The hospital then provides medical care, ordering tests, medication, even surgeries to improve your health. Unlike shopping in a store, nothing has a price tag. You cannot tell the $1 pill from the $100. You take both and hopefully get better. Then the bill arrives. It could be as “small” as $10,000 or as large as $500,000. The hospital simply follows the doctor’s orders and in the process, you amass a large bill. Without insurance or being independently wealthy, you join the 41% million Americans with medical debt.

How Much Debt Might You Incur?

At $5,000, the average medical debt sounds manageable, but most people think in terms of paying off a credit card, not in paying off a bill all at once.

The bills pile up quickly, especially if things happen as they did to one Oklahoma City woman who lost her insurance when she lost her job. The high cost of COBRA coverage was too great an expense for Bliss Butler without employment. First a kidney stone, then a broken leg sent her to the emergency room.

She returned to the hospital for treatment of an irregular heartbeat. She regularly receives invoices in amounts like $36,860.75, $19,881.58, and $60,000. She now has no idea of the total cost of her debt, but she already cleaned out her retirement savings of $20,000 to pay what she could. Her costs far exceeded the average medical debt.

Get Rid Of Medical Debt

Butler’s method of using retirement savings turns out pretty common. Four others join it – Chapter Seven bankruptcy, Chapter Thirteen bankruptcy, medical loans, and medical credit cards.

You probably notice that three of those methods simply delay the payment and change to whom you owe it. Taking out a medical loan or medical credit card means you pay the bank after you use the loan or credit card to pay the hospital. Chapter Thirteen restructures the bills and creates a manageable repayment.

The rarely allowed Chapter Seven liquidates the debt. Essentially, it wipes it away, but you cannot take out loans or credit cards for seven years after filing it. The last alternative, emptying your retirement savings, leaves you without funds for the future and may not cover all of the bills.

That money may not cover it and that results in many people declaring bankruptcy. The majority of personal bankruptcy filings relate to medical bills. So, how do you avoid those problems? How can you avoid racking up medical bills you have trouble paying?

Medical costs rank as the number one reason an individual would consider withdrawing from their individual retirement account (IRA).

Realistic Strategies For Dealing With the Average Medical Debt

Living healthily and participating in wellness programs can stave off many problems. When you make smart choices about your health, you help yourself. Eating a healthy, well-balanced diet, exercising regularly, sleeping eight hours a night, and drinking 64 ounces of water per day go a long way to keeping your health what it should be.

Get Regular Check Ups

Undergoing an annual check up can catch problems early. With insurance, the office visit typically costs less than $30. Those without insurance can use a sliding scale clinic to reduce the cost of the medical visit to what it would cost with insurance.

Compare Prices

When problems do arise that require treatment, believe it or not, you can comparison shop. Some honest doctors like Dr. Marty Makary, a surgeon and professor of health policy and management at Johns Hopkins Bloomberg School of Public Health, recommend this. He authored a book on pricing in the medical industry, “The Price We Pay: What Broke American Health Care — and How to Fix It,” that counsels readers to shop around for the best possible price within comparable providers.

The same surgery, for example, might cost $44,000 at one hospital, $500,000 at another medical facility. The pricing does not necessarily reflect the quality of care, says the doctor. He recommends using websites like Sesame.com and MDsave.com to compare prices.

According to Makary, you do not legally have to sign the financial consent form. You can write in the signature line a statement such as “Did not read” or “I don’t feel comfortable signing my life away financially.”

When Medical Bills Happen - Organize

Even if that fails, you can take steps to better the situation and get help with medical bills. Sometimes, a situation arises when you do incur a not so average medical debt despite above average self-care and wellness plus annual checkups. You can handle the bills and pay them off. It takes time and organization and work.

You need to know precisely what you owe and to whom. If your situation resembles Butler’s, gather all of the bills together and make an appointment with a financial counselor. Skip the advertising in the search engine results and make an appointment with The National Foundation for Credit Counseling (NFCC). NFCC provides non-profit services to help individuals better manage their debt.

The financial counselors have experience reading and understanding the invoices and can tally the total debt. They also have contacts within the financial industry and their local offices typically have contacts at each hospital.

They can help you determine who and how much you actually owe. The other benefit to financial counseling is they provide expert negotiators. By reviewing the invoices with you, the financial counselor can help you ensure that bill reflects what you actually received for medical care. These itemized statements list each service and its cost.

When Medical Bills Happen - Negotiate Then Pay

Once you determine the accuracy of the invoices and you know the total amount due, you can negotiate with the hospital to lower the bills. The financial counselors at NFCC can also help with this. You can negotiate a medical procedure’s cost before, during, and after its delivery, says Makary. That means once you have the bill in hand, it is not too late to reduce its cost.

Once the costs lower, if you still find that the bills tally to more than you can afford, inquire about charity and non-profit services offered by the hospital or a local medical organization. This can provide relief from recurring costs, too, such as prescriptions. Many pharmaceutical companies offer programs to provide medications to lower-income patients for no cost.

Make a payment plan

Once you have exhausted those options, consult with the hospital about structuring a payment plan. While not all medical facilities allow this, some do and prefer to receive some regular payments rather than none at all. You may be able to create an in-house payment plan that lets you avoid paying interest.

Get a Loan

Taking out a loan of some type comes next, especially if you could not finagle a payment plan. If you own your home, tap the equity for a home equity line of credit. This lets you pay off the medical bills all at once and you obtain a reasonable monthly payment to make instead.

Taking out a medical loan or consolidation loan comes next on the list of possibilities. Depending on your credit score, this could provide a relatively affordable option.

If you have a credit score of 640 or greater, you can qualify for prime interest rates. This makes the loan pretty cheap and adds little to the re-payment cost. Prime rates range from about seven percent to one percent.

A lower credit score puts you in the sub-prime interest rate range which starts at eight percent but typically hits higher double digits. You could pay as much as 25 percent interest. That might sound horrible, but it is better than defaulting on all of the medical bills and ruining your credit.

Use Credit Cards

Under normal circumstances, credit cards provide the last option on the list due to their typically high-interest rates, but in this case, they rank above withdrawing money from your IRA or borrowing against it.

You could potentially qualify for a zero interest rate credit card or a low-interest rate card if you have a great credit score. You might take out more than one card if your bills climb near $10,000. With a credit card, the same rules apply as qualifying for a loan. Your credit score decides your fate – prime or sub-prime rate.

This lets you space out the payments though since you automatically get a payment plan. You can also easily consolidate credit card debt so you never need to worry about multiple payments. You can also reduce the amount of debt this way.

If everything else fails - Take Money from Your 401(k)

Finally, we come to the solution Butler tried. You tap into your 401(k). Sniffle. Only do this as a last, last, last resort. Borrow against it, if you can. That lets you repay and still have the money in the IRA. Borrowing against it can leave the balance intact.

Here is the major caveat. If you lose your job or quit while you have the loan out, the balance comes due immediately. Gasp.

Borrowing against it still makes a better choice than withdrawing from it. Once you withdraw money from your IRA, it is gone. Bye bye, money. Plus, you will incur a ten percent penalty for an early withdrawal if you have not yet reached the ripe ole age of 59½ years old. The only way to avoid the withdrawal penalty and be younger than 59½ is that your medical bills total greater than 7.5 percent of your adjusted gross income.

Say Hello To Your Money!

By now, you probably see the advantage of going to a financial counselor as soon as possible. You can avoid bankruptcy or emptying your savings. Organizations like NFCC can help you organize, negotiate, and create payment plans.

Finally,

You can avoid becoming one of the 16 million adults in America with more than $1,000 in medical debt. While medical insurance is expensive, you can shop around for it and it beats going into debt. If your costs exceeded what insurance covered, you can consolidate, negotiate, and restructure to repay.