How to Negotiate and Settle Medical Debt and Hospital Bills
Last Updated: July 18, 2017
We are hearing more about people who are getting into debt because of exorbitant medical bills and no way to pay them. The New York Times recently wrote an article about a laid-off New Jersey supermarket executive who received a $171,569 medical bill for a six-day hospital stay due to a heart attack. Since he was unemployed, he did not have health insurance and one has to wonder, what in the world is this guy going to do? Better yet, what can any of us do if we get a medical bill such as this?
Negotiating hospital and doctor fees is not an easy task, but it can be done. The most important thing to keep in mind is to not bury your head in the sand and think these bills are going to magically go away on their own. You must apply for help or try to negotiate these bills within 90 days of incurring the bills. Any longer, and you run the risk of these bills going to a collection agency. If that does happen, fear not — we will discuss tips on negotiating medical bills with collection agencies later in this article.
Steps to Negotiate and Settle Your Medical Bills
Step 1: Organize and Review Your Medical Bills
You will be surprised how many bills you will receive from a stay in the hospital. From the ambulance ride to the hospital, to the lab tests, to the prescription drugs, you will receive a multitude of bills in the mail. Make sure to keep track of them and putting them all into a spreadsheet would be the best idea.
Next, you will want to review each and every bill to make sure there are no errors such as overcharges or double-charges. Keep a look out for these common billing mistakes:
- If you are discharged in the morning, protest if you're billed for a full daily-room rate for the date you left the hospital.
- If you brought your medications with you, make sure you weren't charged for them by the hospital.
- Dispute any additional fees on your bill for routine supplies, like gowns, gloves or sheets. These items should be factored into the hospital daily-room charge.
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Step 2: Negotiate Bills With the Original Creditors Once You Know How Much You Can Afford to Pay
Now that you have all of your bills, you need to see how much will be paid by your insurance carrier (if you have one) and how much will be your responsibility. If you have medical insurance, you should see an amount that was paid by your carrier deducted from the total amount due. If you do not see this, immediately get on the phone with your insurance company to make sure you get this corrected.
If you do not have any medical insurance, the balance will have to be paid by you. Either way, you now will have a total amount that you are responsible for. Next, how much can you afford to pay? If you only have so much money saved or money left over after your monthly bills are paid, you need to know this amount.
Call each provider and explain to them you only have so much money to pay on this bill and what can they do to try to discount this bill for you. More often than not, a provider would rather get some money than no money so they will be more inclined to work out something with you. If not, there are a lot of medical bill negotiators that call handle this dirty deed for you.
Step 3: Negotiate Bills With Debt Collectors
Sometimes getting everything together takes longer than you thought, and now some or all of your medical bills have been sent or sold to a collection agency. There are a few things to consider first and foremost before you start to deal with a collection agency:
- Determine if the bill is past the Statute of Limitations. The Statute of Limitations varies from three to six years so you will have to check your state laws to verify the exact time limit. And, the SOL starts when an account becomes delinquent or when you last made a payment - not the date of service.
- A collection agency may try to "re-age" the debt by having you make a small payment on it. If you make a payment on the debt, it will restart the SOL clock so be very careful on what you say and agree to with a collection agency. Make sure you come to a full and final agreement before you make any payments. Refer to our article on dealing with collection agencies for more info.
- If you want to settle your debt with a collection agency, offer them 25 percent of the original amount. They can afford to settle these debts for far less than the original amount because they buy these debts from the hospitals and doctors for pennies on the dollar. What they get from you is pure profit so make sure to stick to your guns when negotiating an amount. And, make sure to get everything in writing!
- After you settle with a collection agency, a "debt settled for less than the full amount" will appear on your credit report. Fear not - it will fall off after seven years. It might not be a perfect solution, but it stops the phone calls and letters and the worry of this bill hanging over your head.
- You will get a Form 1099-C from the collection agency. If you were insolvent prior to settlement of the debt, you can file a Form 982 to claim an exclusion to paying the tax on the canceled debt.
As we stated earlier, the worse thing you can do is to ignore your medical bills as they will not go away. You don't have to let them lead you down the path to bankruptcy - you can negotiate your bills with the original creditors or with collection agencies. All you need is some guidance and you can settle your medical debts for far less than you thought possible. Make sure to take advantage of any financial assistance and the help of numerous medical bill advocates who can help you get your medical bills under control.