Medical debt is a major problem for millions of Americans. It has been one of the leading causes of bankruptcy, and the sky-high costs of medical treatment are well documented. There are steps you can take to keep your medical bills in check, however that may not be much consolation if you have already accumulated significant medical debt.

Like with any debt, you will want to make a game plan for how to manage it and meet your obligations. Of course, this includes the usual strategies like budgeting and cutting costs in order to free up your income.

However, you will also want to know your rights when it comes to medical debt. One important thing to be aware of is the statute of limitations, which will be determined by your state’s law. Let’s take a look at more specifics.

What are Statutes of Limitations?
If you aren’t familiar with this concept, the term “statute of limitations” (sometimes shortened to “SOL”) may seem confusing, and it certainly is a mouthful. It’s actually quite simple, though. A “statute” is a written law, and “limitations” refers to the “limit” related to when a claim can be brought in court. So, the statute of limitations essentially refers to the time limit for which someone can sue about a particular issue.

That may be a slight oversimplification, however, because in practice the statute of limitations functions as a defense in court rather than an automatic way to prevent a party from suing. In other words, if Party A sues Party B for a medical debt that is past the statute of limitations, Party B will not automatically win. Party B should seek the counsel of an attorney, and will need to appropriately acknowledge and respond to the lawsuit and raise the statute of limitations as an issue.

This quirk is one reason why “zombie debt” can be so problematic. In some cases, people don’t legally owe a debt anymore, but a creditor is able to bring it back to life by suing the debtor or even threatening the debtor into making a promise to pay (even after the SOL). Note: in most cases, a creditor may still contact you about a debt even after the SOL has passed.

Which Statute of Limitations is Relevant?
Every state has its own statutes of limitations for different types of debt. These typically include written contracts, oral contracts, promissory notes, and open-ended contracts. In many cases, the statute of limitations will vary depending on which category a given debt falls under.

In most cases, medical debt is considered a written contract. After all, think about all the paperwork you typically fill out when going to the doctor! According to NOLO, the statute of limitations for written contracts ranges from three years to ten years across states. Check out this chart and consider double checking it against your states’ law (and read below about how some states are adding new SOLs for medical debt).

Why a Shorter SOL is more Favorable
A shorter statute of limitations is considered more consumer-friendly. By shortening the window of time in which you can be sued, a short SOL provides greater certainty. In states with long SOLs, consumers may have the rude surprise of a last-minute lawsuit after nearly 10 years of a creditor not taking action on a given debt. A shorter SOL forces the creditor to take action sooner, and if it doesn’t then the consumer can have some peace of mind about their legal rights.

With this in mind, some states are beginning to pass SOLs for medical debts specifically, rather than essentially bundling medical debts in with the broader category of written contracts. New York made such a legislative change in 2020, reducing its statute of limitations on medical debt to three years.

Know Your Rights
If you find yourself in a position where you need to know the statute of limitations, you could consult the chart linked previously in this article and do additional research into your state law to confirm that it is correct. Also, consider contacting an attorney or local legal aid organization if you are unsure. It is very important to remember your rights and be prepared for creditors to continue contacting you. Make sure you understand the pitfalls surrounding so-called “zombie debt” and are ready for any communications about debts you owe or owed previously.

For more help with your debt management, remember that our certified credit counselors are here to help. You can get started with a no-cost counseling session today.

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Medical bills are never fun. In fact, they can be overwhelming. Whether you have a routine, planned procedure or have to receive emergency medical treatment, chances are that you will end up with a bill higher than you were hoping to receive. The best-case scenario is that you can pay the balance without any difficulty. The worst-case is that the bill is unmanageable and you cannot pay. Thankfully, there are some tips and strategies that can make your medical bills less expensive and help you pay them off effectively.

First Steps to Take

We are going to get into the nitty gritty of how you should pay your medical bill—as in which payment method you should use. However, there are some important steps you will want to take first to ensure that your medical bill is as low as possible.

Reviewing Your Bill and EOB

First, be sure that you review your bill after it goes through your insurance. Your insurer will send you an Explanation of Benefits (EOB) that details the portion of the bill that was covered by insurance. It should also list the remaining balance owed, which is what you are responsible for paying. If you receive a bill from your care provider with an approaching due date, and have not received an EOB, you should contact your provider and your insurer to see what is going on.

Also, be sure to get an itemized copy of your bill. A bill from your doctor that just shows a total due is not very helpful and leaves plenty of room for error. Make sure you receive a copy that details each individual charge. If your doctor does not provide this automatically, you should call and request such a copy.

Negotiating

Once you know how much you owe, consider negotiating. You can negotiate with the health care provider and with your insurance company. Sometimes, billing errors occur when a health care provider lists a treatment with a particular code that is not covered by your insurance company. Sometimes this is a misunderstanding, and a simple change of code will allow you to have coverage—and therefore owe less—for the given treatment.

Even if the coding is correct, you can try negotiating with the healthcare provider. You have a few tactics at your disposal if you face a high bill. You can review the Healthcare Bluebook and use its data as leverage. This tool tracks pricing for various procedures, tests, and services by location. You can research your local area and determine how your provider’s cost compares with the average in the area. This may give you evidence that you are being overcharged, which could sway a provider to lower your bill.

It never hurts to ask for a balance reduction, even if you cannot provide evidence that you have been “overcharged.” Explain your financial situation and why the bill is unaffordable, and ask to have the amount reduced. You might ask to pay the Medicare rate, which would represent a steep discount in some cases. You can also offer a lump sum settlement in which you make a large payment, short of the full balance, and the provider accepts it as a full payment.

Lastly, consider financial assistance. Ask the provider if they have a formal financial aid program. Many large providers have a formal program. Typically, you will have to fill out a detailed application, including your employment, income, and other personal information. If you qualify, this may lead to significantly lower costs or a favorable repayment arrangement. Even if you do not qualify, you can try negotiating the repayment process rather than the actual balance. Try to get on a repayment plan that is affordable and, ideally, interest free.

Which Payment Method Should You Use?

If you are able to pay, whether you make a one-time payment to eliminate the balance or a monthly payment on a plan, you should probably pay in cash, check, or debit card. Why not pay with a credit card? Well, you can pay with a credit card if you have the funds available and will immediately pay off the credit card balance. But you do not want to pay on a credit card if you cannot pay it off in full right away.

Why? Because putting the medical debt onto a credit card is almost always going to be less favorable. Many providers are willing to provide a zero-interest or low-interest repayment plan. By moving the debt to a credit card instead, you are giving up that fantastic benefit and moving the account to a credit card instead. This means that the debt can pile up interest and fees much more quickly.

One potential exception might be if you qualified for a credit card with excellent terms, such as a zero-percent balance transfer card. There may be some cases where this would be a smart move and save you money versus a repayment plan with your provider—particularly in a case where you were not given a repayment plan option. However, this will probably only make sense for someone with an excellent credit score who can get the best credit card terms.

A similar exception may exist if you qualify for a medical credit card (which can be used only for qualifying medical expenses). These also typically offer a promotional interest free period, but are typically available to borrowers who do not have excellent credit. These may look like an attractive option. However, the interest rates on these cards typically explode after the promotional period, so you have to be very careful. Again, an interest-free arrangement directly with your provider would be much better than a credit card.

Paying Overdue Medical Bills

So far, we have been discussing how you should handle the repayment of a medical expense soon after you are charged. But what about medical bills from the past that are overdue? When a medical bill is past due, it could hurt your credit. Your health care provider could report the delinquency, and could send the account to collections.

Providers usually wait anywhere from 60 to 180 days to send an unpaid balance to collections. Thankfully, the credit bureaus give you a 180-day grace period before allowing a medical debt to appear on your credit report. Additionally, changes to the FICO scoring model have limited the impact of medical debt. Medical debt is not weighted as heavily in the FICO 9 scoring model as it had been previously. Also, collection accounts that you pay off or settle are disregarded in your credit score for FICO 9 and the new FICO 10. However, while FICO continues to release these new scoring models, lenders are very slow to adopt them. Therefore, you may not be able to fully realize the benefits of the way FICO now treats medical debts; it will depend on the lenders that you use down the road.

Regardless of the scoring model in question, there are some things to keep in mind. First, remember that you can negotiate with collectors. You may be able to offer a lump sum payment for less than the full balance. This would have a positive impact on your credit score in the FICO 9 system. Second, you should avoid paying with a credit card and should use cash, debit card, or a check instead. A medical debt in collections has already done some damage to your credit. Yes, under FICO 9 and 10 you can essentially undo this damage. But that benefit is not worth the risk of putting the account onto a credit card if you cannot pay it in full immediately. Putting the account on a credit card opens up the possibility that the new credit card debt could become too much to handle and lead to another round of derogatory marks on your credit report. Skip that risk altogether.

Bottom Line

If you are facing a medical bill, remember that you have numerous options at your disposal. You should proactively communicate with your healthcare provider to make sure you are billed accurately and to explain your financial situation. When it comes time to pay, your best bet is to use cash, a check, or a debit card. You may not be able to pay in full, which is why getting on a payment plan is so helpful. Just remember that you want to avoid taking on new debt, especially credit card debt which has fewer safeguards than medical debt.

For more help navigating your medical debt or credit card debt, consider working with a credit counselor.

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