How to Challenge and Reduce Medical Bills to Prevent Credit Damage

Medical debt is one of the most common and surprising ways middle-class consumers become overextended. You might have good insurance and a steady income, but one unexpected trip to the emergency room or a surgery that was supposed to be covered can leave you with a bill for thousands of dollars. Unlike credit card debt, which builds up gradually, medical debt hits you all at once. And because hospitals and doctors bill in confusing ways, it is easy to end up paying for services that were never provided, were charged at the wrong rate, or should have been covered by insurance. The good news is that you do not have to accept the first bill as the final price. With a little effort, you can often reduce what you owe and protect your credit score from taking a major hit.

The first step is to never ignore a medical bill. If you put it away unopened, it will not disappear. It will go to collections, which will show up on your credit report and cause your score to drop significantly even if you eventually pay it. Instead, open every bill and review it line by line. Look for mistakes. Studies have found that as many as eight out of ten medical bills contain errors such as duplicate charges, incorrect procedure codes, or charges for services your doctor never ordered. For example, you may be billed for a brand-name drug when a generic was used, or for a test that was cancelled. Requesting an itemized statement from the hospital is often the first step because the initial bill is usually a summary. You have the right to a detailed breakdown of every charge. Compare that with the explanation of benefits from your insurance company, which shows what was actually covered and at what rate. Any charge that does not match should be challenged.

Once you have identified errors, call the hospital’s billing department. Be polite but firm. Explain why you believe the charge is wrong and ask for it to be removed. Billing offices are used to mistakes and often have a process for correcting them. If you do not have a specific error but simply cannot afford the bill, you have other options. Many hospitals have financial assistance programs based on your income. These are required for nonprofit hospitals under the Affordable Care Act. Even if you think your income is too high, apply anyway. The rules vary, and you might qualify for a discount of 50 percent or more. Some hospitals will even waive the entire bill if you meet certain criteria. You can find the application on the hospital’s website or by calling their patient financial services department.

If you do not qualify for charity care, ask about a payment plan. Most hospitals will agree to let you pay over several months without charging interest. This is far better than putting the debt on a credit card, which would add interest and fees. Only use a credit card as a last resort, and only if you can pay the full balance before the due date. Another strategy is to offer a lump sum for less than the full amount. Many health care providers will accept a 20 to 30 percent reduction if you can pay immediately, because they would rather have cash now than a small amount over time or send the bill to a collection agency that takes a cut. When you make this offer, get the agreement in writing before sending any money.

If the bill is already in collections, do not panic. You can still negotiate. Collection agencies buy debts for pennies on the dollar, so they are often willing to settle for a fraction of what you owe. Ask the collector to send you a letter stating that if you pay a certain amount, the debt will be considered paid in full and they will ask the credit bureaus to remove the account from your report. This is called “pay for delete.” Not all agencies agree, but it is worth asking. If they refuse, you can still pay the reduced amount and then dispute the account with the credit bureaus after paying. There is no guarantee, but it sometimes works.

One more important point: never pay a medical bill with your health savings account (HSA) or flexible spending account (FSA) if you think you might be able to negotiate a lower price later. Once you pay with those pre-tax dollars, the money is gone and you cannot get it back. Wait until you have settled on a final amount.

Medical debt is scary, but it does not have to ruin your finances or your credit. By checking for errors, asking for help, and negotiating aggressively, you can often reduce what you owe and keep your credit score in good shape. The key is to act quickly and stay in control of the conversation.