1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair
2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% -
3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.
Medical Bills Plague Millions of Americans
A recent study by The Commonwealth Fund found that the health care system is failing in a big way. In 2007, 41% of American adults reported having trouble paying off their medical bill debts. In just two years, this percentage had increased 34%, affecting 72 million people.
A third of struggling families have depleted savings to keep up with the mountain of debt looming over them. Another 29% reported having trouble paying for basic necessities like food, rent or utilities. In a desperate effort to keep their households afloat, 30% of Americans accumulated significant credit card debt, further compounding their problems. A third of Americans spent 10% of their annual income on inflated health insurance premiums and bills. The Center for Studying Health System Change reported that 36 million people couldn’t afford to fill their prescription medications.
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Fifty million American adults are uninsured, whether it’s a result of losing their jobs, having pre-existing conditions that aren’t covered or trouble paying the high monthly cost. Yet, even though 61% of the people with hefty medical debts were insured at the time of their care, they still reported having difficulty affording their payments.
Hospitals May Negotiate
The most shocking thing about the American health care system is that the bills are less like buying a shirt from a department store and more like buying a short from an open-air bazaar, where negotiating can be effective. There are often higher mark-ups on individuals, versus if Medicare had paid for the exact same procedure, caution medical experts.
Generally speaking, hospitals aren’t like other creditors. They’re more sympathetic to the tough bind that escalating medical bills put families in. Many patients can negotiate lower monthly payments, sometimes paying as little as $20/month or reducing overall charges 25-50%. Often even the smallest payment on-time regularly shows good faith and intention to pay off the debts eventually.
In one case, twenty-three-year-old Kellie Brown lost her insurance just before needing an appendix removed and developing a related infection, which would have cost her $40,000. She told the two hospitals about her financial situation and one hospital knocked down her cost to $10,000; the other to $8,000. To help her pay off the remaining $18,000, her friends raised $6,000 at a fundraiser, which gave Kellie more bartering power with the hospitals. One of the hospitals took an extra $2,000 off her bill and she makes $50 payments toward the other bill.
Additionally, Medicaid may be able to pay off a portion of the overall debt if a person’s income and needs meet certain criterion. Pregnant women, dependent children, welfare recipients, senior citizens and the disabled are demographics that are often covered. In 2001, Medicaid paid 41% of the long term care costs for those in nursing homes and the program covered more than 46 million people overall.
Avoid Using Credit Cards for Medical Bills
A natural instinct is to think this enormous debt can be handled by spreading it out over several credit cards and bouncing from one to the next until they’re all maxed out. However, using plastic can take away some bartering power because the patient is essentially saying, “Yes, I accept this debt as valid.” Once medical costs are transferred to a credit card, it becomes credit card debt, therefore no longer eligible for a reduction from Medicaid.
Also, the credit card’s interest rate can quickly escalate the payment to intolerable levels and even credit cards offering 0% interest can quickly skyrocket up to 30% if one payment is missed. While medical expenses are often completely removed from one’s credit report once the balance is paid, missed credit card payments and collection accounts remain a credit score blemish for up to seven years.
Debt Consolidation Can Help
A 2005 Harvard study found that medical bills were the leading cause of bankruptcy, accounting for half of the 1,458,000 filings in 2001. The study also found that more than three quarters were insured at the beginning of their medical expense, but 38% had lost coverage by the time of their bankruptcy. With average bills ranging from $14,000 for the privately insured to $35,000 for Cancer patients, bankruptcy seems inevitable.
However, many people are seeking the help of a debt consolidation company to reduce their monthly payments as much as 50%, lower overall medical bills by as much as 50%, consolidate various bills into one affordable monthly payment, keep personal property safe, end harassing collection calls, get started on a more reasonable repayment schedule and avoid bankruptcy.
Video: Medical Debt Negotiation
In one case, Kristine Arnould, a self-employed woman, suffered a pulmonary aneurism and was subsequently slammed with a $37,000 medical bill. She informed the hospital she would pay “fair market value” for her medical expenses, similar to what Medicare paid, and she began to send small payments of $25, along with letters contesting her balance. Kristine’s big break came when she teamed up with a debt consulting firm who helped her negotiate and bring her balance down to a mere $6,000!
In another case, Chris McCaughna was saddled with his deceased brother’s medical costs of $79,000. Working with a debt consolidation company and medical billing advocate, he determined what a fairer payment was and wound up paying $41,000 plus a $15,000 fee to his negotiator. All things considered, he said it was well worth it to save $23,000 in the long run and make his monthly payments more bearable in the short term.
To find out how to reduce insurmountable bills and save thousands, patients can call call the number above or fill out the quick form. A nonprofit credit counseling agency approved by the Better Business Bureau that focuses on negotiating lower medical bills may be able to help you.