5 Steps You Can Take to Avoid Medical Debt

Medical debt can be a huge burden. Here's how to stay away from it. Image source: Getty Images.

Sometimes people land in debt as a result of spending irresponsibly and indulging in luxuries they can't afford. Often, however, debt arises due to uncontrollable circumstances, like home repairs, vehicle issues, or health problems. The latter is so common that medical debt is the No. 1 source of personal bankruptcy filings in the U.S. If you're looking to avoid that fate, here are five essential steps you should take in managing your healthcare costs.

1. Understand your health benefits

Knowing how your health insurance plan works can help you avoid mistakes that might cause your medical care to get denied, thereby leaving you on the hook for the associated bills. First, familiarize yourself with your insurance plan's policy regarding out-of-network providers. If you don't get great (or any) coverage for doctors considered out-of-network, staying in-network could save you a bundle.

Next, read up on what steps are needed to see specialists or move forward with certain procedures or diagnostic tests. Your insurance plan might mandate that you obtain a referral from your primary care physician before seeing a specialist, in which case you'll need to do that legwork to avoid getting stuck with a bill. Similarly, you might need to go through a special precertification process before having surgery or certain tests performed. Sometimes all that means is calling your insurance company, or presenting a letter from your physician and waiting for approval. Not all plans have these requirements, but if yours does, ignoring them could leave you responsible for costly treatments your insurance company may have otherwise picked up the tab for.

2. Examine all medical bills before paying them

Reading through medical bills and verifying diagnostic codes is hardly a fun way to spend an afternoon. But if you don't take the time to do so, you could wind up paying for services you never actually received. Before you pay any of your healthcare bills, review them for accuracy and question anything that doesn't look right. Sometimes all it takes is for a medical office to indicate the wrong billing code, and suddenly your claim is denied -- or you're stuck paying for a more expensive service than the one you actually received.

3. Appeal claims denied by your insurance company

Just because your insurance company says it won't pay for certain services doesn't mean you have to throw your hands up and resign yourself to another whopping expense. If a claim of yours is denied by your insurer, you have every right to go through the appeals process before officially getting stuck with that bill. Often times medical providers will advocate on your behalf, so that if, for example, your insurance company denies a claim on the basis that the service you received wasn't medically necessary, your doctor might write a letter to the contrary. And if your insurance company changes its tune, you're off the hook as far as that bill goes.

4. Negotiate the cost of treatment

There's a difference between the rate a provider will charge an insurance company and the rate it'll charge you when you're paying out of pocket as an individual. If you know going into a procedure or treatment that you'll be stuck with the bill in its entirety, say something, and aim to negotiate a lower price. Medical offices will often cut you a break in these situations, leaving you with less to pay.

5. Work with providers to get on payment plans

When you're stuck with a medical bill you can't pay right away, your first inclination might be to whip out a credit card, charge that expense, and pay it off over time. Don't do it. First, carrying a balance on a credit card often means subjecting yourself to exorbitant interest rates that only add to your costs. Second, carrying a balance for too long can cause your credit score to plummet, thereby making it harder and more expensive for you to borrow when you need to.

A better bet, therefore, is to ask your providers to work out a payment plan with you. Many medical offices are already set up for this, and once you get on one of their plans, you'll generally have the option to pay your bill over time without accruing an obscene amount of interest.

Letting your medical bills get out of hand puts your finances at risk -- and that's not a situation you want to be in. Rather than let that happen, stay on top of your bills and be savvy about keeping your costs to a minimum. The more vigilant you are, the less likely you'll be to land in serious debt.