Debt Consolidation for Medical Bills

The medical billing process can be very confusing. The billing statements use unfamiliar billing codes that are difficult to interpret, and you may receive bills from multiple providers you don't recognize. Instead of getting a single bill for a hospital visit, for instance, you may receive bills from the hospital, the doctor, the specialist your doctor consulted with, each lab that ran any tests, and so on.

When medical bills become overwhelming, debt consolidation can be a very efficient solution to combine all the bills into one simple monthly payment.

Verify Your Bills Are Accurate Before Consolidating Medical Debts

When you consolidate, one loan pays off all your medical bills at one time. What is important to realize is that 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, and they usually do not state in layman's terms what you are being billed for, so it can be difficult to determine whether any given line item is legitimate. If you do not understand a bill, call and ask — and if it sounds questionable, question it. All to often mistakes are made on medical bills that 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, and you are billed for the balance. For example, if you undergo a treatment that usually costs $1,000, but your insurance company has a negotiated rate of $700, you are billed for the $300 balance.

"Unbundling" is another common source of over-billing, where the provider bills individually for multiple related procedures (such as blood tests) that should be billed as a single unit. By billing the individual components of a procedure rather than billing it as one, all-inclusive procedure patients end up paying more. Even if this is done in error be aware that the act of "unbundling" medical services is prohibited and should be corrected immediately.

Medical Bill Debt Consolidation Risks

Consolidating medical bills is often done with a home equity line of credit (HELOC). While this approach can provide lower monthly payments, the steep downside is that you must put up your home as security, so 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, take some time to evaluate all the options, including negotiating directly with each provider for longer payment terms or reduced fees. In addition, weigh the pros and cons between debt consolidation and other debt relief options like medical bill debt settlement, credit counseling, or even bankruptcy, to see which path would deliver the greatest benefit and financial security.