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Understanding Medical Debt: Know Your Rights and Options

If you’ve been to the doctor and now are struggling with the cost of your care, you are just one of millions of Americans with medical debt. Recent studies have shown that more than half of the adults in the U.S. currently have or have experienced some level of healthcare debt, ranging from small sums to hundreds of thousands of dollars.

Considering the high cost of medical care, many people decline or delay recommended hospital and doctor services because they worry about overwhelming bills and fees. Understanding your risk of medical debt, the toll it could take, and your patient rights all play an essential role in ensuring you can continue receiving necessary healthcare without falling into financial hardships.

Breaking Down Medical Debt

As many as 41% of adults have unpaid medical or dental bills. Another 15% state that they have recently paid off outstanding medical debt through collections agencies or credit card accounts. In total, 56% of American adults have dealt with financial instability over the last 5 years due to unavoidable hospital or doctor’s care.

People who cannot secure affordable insurance through their employers, parents, Medicaid, or Medicare have a notably higher risk of incurring medical debt. Rules about preauthorizations, medical network restrictions, and other coverage limitations can even push insured people to make complex decisions about whether and how to seek the care they need.


Who Is at Risk for Medical Debt?

Lower-income people have a higher risk of incurring medical debt. While high healthcare costs impact everyone, most ethnic groups, age demographics, genders, and races experience medical debt uniquely because of barriers to community access, education, and career opportunities.

Some key statistics include the following:

  • 34% of adult men currently have unpaid healthcare bills, compared to 48% of women.
  • 37% of White people owe money for medical services, compared to 50% of Hispanic and 56% of Black people.
  • 62% of uninsured people have significant medical debt, whereas 42% of people with insurance coverage experience similar problems.

Income and education factor into each of these demographic inconsistencies. People who earn less than $40,000 a year have the highest medical debt rates (57%), whereas only 25% of people with incomes over $90,000 owe money to healthcare collections. Similarly, nearly half of all people lacking a higher education have medical debt compared to 31% of college graduates.


How to Know If You Have Medical Debt

If you have medical debt, you will likely hear from a third-party debt collector contracted by your hospital or physician’s office. However, some people may not know the full extent of their dues or even forget about services received years ago.

Regularly check your Equifax, Transunion, and Experian credit reports to know where you stand financially. You can do this for free once every week without incurring significant fees or penalties. Remember that credit statements should not reveal any medical debts that are below $500, less than a year old, or paid off. If you find discrepancies, dispute them with the reporting agency to prompt an investigation.

The Toll of Medical Debt

Having medical debt can result in significant consequences, including:

  • Financial consequences: Over the past 5 years, 63% of adults cut down on essential resources like food and clothing to pay off medical debt. Likewise, 48% burned through all their savings, and 37% skipped or delayed paying rent and utility bills.
  • Housing consequences: 28% of adults postponed buying a home or funding a college education for themselves or their children to cover medical expenses. 19% downsized their living situation or moved in with friends and family.
  • Emotional toll: Being in debt can cause stress and anxiety. Many adults take on second jobs or cut down on spending elsewhere to pay off the debt. These additional burdens can increase the emotional toll.
  • Future or continuous healthcare implications: Prolonged debt can significantly impact your credit score and reputation among healthcare providers. 15% of adults reported recent denials of care due to money owed for previous services.

Common Terms to Know 

Understanding some of the most common insurance and billing terms can help you prevent surprise expenses and better analyze any bills you receive.

Coverage Terms 

  • Out-of-pocket maximum: The out-of-pocket maximum is an annual limit that a policyholder must pay for covered services before their insurance carrier pays for 100% of the remaining costs.
  • In-network: Doctors and hospitals that are in network are those that are contracted and approved by your insurance carrier.
  • Out-of-network: Doctor and hospital care received out of network, or outside your insurer’s jurisdiction, often results in higher costs or denied coverage.
  • Explanation of benefits (EOB): An explanation of benefits is a statement from your insurer detailing how they will or have covered required medical services.
  • Denial of coverage: A denial of coverage is when an insurance company refuses to pay for specific medical procedures, tests, or prescriptions.
  • Medically necessary: Doctors can label something as medically necessary, which is an official verification that a procedure meets accepted standards of medicine and is essential in diagnosing or treating an illness or injury.


Billing Terms 

  • Balance billing: A healthcare provider may practice balance billing, a process where a patient is billed for the difference between what the patient’s insurance company pays for a service and what the provider charges for that service.
  • Underinsured: A person is underinsured if they have insufficient health insurance to fulfill a claim.
  • Uninsured: A person is uninsured when they are lacking health insurance altogether.
  • Collections agency: A collections agency is a third-party company that pursues debt payments on behalf of a creditor, such as a doctor or hospital.
  • Debt consolidation: One type of debt refinancing strategy is debt consolidation, which uses one large loan to pay off multiple smaller ones.
  • Bankruptcy: A person with insurmountable debt can declare bankruptcy to liquidate their assets at the expense of their credit score and financial future.
  • Credit report: A credit report is an official statement of your credit history and current accounts.
  • Patient advocacy: Professionals help patients navigate the complicated inner workings of the healthcare system through patient advocacy.

The Importance of Health Insurance

Because healthcare is expensive, most people need different types of insurance to afford things like doctor visits, dental care, mental health support, and medications.

According to an Affordable Care Act (ACA) mandate, all compliant employer-sponsored, public, and private health insurance plans must cover 100% of preventative services like annual exams and checkups. However, most carriers still require patients to meet an out-of-pocket deductible, charge a coinsurance or copayment for approved services, and require monthly premiums in exchange for benefits.


When Insurance Isn’t Enough

Even the most comprehensive insurance plans occasionally fail to prevent medical debt. 44% of insured individuals aged 18-64 reported owing money for recent medical or dental services. Another 17% paid off medical debt incurred over the past 5 years. However, insured people still owe significantly less for medical care than uninsured people, even if they receive identical services.

Understanding Your Coverage

Every insurance company sets unique cost-sharing protocols and sells multiple policy types, such as HMOs and PPOs. Each policy has its own rules about out-of-network care, specific medications, and non-medically necessary or non-referred services.

For example, even if your insurance plan covers a medical procedure, it may not approve lab fees and diagnostic tests. In fact, lab fees, tests, and other out-of-network charges account for 59% of all medical debt.

A large portion of healthcare debt stems from emergency procedures. Though all ACA health insurance plans must pay for emergency room services, many charge a higher initial copayment. The criteria for emergency care coverage may also vary based on insurer and individual policy, meaning there may be nuanced coverage restrictions to consider.


How to Read Your Coverage Terms

Even before you need to seek care, familiarize yourself with your policy’s coverage terms. Check over the following:

  1. Check over your network. Look over your plan’s network of doctors, specialists, facilities, and pharmacies to ensure your preferred healthcare providers are within the network.
  2. List out specific services you need. Preventive care is generally covered in ACA-compliant health insurance plans, but understanding how specific procedures, tests, and treatments are covered can help you avoid unexpected costs. Read the fine print or speak with your insurer for more details.
  3. Note when pre-authorization and referrals are needed. Learn when your insurer requires pre-authorization or referrals for covered care. Pre-authorization is when your insurance company must sign off on a procedure before it takes place for coverage, and referrals are when your primary care physician must coordinate your follow-up with a specialist.

Understanding Medical Billing

All hospital and doctor bills should list significant charges for medical procedures, lab tests, pharmaceuticals, and supplies used or performed during your visit. Healthcare facilities then generate a second bill to cover the fees required from every nurse, physician, surgeon, and medical assistant who worked your case.

Patients with health insurance should also receive an EOB explaining the following information:

  • What their insurance will cover
  • The amount of every payment made and to whom
  • Their deductible and coinsurance fees

Hospital billing staff will determine each financially responsible party and file a claim with your insurance company on your behalf. After paying their share of expenses to the healthcare facility, your insurer will request payment for the agreed-upon deductible and coinsurance.


How to Dispute Charges

Anyone who receives a medical bill has the right to dispute it. Whether you’re insured, uninsured, or covered by a specific healthcare plan, you have the right to question and seek clarification about any aspect of the bill that seems inaccurate or unclear.

Follow these steps to dispute a hospital bill or insurance discrepancy:

  1. Request an itemized bill. 80% of hospital bills contain errors. Look out for double charges, number mix-ups, and fees for routine supplies or canceled procedures.
  2. Refuse to pay unfair charges. If you unknowingly received out-of-network care at an in-network facility, withhold payment until the dispute’s resolution.
  3. Research fair market prices. Negotiating using Medicare and commercial insurance standards as leverage could help your case.
  4. Call your insurance company. If they cannot resolve the issue, file an appeal or grievance with the NAIC, your state, or your employer’s HR department.
  5. Call hospital leadership. Inform the facility’s CFO and CEO of predatory billing practices and, if necessary, threaten legal recourse.
  6. Get professional help. A medical billing advocate can help you understand your bills and apply for financial assistance. Many hospitals have billing advocates on staff.

Know Your Rights

Patients can exercise various rights to prevent medical debt and advocate against predatory billing practices. Good faith estimates, the No Surprises Act, the Emergency Medical Treatment and Labor Act, ACA mandates, and IRS-enforced financial assistance are just some legal statutes protecting healthcare consumers and their families.


Legal Protections and Consumer Rights

The federal No Surprises Act took effect on January 1, 2022, requiring medical providers to give uninsured patients who schedule care at least three days in advance a “good faith” estimate of projected costs. Patients can legally dispute payment if these projections fall $400 or more below the final bill.

While good faith estimates do not apply to emergency departments, the No Surprises Act (NSA) includes additional measures protecting emergency care patients against:

  • Surprise bills for emergency services received from out-of-network facilities without prior authorization
  • Out-of-network cost-sharing, such as copayments or coinsurance, for all emergency and some non-emergency services
  • Charges and balance bills for supplemental care received from out-of-network providers working at in-network facilities, such as anesthesiologists or radiologists

If your medical provider cannot resolve billing issues, contact the CMS No Surprises Help Desk at 1-800-985-3059 or submit a claim online. Or, if your health insurance company has unlawfully withheld or minimized coverage, contact your state Consumer Assistance Program.

Emergency Care Rights

Congress passed the Emergency Medical Treatment and Labor Act (EMTALA) in 1986 to guarantee emergency room care to everyone regardless of insurance status or ability to pay. By accepting Medicare reimbursement, all compliant hospitals agree to the following responsibilities:

  1. Provide all patients with a medical screening examination (MSE): This determines the necessity of emergency care and whether a patient can receive medical attention elsewhere.
  2. Stabilize all patients determined to have an emergency condition: For example, emergency departments must treat and monitor gunshot victims until they can be transferred or discharged without clinical deterioration.
  3. Transfer or accept appropriate patients as needed: After treating a patient to the best of their abilities, all hospitals must transfer patients and their medical records to a better equipped medical facility and provide care en route. Likewise, given it has sufficient resources, the receiving hospital must legally accept the patient.

Hospitals and doctors who violate EMTALA mandates can provoke fines as high as $100,000, civil lawsuits, and termination of their Medicare Provider Agreement.


Financial Assistance Programs/Charity Care Laws 

Most healthcare facilities have some sort of financial assistance program that can help patients afford necessary care. The Affordable Care Act requires all tax-exempt hospitals to print widely-publicized Financial Assistance Policies (FAPs) and Emergency Medical Care statements.

These documents detail the eligibility requirements for reduced or free care and how to apply for financial assistance. These forms provide guidance and support for all patients, improve access to care, and reduce financial stress during medical situations.

These documents inform patients of the following information and services:

  • Financial aid eligibility and whether applicable benefits are free or discounted
  • How the institution calculates every charge on your bill
  • How patients can apply for charity care or financial assistance
Ask for a copy of the hospital’s FAP and fill out an application to begin the financial aid process. Next, notify existing debt collectors that you have sought help, request a pause on collections, and instruct them to label previously tallied delinquent payments as “disputed” on your credit report. If this process plays out and you still believe the hospital has abused its tax-exempt status, contact the IRS.

Some states, like California and New Jersey, enforce charity care laws requiring all hospitals — even those that pay taxes — to provide free or discounted care to eligible patients. Others, like Colorado and Massachusetts, encourage enrollment in state-run healthcare assistance programs.

Preventing Future Medical Debt

While preparation cannot always prevent medical debt, try the following strategies to avoid it where possible:

  • Review your insurance coverage. Understanding what’s covered, the cost of procedures and tests, and available alternatives will help reduce out-of-pocket expenses.
  • Keep detailed records. Organize all billing documents and EOBs to support future disputes and legal cases.
  • Review medical bills carefully. Request itemized bills and demand an explanation for suspicious charges.
  • Negotiate your bill. Many patients can secure discounts by paying bills upfront or with cash. Other hospitals offer payment plans that charge little or no interest.
  • Act quickly to dispute charges. Waiting too long to pay, dispute, or negotiate a bill will result in it going to collections and negatively impact your credit score.
  • Seek financial assistance. Ask about charity programs before or immediately after receiving care to ensure compliance with enrollment deadlines. Take advantage of payment plans. For example, look into low-interest hospital payment plans instead of using standard credit cards to pay for care. These plans impact your loan eligibility and credit score to a lesser degree.

All in All

Understanding your rights and available options when it comes to medical debt is a crucial step toward managing and preventing the overwhelming burden of healthcare expenses. Lower-income people, uninsured adults, and those facing coverage limitations are particularly vulnerable to having medical debt. As debt can affect every part of your life, it is important to understand your insurance coverage, hospital billing practices, and your available resources.

There are legal protections that offer safeguards against predatory billing, ensuring fair estimation of costs and protecting patients during emergencies. By being informed and proactive, you can better navigate the maze of medical debt, ease its negative effects, and secure necessary healthcare.

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