Q&A: Here’s why you shouldn’t put that huge hospital bill on a credit card

Dear Liz: Because of COVID, my 27-year-old son lost his job and health insurance. He was unable to afford continued health insurance and did not qualify for Medicaid. He contracted spinal meningitis and was hospitalized 12 days. The hospital reduced his bill to $28,000 from the original $80,000, but he is still unable to pay. He remains unemployed and without any savings. What would you suggest he do?

Answer: Your son should first call the hospital and ask about applying for financial assistance. Federal law requires nonprofit hospitals to offer this help to low-income patients, and many for-profit hospitals also offer programs that can reduce or even eliminate the charges.

He also should ask about a payment plan geared to what’s left of his income. He should resist any hospital pressure to put the bill on a credit card, because hospital payment plans typically don’t charge interest while credit cards do.

If he’s still left with a bill he can’t pay, he should consult a bankruptcy attorney, and do so as soon as possible. Bankruptcy experts are predicting a big uptick in filings as people and businesses struggle with fallout from the pandemic.

Friday’s need-to-know money news

Today’s top story: There’s more than one way to slay a debt. Also in the news: How to know when it’s OK to spend, 3 steps to spring cleaning your credit card debt, and what to do when you desperately need help with medical bills.

There’s More Than One Way to Slay a Debt
These key points could help.

How to Know When It’s OK to Spend
Loosening the purse strings.

3 Steps to Spring-Cleaning Your Credit Card Debt
Time to shake the dust off.

What To Do When You Desperately Need Help With Medical Bills
Looking into medical debt forgiveness.

Q&A: Finding a way out from under big medical bills

Dear Liz: I am so lost. I recently became a widow at 52. My husband didn’t have life insurance. I had to grab a job two weeks after he passed. Five months later, I’m sick with late-stage congestive heart failure and can’t work. I’m barely able to pay my mortgage now with Social Security survivor benefits. I need to sell and rent something cheaper before I lose my home of 18 years. I have to decide between continuing to make the payments and buying medicine and food.

I don’t have health insurance because Medicaid was not expanded in my state and I haven’t been on disability long enough to qualify for Medicare. I owe a lot of money to someone who helped me. I would have been dead without the help, not to mention homeless. My husband left me in a bind.

Answer: I’m so sorry you’re having to deal with all this.

If you’re not already getting help paying for your prescriptions, check out resources such as NeedyMeds.org, the Partnership for Prescription Assistance and the Patient Advocate Foundation’s National Financial Resource Directory. It’s crucial with your diagnosis that you take your medications as prescribed and don’t skip or alter your dosages.

Your medical providers may have charity programs to help pay your healthcare bills, or they might be willing to accept small payments. You may be able to negotiate a discount if you ask to be charged the same rates as your area’s largest insurer.

If you’re on Social Security Disability Insurance, you’ll qualify for Medicare after two years. Without health insurance, though, it may be hard to get the quality care you need to live that long.

You could move to another state that would cover you under Medicaid, but that may not be feasible, given how sick you are. Plus, you may not qualify if you have some equity in your home and you sell it. While your residence is not a countable asset that could prevent you from getting Medicaid, the profits from a sale probably would be.

A housing counselor could help you explore your options, which could include selling, taking on a roommate or getting a mortgage modification. You can get referrals from the U.S. Department of Housing and Urban Development site or by calling (800) 569-4287.

Another option is foreclosure, especially if you don’t have much equity in your home and the foreclosure process is relatively slow in your state. You could use the money that otherwise would go to house payments for living expenses and medicine until you have to move. It’s not ideal, but none of your options are at this point.

Credit bureaus ease medical debt pain for a few

Too many Americans have bad credit because of unpaid medical bills. That’s not likely to change anytime soon, despite two reforms in how those bills will be reported to the credit bureaus.

Starting Sept. 15:

—There will be a 180-day waiting period before unpaid medical debts can show up on people’s credit reports.

—Medical collections will be deleted from credit reports if they’re paid by health insurers.

Credit bureaus Equifax, Experian and TransUnion agreed to the new standards as part of two settlements with state attorneys general in 2015. The changes in medical debt reporting were designed to help people whose bills fell through the cracks between their health care providers and their insurance companies, says Chi Chi Wu, a staff attorney for the National Consumer Law Center.

In my latest for the Associated Press, find out who these changes are expected to help.

Tuesday’s need-to-know money news

Today’s top story: The costs associated with “free” college programs. Also in the news: 4 easy ways to become a banking guru, 3 medical debt mistakes to avoid, and 9 internships that pay better than “real” jobs.

‘Free’ College Programs Will Still Cost You
Not all expenses are covered.

4 Easy Ways to Become a Banking Guru
Mastering the art of banking.

3 medical debt mistakes to avoid
Don’t bury yourself even deeper.

9 internships that pay better than “real” jobs
Some interns can make close to $100K.

Friday’s need-to-know money news

Pile of Credit CardsToday’s top story: How to fix common credit card problems. Also in the news: Why Millennials are delaying retirement savings, how to get a great deal on a car lease, and how medical debt can affect your credit score.

5 Common Credit Card Problems & How To Fix Them
Solutions to common problems.

Millennials Crushed By Debt Delay Saving For Retirement
A very costly delay.

5 Ways to Get a Great Deal on a Car Lease
Do your research.

How Medical Debt Can Affect Your Credit Score
Pay close attention to inaccuracies.

Monday’s need-to-know money news

air-miles-cardToday’s top story: How your medical debt impacts your FICO score. Also in the news: Signs your parents are victims of a financial scam, what you need to know when hunting for scholarships, and how to fly first class on the cheap.

The Impact of Medical Debt on FICO Scores
A new formula treats medical debt differently.

5 Signs Your Parents Are the Victims of a Financial Scam
Older adults are more susceptible to scams.

Everything You Need to Know When Hunting for Scholarships
Helping your kids on the road to college.

How to fly first class for free (or on the cheap)
Bargain your way out of coach this summer.

Thursday’s need-to-know money news

009fbf535e76a5f4c22dfae6c5168d0bToday’s top story: How to declare your financial independence. Also in the news: What you need to know before becoming a landlord, how the financial crisis in Greece could effect your portfolio, and a little known Texas law that could save you from medical debt.

3 Ways to Declare Your Financial Independence This July 4th
Let financial freedom ring!

Things to Know Before Becoming a Landlord
Proceed with caution.

Does Greece Matter? The Bigger Picture For You And Your Portfolio
The ripple effect.

The Little-Known Texas Law that Can Save You From Medical Debt
Even if you don’t live in the Lone Star state.

Credit scores “overly penalized” for medical bills, regulator says

Zemanta Related Posts ThumbnailIf you have a collection account on your credit reports, chances are pretty good it’s from a medical bill. And chances are also good that the collection is having an outsized impact on your credit scores.

Today the Consumer Financial Protection Bureau released a study saying credit scores unfairly penalized people with medical collections. Those scores underestimated the creditworthiness of such people by 16 to 22 points, according the bureau’s review of 5 million people’s credit reports.

The byzantine way medical care is bought and paid for in the U.S. contributes to the problem. Even if you’re insured, it’s easy for a medical bill to slip through the cracks.

“Sometimes insurance does not cover everything.  Sometimes [people] do not know what they owe because of how complicated the billing process can be,” CFPB Director Richard Cordray noted in a prepared statement.  “Other times they may not even know they owe anything, thinking that their insurance will cover the bill.  Sometimes the debt is caused by billing issues with medical providers or insurers.  Complaints to the Bureau indicate that many consumers do not even know they have a medical debt in collections until they get a call from a debt collector or they discover the debt on their credit report.”

FICO, creators of the leading credit score, have already tweaked the formula to ignore collections under $100. The next version of the score, FICO 9, will use “a more nuanced approach to assessing consumer collection data,” promised spokesman Anthony Sprauve. With this formula, scheduled to be released later this year, “medical collections will have a smaller impact than non-medical collections.”

The problem, as credit industry insiders will tell you, is that most lenders continue to use older versions of the FICO formula that don’t have these upgrades. So even though FICO concedes the point that medical bills aren’t as predictive as other types of collections, they can still unfairly wallop your scores.

 

Wednesday’s need-to-know money news

Today’s top story: Could your job search be impeded by medical debt? Also in the news: Easy steps for a complete money makeover, the future of identity theft, and details on the new MyRa retirement savings plan. Zemanta Related Posts Thumbnail

Could Your Medical Debt Keep You From Getting a Job?
Not if Senator Warren has her way.

9 Easy Steps for a Complete Money Makeover
Start by choosing a better bank.

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Thieves are after more than just your money.

Introducing the myRA retirement savings account.
Announced at last night’s State of the Union, the account would work like a savings bond.

Got a charge for $9.84 on your credit card? Beware
This small charge could put your credit and identity at risk.