what you would pay even with a regular credit card! For instance, if you have a medical debt of $2,500, but have only managed to pay off $2,000 by the end of the introductory period; instead of having to pay just for the remaining $500, you will owe interest on the whole $2,500.
Consolidating Your Medical Bills
Debt consolidation is often a good idea because you can pay off multiple loans at the same time and focus on just one. However, this is not the case with medical bills. As we mentioned before, medical bills do not accrue interest. Taking out a loan to pay them off isn’t a wise decision because you will have to pay interest on it. Therefore, when it comes to medical bills, debt consolidation can result in you paying more than necessary in the long run.