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Medical Debt: What It Is and How to Deal With It

Updated Feb. 22, 2023
Lindsay VanSomeren
By: Lindsay VanSomeren

Our Personal Finance Expert

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It's one of the biggest financial problems for millions of Americans. Medical debt is when you can't pay your medical bill by the due date, and it can wreak havoc on your savings and your mental health.

You can get out of medical debt, no matter how hopeless your situation feels. Millions of people before you have done it, and you can do it, too. Here's how.

What is medical debt?

Medical debt refers to any balance you owe from healthcare services that you can't pay by the due date.

It's frustratingly common in the U.S. According to one study, 56% of Americans have experienced financial hardship due to medical bills. According to Consumer Reports, 30% of Americans have had medical debt sent to collections.

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, they may hire a collection agency to try to get the money. They 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.

A better solution is to set up a way to pay off your debt, which we'll discuss below.

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, pharmacists, hospitals, and others -- has become extremely expensive and often confusing to understand. It's a wonder anyone's able to afford healthcare these days (except for the very healthy or very wealthy).

Even if you have a good health insurance plan and you know how to use it most effectively, it's still possible to rack up big medical debt.

For example, you can be diligent, making sure to seek out doctors that are in-network. But if you get in a bad car accident and need emergency treatment, you don't get a say in whether the medical team saving your life is in-network or not. You are, of course, just focused on your own well-being at that point. But the bill for that life-saving treatment may give you a heart attack.

And that's before you consider care for expensive conditions like cancer, Alzheimer's disease, or lifelong disabilities.

What options do I have for medical debt?

Although the healthcare industry sometimes seems designed for patients' financial failure, there is a bright side. Many options exist solely to help with the financial difficulties patients face.

It's important to know your options for paying down medical debt. Some are much better than others. Below, we'll cover some of the methods you can consider.

Ask the doctor to forgive all (or a portion) of the bill

Although it seems like a pie-in-the-sky dream, it is possible your doctor will simply waive a portion of your balance -- but only if you ask. Write your doctor a letter laying out your request and your reasons for it.

Your chances may be greater if you have insurance and it's already paid a portion of the bill. Your chances also may go up if the medical debt causes you a significant financial hardship.

Pros Cons
May be able to wipe away some or all of your debt May be temporarily embarrassing
May have to write an official letter

Medical loans

There are actually personal loans designed specifically for medical costs, and given out by third-party lenders. You may also be able to sign up 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. If your credit score needs a boost, you might have trouble finding an affordable loan.

Pros Cons
Unsecured Cost may vary according to your credit
Fixed monthly payments you can plan your budget around

Payment Plans

There's a good chance your doctor's office has a system to handle people who can't pay off their bills immediately. Remember, you're far from the first person with this problem.

Call your doctor's office and ask if they have a medical payment plan available, and if so, what the details are. You may be able to get on a plan with no or low interest and affordable monthly payments.

Pros Cons
Offered by many doctors and medical providers Not available everywhere
Repayment terms can be extremely flexible

Medical credit cards

Another option is to charge your debt to a credit card -- but not just any old credit card. Look for medical credit cards created for this kind of debt. One reason to use a medical credit card rather than a traditional credit card: Medical debt can't be reported on your credit report until it's at least six months past due. If you use a medical credit card to pay for debt, your credit score will thank you.

You can apply for these on your own, or sometimes through your doctor's office, just like with medical loans. And they're not just a one-off solution. Medical credit cards can be used many times, which can be handy for ongoing medical expenses.

Pros Cons
Designed for medical debt May not be accepted by all your healthcare providers
Widely available at doctors' offices May have more restrictions than a traditional credit card
May be able to use for ongoing expenses Cost may vary according to your credit

0% intro APR credit card

If you're absolutely certain you'll pay off a 0% APR credit card before the promo period ends, you can essentially use it as an interest-free loan. Still -- it's a risky move, and one to consider carefully.

Using your everyday credit card to pay for medical expenses can negatively impact your credit record. If you charge your medical bill to your regular credit card, lenders can't tell that it's actually medical debt. As a result, it may impede getting approved for other credit.

But if you absolutely need to use a non-medical credit card to pay for medical debt, a 0% APR credit card is likely your best option.

Pros Cons
No interest in the 0% APR promo period Can trap you in credit card debt
May be able to earn rewards or other perks Can make you look less favorable to creditors
May be more expensive than other options once the 0% APR period ends

Charitable organizations

There are several organizations that 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. Each is different. Check with ones in your area or for your condition to see if there's help available.

Beyond those localized options, here are a few organizations that provide financial assistance to people struggling to pay medical debt:

Pros Cons
Assistance is usually free May not be available for everyone
More readily available for people with specific diseases or conditions

Debt counseling or bankruptcy

Sometimes, despite your best efforts, it's just not in the cards to pay off your debt through normal means. 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. They may not be pretty, but they're still 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. There are a lot of laws surrounding debt collection and bankruptcy, so it's definitely worth it to seek help if you're considering this solution.

Pros Cons
Debt counseling can be affordable or free Bankruptcy attorneys can be expensive
You can get help negotiating with the doctor's office Bankruptcy can damage your credit

What is the right option for me?

It can be tough to make sense of your options. 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 those aren't options, seeking out a loan or credit card that's specifically for medical debt can be a good next step. If those options aren't available to you, asking for help from a charitable organization or seeking out bankruptcy may be worth considering. And 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.

Medical debt is no fun. But we're confident that if you employ some of these options, you'll be able to get rid of it. Your journey may be harder or easier than others, but you can get over this and move onto better things -- for your health, and for your wallet.

Our Personal Finance Expert