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Finding yourself in need of medical care can feel overwhelming. You know that you need to see a doctor or have a procedure, but you also know that medical bills can add up quickly.
Particularly if you will be hospitalized for any period of time, the ensuing debt can haunt you for years to come. Very few people plan for a medical emergency even though it can happen to anyone at any time.
My husband and I each had a hospitalization in two years back-to-back.
Despite having health insurance through our employers and the healthcare marketplace, we still ended up with thousands of dollars in medical debt. Navigating the system was time-consuming, confusing, and endlessly frustrating.
We spent months going back and forth with the hospital and our insurance companies to negotiate lower rates. Fortunately, we were successful and ended up saving thousands on our bills.
When we were first faced with our medical bills, it felt like an insurmountable obstacle. We each needed medical care and were forced to find a way to cover the exorbitant cost.
We learned a lot through our experience with the healthcare system, and now you can learn through our experience. Here is what we wish we had known before we needed medical care.
How to Prepare for Unexpected Medical Costs
The best thing you can do to prepare for unexpected medical costs is to try to anticipate what might happen in the future.
It’s true that you can never know for sure when disaster will strike, but it is good to know that you are taking the right steps to help minimize its impact if it hits you.
Take a look at some of these tips to help you prepare for your own medical expenses.
Open Up a Health Savings Account
If you have a high-deductible health insurance plan, then you might be eligible to open up a health savings account (HSA).
The IRS defines a high-deductible plan as anything that has a deductible of $1,400 or greater. A deductible is the amount that you must pay before insurance starts to kick in their portion of the funds.
An HSA allows you to contribute up to $3,550 annually which can be used to help cover any out-of-pocket medical expenses, including hospital visits, eligible health care costs, dental care, and even vision care.
For a full list of eligible expenses, check out this list from Cigna.
In addition to helping you save specifically for medical expenses, there are some excellent tax benefits to opening an HSA. All contributions are tax-free and they grow tax-free while they are being invested. This means that you are investing your pre-tax dollars from your paycheck so that your money is working harder for you.
As long as you are only withdrawing these funds for qualified medical expenses, the withdrawals are also tax-free. The money rolls over each year so that it can continue to grow until you need it.
If you qualify for an HSA, there is also a possibility that your employer may contribute money to it annually. My husband has a high-deductible insurance plan and his employer also contributes a few hundred dollars into his health savings account each year.
This helps us to pay his copayments, prescriptions, and it has even helped us to pay down some medical debt from his hospitalization.
He saves money on taxes when he contributes to it, and we are guaranteed to have this money earmarked for medical expenses since we can’t use it anywhere else, which means we’ll spend less time worrying about how to pay our medical bills during an emergency and more time in the comfort of our family.
Open a Flexible Spending Account
If a health savings account isn’t the right fit for you, you might consider investing in a Flexible Spending Account or an FSA.
This is similar to an HSA in that you can contribute money to your account without paying taxes on it.
This means that you are saving the amount of money equal to what you would have paid in taxes on the money that you choose to invest. You can invest up to $2,750 annually per employer.
The funds can also be used to cover medical expenses that are not covered by your insurance.
All you have to do is submit a claim to the account through your employer with proof of the expense and the statement that it is not covered by insurance.
It can be used to help pay your deductible or copayments as well as for any medical or dental expenses. For more information on what is covered by FSA funds, you can check out this list from the IRS.
Keep in mind that not all of your money will roll over from year to year with an FSA.
You can only roll over $550 to the next year, so make sure that you are only contributing money that you are going to spend on qualified medical expenses.
Lightening the Load with Insurance
Signing up for health insurance is a great way to be preemptive when it comes to unexpected medical bills. Health insurance companies help to cover your medical care in exchange for a monthly premium.
You will have to decide which plan is right for you based on how often you foresee using your insurance, how much you can afford to spend each month, and how much you could afford to pay upfront in the event of an emergency.
In our household, health insurance is a must-have item. I have pre-existing conditions that can be quite expensive once you tally up routine trips to the doctor, hospitalizations, and even just my usual prescriptions.
It makes sense for us to pay a monthly premium in exchange for a hefty discount on some of these services.
The first thing you must consider is how much you could afford to pay out-of-pocket before insurance kicks in. This figure is known as your deductible.
This is the amount of money you will be asked to pay for covered services before insurance will help out. After your deductible is met, you will typically be charged a smaller copayment or a percentage of the remaining bill (known as coinsurance).
A higher deductible plan usually has a lower monthly payment or premium because the insurance company is not paying for the first large chunk of your covered services.
A lower deductible plan typically has higher monthly premiums because insurance is asked to kick in sooner. I often choose a middle of the road plan since I use my insurance regularly.
My husband who rarely visits the doctor has a high deductible plan.
Debt Payoff Tips
Even if you weren’t able to prepare in advance for your medical expenses, you can still work hard to pay them off.
You might be able to get a lower bill or negotiate a payment plan that works for your budget. Keep some of these debt payoff tips in mind to help you from spending money unnecessarily.
Lowering Bills through Negotiation
Many people are in shock when they receive their first medical bill in the mail. They don’t realize that this initial bill can often be negotiated to receive lower rates.
There are many ways to go about it, but you can definitely get your bill lowered through negotiation with the billing department of the hospital or doctors office.
The first thing you should know is that insurance companies often pay lower rates than individuals without insurance will be charged.
If you incurred medical expenses while being uninsured, you can call the billing department and ask them what they would typically bill the insurance company.
You can even do some research on your own to find out what the going rate is by searching for the fair market price of the services you received.
Sites like Healthcare Bluebook can help with this research. Oftentimes, you can get your bill reduced from the sticker price to these lower rates with relative ease.
Hospitals know they’re care is expensive and want to help you pay what you can, without causing you too much trouble.
Make sure to review the bill that you are sent. Ask for an itemized list of what you are being billed for.
Compare it to the notes in your chart and make sure that each item is legitimate. Some hospitals may have coded it for the wrong diagnosis or the wrong service.
This can lead insurance companies to reject claims and can cost you more money out of pocket.
Many billing departments also have some flexibility in what they charge you based on your income. Nonprofit hospitals (and even some for-profit hospitals) have a financial assistance policy.
This allows them to waive some or even all of your medical bills if you are a low-income individual or family.
You may be asked to provide tax returns or paystubs to prove the income that you bring in.
My husband and I have both taken advantage of this service at for-profit hospitals. In both cases, we were able to get our total bill reduced by more than half. All we had to do was provide copies or our most recent tax return as well as paystubs.
They also asked us to fill out a brief questionnaire on our current living expenses and the balances in our bank accounts to determine if we qualified for their charity program. It took some time for them to review our documents and negotiate with us, but it was well worth the added time that it took.
It saved us thousands of dollars and 50% of our medical bills were paid for by a local charity.
Don’t Put Medical Debt on a Credit Card
Once you reach a settlement with your provider, it is important to come to an agreed-upon payment plan. Many people are tempted to put their debt on a credit card to keep it from going into collections.
However, many hospitals and providers are willing to work with you on a monthly payment plan that can keep you from putting large amounts of debt onto a high-interest credit card.
You may find that the payment terms through your provider are low-interest or even interest-free which can save you hundreds or thousands of dollars depending on how long it takes you to pay off your debt and how much interest you would have accrued on our credit card.
When you speak with the billing department, make sure to set up a payment plan that you can afford.
They won’t send it into collections as long as you are faithfully making the agreed-upon payment each month.
If you set payments that are too high for your monthly budget to afford long-term, then you might end up skipping payments. This undoes any negotiating that you may have been able to do in the future and can put a dent in your credit if it is allowed to move into collections.
This can limit the loans and borrowing power that you will have in the future because it will show up as a mark on your credit report that you did not make payments on time.
When we first received our final medical bill in the mail, we were tempted to put it on our credit card to resolve the pending bill. Fortunately, we decided to wait it out and talk with the billing department first.
They were able to give us a no-interest payment plan spread out over six months that made our payments more affordable than our credit card would have been.
Cash is King
As in all things, you might find that you have more bargaining power if you are able to offer to pay for everything in cash.
A cash payment saves the doctor or hospital on credit card fees. An upfront payment also minimizes the amount of time that they will have to spend negotiating a monthly payment plan and the amount of time that staff will spend mailing out monthly bills to you.
It saves them both time and money, and they are often willing to offer a discount for this savings.
So, if you have the funds, ask about paying upfront and in all cash. It might be the most direct approach, but it could save you a ton of headaches with billing & insurance down the road.
Handling Unexpected Medical Bills
You never know what life might throw at you next. An unexpected hospitalization or an expensive procedure could set you back thousands of dollars, particularly if you are uninsured.
Fortunately, you have some options available to you to help minimize what you will pay out of pocket.
You can even set up a payment plan that you can afford instead of putting debt onto high-interest credit cards.
I know firsthand how devastating an unexpected medical bill can be. Even with insurance, I still faced thousands of dollars for the cost of my treatment. Fortunately, I was able to be polite and firm with the billing department.
They worked with me to negotiate a lower rate based on my income and set me up on a payment plan that I could afford instead of sending it to collections and damaging my credit.
With a little research, you might be able to negotiate a lower rate for your medical expenses. However, the best thing to do is to prepare now for an unexpected medical expense.
Consider opening an HSA or FSA as well as obtaining some form of health insurance to help cover everything from routine doctor visits to catastrophic events. All of these things can help you to stay on firm financial footing instead of being financially devastated by an unforeseen medical expense.