How to Pay Off Your Medical Debt

Reckoning with the Burden of Health Costs

We never want to think about the costs of health care, especially when it’s a need.

According to a recent SIPP survey, people in the United States owe at least $195 billion in medical debt. They also found that 23 million people, or around 1 in 10 adults, owes significant medical debt. Medical debt occurs across all demographic groups, all levels of income and savings, although the study found that Black Americans and people living in the South or Medicaid non-expansion states were more likely to owe significant debt. About half of those in the survey reported owing more than $2,000 in medical debt.

Many health-related debts accrue as we age due to the increasing amounts of ailments and issues our bodies face. This means middle-aged and older Americans are likely to have more medical debt than younger people. Middle-aged Americans can also be saddled with more home debt, leftover student or educational debt, and business or personal loans that add to their increasing financial burdens. A significant health event can be a costly burden that causes your financial goals to go up in smoke.

No one should be saddled with that kind of debt, let alone for an unpreventable or unforeseen health expense. We should be able to pay for our health needs and maintain wellness late into our lives while also being able to afford the things we want. Of course, this is easier said than done—many, if not most, people would gladly have their health debt eliminated overnight if it were so easy. After all, who wants to owe significant amounts of money for something they had to have?

As with everything financial, there is a solution to an age-old problem: smart financials, hard work, careful budgeting, and consistency.

But it’s a challenge that takes work. For instance, in the survey I discussed above, it was found that the largest medical debt bracket was for those owing $10,000 or more—about 1 percent of all adults. In other words, as Americans, we have a lot of medical debt to deal with compared to our other expenses. So it can seem insurmountable to take on paying off the debt with just a budget and some work, especially if you have to take off from work for your medical condition, meaning you rack up more expenses without generating more income.

But I’ve always believed we have it in our powers to break the mold and take on those financial burdens while freeing ourselves up from debt; we can pursue our financial goals while taking care of what we owe.

Let’s take a look.

Paying Off Medical Debt One Bill at a Time

Your first step will be to make an inventory of all your known medical debt. Comb through drawers, inboxes, emails, and everywhere to ensure you have all your medical bills and total debt obligations accounted for. If you have other outstanding debts, such as loans or a mortgage or monthly bills, it might help to make a spreadsheet with separated costs and how much you owe in each category.

For instance, student debt in one column, car payments in the other, and so on. The debts with the highest interest rates should be paid off first to save yourself some money. Use your columns to determine which debt obligation that is and focus on paying that one off at a slightly higher rate than the others. If they’re all equal, then pay them across the board, or in any order you feel like. If your primary goal is the medical debt, then make that your main budgeting priority.

Once you’ve done that, look over your medical bills and ensure that you actually owe what you’re being billed for. According to one report, 80% of bills contain at least one error. This means that when you review a bill you should watch closely for discrepancies and errors and report them as soon as you can. If you have private insurance, watch out for the “surprise medical bills” that are tacked on from providers outside of your health insurance carrier’s network. Some states have made this practice illegal, along with a federal law called the No Surprises Act.

If your bill is accurate and you don’t feel you can pay it as-is, try to negotiate the bill down or work out a repayment plan. Under the Affordable Care Act, nonprofit hospitals, which are the majority of them, must make financial assistance available to low-income patients, as well as post policies online. For certain patients with lower incomes or other hardships, you can qualify for a partial or even full reduction of your bill, which is referred to as charity care.

You can also work out a repayment plan that takes into account your income and savings levels. It’s always good to have a number in mind for what you can afford, and as you work out a deal for manageable payments, be sure to be honest and open about what can and cannot do. Many providers are happy to arrange for a low or no-interest repayment plan, which helps save money from accruing interest costs the longer you have to pay off significant debt.

It’s important to prioritize your budget and make sure you’re hewing to it without taking on significantly more debt in the process. For instance, it is not advisable to pay off medical debt with a credit card. Credit card interest rates average more than medical payment interest rates, meaning you “pay off” the medical debt with a credit card only to take on equal payments but with more accrued interest, i.e. you end up owing more for the same thing. If you get behind on credit card payments, your credit score can take a serious hit that will make it harder to get a loan in the future if or when you need one, possibly to pay off even more medical debt.

Many people plan their budgets using the 50/30/20 rule of thumb. This rule allocates your after-tax income to three categories: 50% to needs, 30% to wants, 20% to your financial goals. This is a common and useful breakdown that many people find helpful. When it comes to paying off medical debt, it can be a good strategy to change up those numbers a little, especially if your priority is to aggressively pay off medical debt. Perhaps the 30% and 20% can be swapped, or you can allocate the entire 50% leftover after other needs to paying it off. Your budget and practical reality will determine how feasible this is.

When signing up for a medical expense or looking over payment options, you might see a medical credit card as an option offered by your health care provider. While medical credit cards can be a viable option for spreading out payments and having all your medical debt on one card, which many people find useful for budgeting. However, it’s important to keep in mind interest rates, credit scores, and whether or not a personal loan might be a better solution.

Of course, budgeting and saving and paying it all off the classical way is another strategy many people pursue. If you’re in a financial position to pay it off using cash, and your finances can survive such a hit, then by all means avoid the debt entirely and pay it off in a lump sum.

When you have significant medical bills, it might be tempting to arrange a GoFundMe campaign to cover the costs. For perspective: from 2016 through 2020, there were 437,596 GoFundMe campaigns launched in the United States. Of those campaigns, less than 12% reached their fundraising goals—or, the campaigns failed 88% of the time. The odds for a successful medical GoFundMe are not in your favor, despite the popularity of the attempt. It is not a reliable or an advisable way to pay off medical debt, but the attempts persist.

That being said, in the same period, medical GoFundMe campaigns did raise over $2 billion from around 21.7 million donations—which is certainly a lot of money. But of course, that $2 billion is what was raised from the total of over $8.45 billion that was asked from GoFundMe campaigns in the first place. A GoFundMe should only be considered if the debt is low enough and the chances of success stand out as truly probable. There are lots of generous people out there, and while it would be a mistake to hinge your entire repayment strategy on them, if you lack other options it might be something worth considering.

Securing Your Medical Future

The hope, from all of this, was to show that it’s possible to pay off medical debt while thriving financially. We shouldn’t lose all our future options just because of a medical event that we didn’t foresee or weren’t prepared for. Besides, most of us lack the savings to cover a significant medical event in the first place, meaning it’s likely we’ll all be on the hook for repayments at some time or another. This makes medical debt a nearly-universal issue to take care of.

With the right budgeting steps and smart inventory of bills and options, medical debt can be an expense but not a burden. No matter what you want to do with your life or what your goals are, there’s a place for a thought-out budget that gets you where you want to go while helping you pay for where you’ve already been. To get out of medical debt without winning the lottery, you’ll need to leverage some budgeting tips and tricks to pinch pennies and create your strategic roadmap while also looking over your bills closely and weighing what matters most.

But your health, and your future, are worth it.