#1 Cause of Bankruptcy? Medical Bills
The biggest cause of personal bankruptcy in the U.S. isn’t irresponsible spending, business failures, credit card debt, job losses or excessively big mortgages. It’s medical bills. Millions of Americans, even if they have health insurance, are at risk of getting sick or getting in an accident and having to repay thousands of dollars of medical debt that they cannot afford. For some, bankruptcy may be the only option, but for others, it can be avoided and medical debt can be paid.
The following are some ways to avoid medical bankruptcy and reduce medical debt.
Keep Buying Health Insurance
Even if your budget is tight or you’ve lost your job, don't let your health insurance lapse. Not having health insurance puts you at a higher risk of medical bankruptcy, since even a single car accident can put you in the hospital, or an unexpected medical diagnosis can make it hard for you to qualify for new health insurance. Even if you have a pre-existing condition you can get coverage from a high-risk insurance pool offered by your state government.
Starting in 2014, with the Affordable Care Act (“Obamacare”) taking effect throughout the country, Americans with pre-existing health conditions can get health insurance at no added cost. But between now and then, it would be wise to keep paying for health insurance – for your own good, and your family’s financial security.
Save Money In An HSA or HRA
Depending on your health insurance plan, you might qualify for a Health Savings Account (HSA) or Health Reimbursement Account (HRA). With an HRA, you and your employer contribute money to a special account that can be used to pay for out of pocket health care costs, such as your annual deductible, co-pays for doctor’s office visits, and any other costs not covered by insurance. With an HSA, individuals can pay a certain amount of money each year into a special health care savings account that is tax-deductible and can be used to pay most out-of-pocket health care costs. The advantage of using an HSA or HRA is that the money can be used to pay your medical bills, tax-free.
Unpaid Medical Debt? Consider Debt Settlement
If you owe money to a hospital or health care professional for services that they have already provided (a surgery, hospital stay or specialty care), consider trying to negotiate with them to reduce the amount of your debt in exchange for a larger upfront payment. There are no guarantees that a doctor or hospital will agree to reduce your debt, but it’s worth a try. Doctor’s offices and hospitals need to pay their bills just like any other business, and they might be willing to forgive part of your medical debt in exchange for a larger one-time payment. Whatever agreement you try to negotiate, make sure to put the details in writing and ask for written proof that the debt is marked as “discharged” and is not being sent to a collection agency.
Don't Give Up
Medical bills can be a burden, but there is hope for people who want to get out of medical debt and avoid the risk of medical bankruptcy. Make sure to keep your health insurance current, use tax-advantaged health care savings accounts (depending on your insurance plan and if you qualify), and try to negotiate with your doctors and hospitals to reduce your medical debt. Staying healthy and avoiding medical bills is also good for your financial health – but even if you suffer from a medical condition that is beyond your control, there are ways to avoid the worst financial consequences.