How to Prevent Medical Debt

Medical debt is one of the biggest problems facing American families today. The average amount owed following treatment for diabetes and neurological disorders is a staggering $26,971 and $34,167.

Hospital Debt Statistics

- According to the Common Wealth Fund, 116 million U.S. citizens have experienced personal debt as a result of being unable to pay medical bills.

- Research by the American Journal of Medicine showed that 62.1% of all insolvencies were considered to be a medical bankruptcy.

Pre-Existing Medical Conditions Lead to Unpaid Medical Bills

Taking out health coverage is not a panacea. It's important to check through the terms of a policy to ascertain your coverage should you ever fall ill. If you have a heart condition and your policy excludes pre-existing medical conditions, coverage isn't going to prevent debt because you're probably excluded.

- The median amount of healthcare-related debt was $17,749 for those filing for medical bankruptcy.

- People that didn't have health insurance owed an average of $26,971.

The earlier coverage is taken out the more affordable the premiums. Not only that, there's less time to develop a medical condition that could leave you with unpaid medical bills.

Reduce Insurance Deductible to Prevent Medical Debt

Although increasing your insurance deductible may reduce the monthly premium, having to pay $10,000 before a policy will pay out is a sure way to get into serious debt. If you don't have $10,000 in savings, reduce your deductible to prevent money problems. It may cost you a bit more each month, but it's a lot better than the alternative.

Incorrect Hospital Bills

The majority of hospital bills contain one or more errors. Although you can identify errors yourself, it's usually better to get an expert to check for mistakes. These errors can lead to additional medical debt amounting to thousands of dollars. There's normally a 10% fee, but the savings you'll enjoy are more than worth the expense.

Reduce Medical Debt with Low Cost Treatments

According to the Center for Health System Change and University of Chicago survey of physicians, 80% of doctors offer generic drugs and medication. However, this figure drops to just 51% with respect to diagnostic treatments and 40% for hospitalization and outpatient treatment. In order to avoid unpaid hospital bills, ask your doctor if he's able to provide you with a cheaper alternative.

Negotiate a Better Price to Avoid Unpaid Medical Bills

The Consumer Reports National Research Center found that only 31% of Americans had attempted to negotiate the cost of medical treatment. According to Gerard Anderson, director of the Johns Hopkins Center for Hospital Finance and Management: "If you go into the hospital and ask the chief financial officer, you may get a 30 percent discount, but you have to ask for it." Any discounts are completely at the discretion of the CFO, but it's well worth asking.

Charitable Assistance

Although it's rarely advertised, check to see if charitable assistance is available. Low income families that would otherwise be unable to pay medical bills may be eligible for financial aid. It's critically important that you ask about the possibility of assistance as soon as you can.

Medical debt doesn't only affect people on low incomes, it can affect anyone at any time. Health insurance with a high deductible that doesn't cover a pre-existing medical condition is of little more assistance than having no coverage at all. Thankfully, hospitals are starting to use computer databases like the Dell Revenue Cycle Management system to prevent medical bill inaccuracies from ever happening.

Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.

Updated: 16 September 2011