Medical Debt: What It Is and How to Deal With It
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Medical debt is a big financial problem for millions of Americans. Roughly 41% of adults in the U.S. have some debt from medical or dental services, according to the 2022 KFF Health Care Debt Survey.
While medical debt can be a huge stressor, you have several options that you don't get with other types of debts. We'll explain how medical debt happens, as well as how you can pay off medical debt or lower the amount you owe.
Medical debt refers to any balance you owe from healthcare services that you can't pay in full by the due date. So how does medical debt happen?
Given the cost of healthcare in the U.S., a better question might be, "How does medical debt not happen?" The healthcare industry -- including insurance companies, doctors, pharmacies, hospitals, and others -- has become extremely expensive and often confusing to understand. It's a wonder anyone's able to afford healthcare these days.
Even if you have a good health insurance plan, it's still possible to rack up big medical debt, especially if you develop a serious condition like cancer, Alzheimer's disease, or a lifelong disability.
If you can't pay your healthcare bill, several things can happen. If you just ignore it, the doctor's office may try to follow up and collect the debt. If that doesn't work, it may hire a collection agency to try to get the money. The collections agency can also sell your debt to another agency. At that point, you no longer owe the debt to the original doctor -- you owe another agency instead.
It's important to know your options for paying down medical debt. Below, we'll cover some of the methods you can consider.
Many hospitals and healthcare providers will let you set up a payment plan with them directly and pay off your bill over time. Ask about this option before you apply for any type of financing, like a medical credit card or loan, as a medical payment plan is often interest-free.
A medical loan is a personal loan that you use for medical costs. You may also be able to apply for a medical loan on your own or through the doctor's office. These loans are usually unsecured, meaning no collateral is necessary -- you won't risk losing your home or car if you have trouble making payments. Look for a loan with low interest and low or no fees. This option is best if you have a high credit score.
Another option is to charge your bill to a medical credit card, which is a credit card designed specifically for medical costs. You can apply for these on your own, or sometimes through your doctor's office, just like with medical loans. You can keep the line of credit even after you've paid off your balance, which can be helpful for ongoing medical expenses.
Just be aware that medical debt can't be reported on your credit report until it's at least six months past due. But when you charge your bill to a medical credit card (or any other type of credit card), you lose that protection because the debt is treated as credit card debt, not medical debt. Debt on a medical credit card will affect your credit score the same way as any type of credit card debt.
Also, be aware that the zero-interest financing these cards often advertise is often deferred interest. If you pay off the balance in full before the end of the promotional period, you'll avoid interest. But you'll pay interest on the full amount you financed (rather than just the outstanding amount) if any balance remains at the end of this period.
If you qualify for a 0% APR credit card, you can essentially use it as an interest-free loan. A regular credit card with a 0% intro period is usually a better option than a medical credit card that offers a similar no-interest window. If you can't pay off the entire balance by the end of the interest-free period, you'll only owe interest on the remaining balance with a regular credit card. Plus, medical credit card APRs tend to be higher once the no-interest period ends.
Medical bills are notorious for errors. Ask your doctor or healthcare facility for an itemized copy of your bill. Look for double billing, which is a common error, as well as any services you were billed for that aren't included in your medical records. If you're facing an especially big medical bill, you may want to consider hiring a medical billing advocate, who can help you find errors and negotiate discounts.
If you believe your health insurance company should have paid for the service, you can file a dispute with the insurer. If it still denies the claim, you have the right to an external appeal where an independent third party makes the final call.
The Affordable Care Act requires that nonprofit hospitals provide financial assistance to people who can't afford their medical bills. Some states require that for-profit hospitals provide charity care, too. If you're admitted to the hospital, ask for a copy of its financial assistance policy, which hospitals are required to provide for free.
Many organizations offer financial assistance in the form of grants for people with medical debt. Your hospital or doctor may be affiliated with such a charity -- make sure to check with them, too. These organizations generally help people below certain income thresholds, but that's not always the case.
Beyond those local options, here are a few organizations that provide financial assistance to people struggling to pay medical debt:
If you're facing staggering medical debt and you're not able to work, no amount of effort will pay that balance down.
In difficult cases like this, you still have options. One good solution is to reach out to a debt counselor from a nonprofit organization like the National Foundation for Credit Counseling (NFCC).
You can also speak to a bankruptcy attorney. Though bankruptcy should be reserved as a last resort, it may be the only path to financial recovery when your medical debt is substantial.
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SoFi disclosure:
¹ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/26. See full bonus and annual percentage yield (APY) terms at sofi.com/banking#1.
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In general, it's best to contact your doctor's office or hospital first to see if you can work out a medical payment plan, or even medical debt forgiveness. If you were treated at a hospital, ask if charity care is available.
If those aren't options, seeking out a loan or credit card can be a good next step. If you're having trouble paying your bills and aren't sure what to do, it's always a good idea to reach out to a counselor from the NFCC for personalized and affordable help. But if you have no realistic hope of paying off your medical debt, declaring bankruptcy is worth considering.
About 10% of American adults don't have health insurance, which leaves you more vulnerable if you have a big medical expense. The popularity of high-deductible health plans, which have lower premiums and high out-of-pocket costs, is another contributor. People who opt for a short-term health plan or health sharing ministry also frequently find themselves with medical debt because these plans offer limited benefits.
It depends. The three major credit bureaus no longer include unpaid medical bills of less than $500, medical debt that's less than six months old, or paid medical collections in credit reports, so these debts won't affect your credit score. Medical debt over $500 that's more than six months old could still hurt your credit score.
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