Medical Debt Collection: The Leading Cause of Personal Bankruptcy

A recent study published by NerdWallet found that one out of every five Americans will be contacted by a collection agency this year regarding their medical debt. That makes medical debt the largest type of personal debt that Americans are struggling with by a landslide, even dwarfing student loan debt. Unpaid medical bills that result in collections have become the number one cause of personal bankruptcy in America.

How Medical Debt Starts 

The root of the medical debt collection crisis lies in the fact that most medical bills are extremely difficult to read and understand, and a surprising number of those bills are actually incorrect. The fact that the medical billing system leaves so much to be desired makes planning for and paying off medical bills an incredibly difficult task.

The NerdWallet study found that a large percentage of people who are struggling with medical debt were completely blindsided by the amounts they were charged for their care. In many cases, even patients who did their homework and thought they had everything covered before receiving care were shocked when additional charges that were never discussed showed up on their bills.

The study also found that there were an alarming number of errors contained in medical bills. Because most medical bills are so confusing, many people give up on trying to understand the charges and just assume that they were billed correctly, which is not always the case.

How to Avoid Medical Debt 

medical billThe best way to avoid medical debt is to make sure that you have adequate coverage for any treatment you may need, expected or unexpected. Just because you have some type of insurance does not mean that you will be completely covered in the event that you need medical treatment. Many insurance policies will leave you on the hook for 20% of the bill, which can be devastating if you happen to need a $300,000 procedure.

Of course, the best way to determine if you have enough coverage is to educate yourself about the details and pitfalls of medical billing. While this won’t exactly make for enjoyable weekend reading, it could mean the difference between having everything taken care of and owing tens of thousands of dollars should you need a medical procedure.

If you are even the slightest bit unsure about what you need to know with regards to medical billing, the best thing to do is simply ask for help. Talk with friends and relatives, your insurance representative, and your doctors. You should also call to confirm that each of your medical bills is correct and ask the company to explain the entire bill for you in laymen’s terms.

Dealing With Medical Debt 

If you are already included in those one in five Americans with medical debt in collections, the last thing in the world that you want to do is ignore the situation. It is not going to go away on its own, so burying your head in the sand won’t help.

The best way to handle a medical debt collection is to call the collector and explain your situation, then attempt to work out some type of plan to make regular payments. With the astronomical amount of medical debt in collections today, most collectors are more than willing to work with you in order to obtain some form of payment.

Because the medical billing industry is so difficult to understand, it is easy to see how people can fall into serious debt problems from outstanding medical bills. If you find yourself in this situation, you are not alone. Seek out help and advice from qualified sources and put together a plan to attack your debt.

By | 2017-05-10T09:47:32+00:00 November 18th, 2014|Blog|0 Comments

About the Author:

Graduated from University of Utah - business degree 1990. Served in US Army as an interrogator / linguist, then as a tactical intelligence officer - Military Intelligence 1986-1990. Managed Western US sales operations for NY based collection agency 1990-1992. Founded Direct Recovery Associates, Inc. 1992-present