Using Debt Consolidation for Hospital and Medical Bills
- Learn about illegal practices that inflate your medical bills.
- How to ensure you aren’t being charged too much for medical expenses.
- There are risks to medical bill debt consolidation but you can avoid them.
The process of calculating medical bills can be very confusing. The billing statements use unfamiliar codes that are difficult to interpret. You may receive bills from multiple providers that you don’t recognize. You will not just get one bill from the hospital. Patients usually receive bills from the hospital, the doctor, specialist, and lab tests too.
When medical bills become overwhelming, debt consolidation can be a very efficient solution to combine all the bills into one simple monthly payment. Especially as CNBC shared that medical debt is a leading cause of bankruptcy.
Verify Your Bills Are Accurate Before Consolidating Medical Debts
When you consolidate, one loan pays off all your medical bills at one time. But be careful before you proceed with consolidation. Once this has occurred, you can no longer dispute the legitimacy of any of your medical charges. That is why it is vital to understand and approve all the medical charges before you consolidate.
Because medical bills are seldom intuitive, it is easy to become confused. The bills are designed to be read by insurance company computers, not patients. They usually do not state in layman’s terms what you are being billed for. It can be difficult to determine whether any given line item is legitimate. This is why you should call and ask if you do not understand anything. If it sounds questionable, question it. Mistakes that are made on medical bills can cost the patients hundreds and even thousands of dollars. Medical Billing Advocates of America reports that 80% of the hospital bills they review contain errors, so take the time to understand your bill before consolidating!
Questionable Practices to Watch Out For
Illegal practices like “balance billing” still occur on a regular basis. Balance billing is the practice whereby an insurance company negotiates a payment for less than the cost of a treatment. The difference of the amount negotiated will be billed to you. For example, you underwent a treatment that usually costs $1,000. The insurance company negotiated a rate of $700. The $300 balance will be your responsibility.
“Unbundling” is another common source of over-billing. This is when the provider bills individually for multiple-related procedures even if it should be considered as a single unit. An example is blood tests. By billing the individual components of a procedure rather than billing it as one, all-inclusive procedure patients end up paying more. The law prohibits the act of “unbundling” medical services. It should be corrected immediately if found that it is in error. You have to be aware of this.
Medical Bill Debt Consolidation Risks
Consolidating medical bills is often done with a home equity line of credit (HELOC). The truth is, this approach can provide lower monthly payments. However, the steep downside is that you must put up your home as security. This is why you need to weigh the consequences first. If you miss payments on medical bills, it can hurt your credit. If you miss payments on a HELOC, you can lose your home.
The Federal Trade Commission advises consumers to evaluate the cost of any consolidation loans. Like any home loan, a consolidation loan will most likely require you to pay points, closing costs, and years of interest. After you calculate all the costs, consolidating medical bills could become a lot less attractive than it initially seems.
Before deciding if consolidating your medical bills is the right answer for you, evaluate all the options. Consider negotiating directly with each provider for longer payment terms or reduced fees. In addition, weigh the pros and cons of debt consolidation and other debt relief options. These other options include medical bill debt settlement, credit counseling, or even bankruptcy. Do your research to see which path would deliver the greatest benefit and financial security.
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