5 Ways to deal with medical debt

Let us understand what medical debt is, and look for practical ways to get out of it

5 Ways to deal with medical debt

Medical insurance is a necessity today. With the rapid advancement in medical technology, healthcare costs have risen significantly. If you haven’t got the right (or adequate) cover, the costs can be crippling and lead to ‘medical debt’, a term that has entered the lexicon recently. For instance, 4-6 crore Indians are pushed into poverty by medical debt each year. In 2019-20, 5.5 crore Indians were pushed into poverty because of medical debt. 

Let us take a closer look at what medical debt is, and examine some ways to get out of it.

What is medical debt?
Medical debt is a term coined to define what happens when a patient is unable to pay the bills that a hospital generates after it provides services. This can be because the patient is uninsured, or because the medical insurance does not cover certain aspects (for example, if the hospital is not part of the cashless claim network), or does not have enough coverage (a Rs 10 lakh policy against a hospital bill of Rs 15 lakh). There is also medical inflation, which is the annually increasing costs of healthcare. In India, healthcare inflation was at 7.14% in 2018-19, double the rate of inflation – meaning that medical bills became twice as expensive as other things. 

Why is medical debt a bad thing?
Medical debt isn’t always something that happens due to bad decisions, unlike most other debt. The person concerned simply might not be able to get back to earning quickly enough to pay the bills in full. For example, the cost of a bypass surgery for a cardiac patient in a metro city like Mumbai ranges from Rs 14 lakh to Rs 70 lakh. One can't reasonably expect a cardiac patient to go back to work immediately and be able to earn enough money to pay off high hospital bills within a reasonable amount of time. These unpaid medical bills are technically unpaid dues, so in the course of time, they can be reported to credit bureaus, affecting your credit score. A bad credit score can prevent you from taking loans for a business or house, among other things.

How can one avoid medical debt?

Let us briefly go through how one can try to avoid medical debt before discussing how to deal with it. 

The first thing to do is to invest in good medical insurance. Do not blindly follow what a website or insurance agent recommends; familiarise yourself with relevant terms like ‘copayment’, ‘deductible’, etc., and take a close look at whether your insurance policy divides the total amount into percentages or amounts allotted to particular things only. For example, if you have a Rs 10 lakh policy, it will not offer the entire Rs 10 lakh for room rent. You have to understand what the limit is for room charges, and for the other components. You also need to put emergency money aside for the worst case scenario – if you need emergency treatment at a non-network hospital. 

Secondly, don’t entrust all your medical costs to your insurance policy. Medical insurance might not cover some costs that you incur – it usually covers 30 days up until hospitalisation and 60 days after discharge, but if your treatment exceeds that (say, physiotherapy), you will need to pay for it yourself. Therefore, you need to make a component of your savings for medical expenses that might not be covered by your insurance policy.

Related: What's the cost of medical aid abroad?

How can one reduce or eliminate medical debt?

Assuming you are saddled with medical debt, here are a few steps that can improve the situation.

1. Go through the bills carefully.
Hospital bills can be a long, complex, frustrating maze to navigate, but the task needs to be done. If there is something you do not understand in the bill, highlight it and bring it to the attention of the hospital. They owe you an explanation for the services rendered, so it is your right. You might find errors that indicate you used a service when you didn’t.

2. Negotiate with the hospital.
The hospital’s charges are not always the actual price for the services. Hospitals usually bill insurance companies much lower rates. For example, an MRI scan might cost you Rs 8000, but the hospital will charge an insurance company Rs 5000 for it. State politely that you cannot afford the full bill and ask for the discounted rates they provide to insurers. If the hospital is adamant that you pay the full rate, say that you cannot afford it and ask for a discount on the total bill. For the hospital, it is a question of receiving some money rather than no money, so they will negotiate. You can even try and work out a payment plan, hopefully with little to no interest.

3. Do not put the debt on your credit card.
A credit card may seem a very easy solution to get the hospital off your back, but it is a bad decision. Credit cards are instant unsecured loans and, as such, charge the highest interest rates. If you fail to make your credit card payments on time, your credit score will drop immediately, and it is a long, difficult climb to get it up again. Hospitals might just be willing to negotiate with you, because it means some recovery for them, as opposed to none. However, this might make sense only as a last resort – credit cards allow you to break up large purchases into EMIs and offer a fixed EMI, which might make it easy for you.

4. Give medical debt due priority – but not too much either.
Medical debt isn’t as important as, say, paying off your home loan EMIs or credit card bills. So remember to treat it as such. Pay attention to your regular expenses that will allow you to earn the money to pay off your medical debt, or else you might end up digging a deeper hole by accident.

5. Get help.
Getting into debt on the back of a major illness can be overwhelming, and you might not be able to see a clear way out of your situation. The constant hounding from debt collectors might also take a toll on your mental health. It might be a good idea to get help, whether it is from a friend who is good at financial planning, or a lawyer who can help you negotiate your way out of your medical debt. You can try and find pro bono services that will help you with your medical debt as well.

Related: How to deal with medical bills that exceed your insurance cover?

Last words

Remember that medical debt is not something to be ashamed of; it is a sad fact of modern life thanks to the high cost of healthcare and inadequate knowledge of medical procedures as well as medical insurance terms and conditions. Subscribing to a good medical insurance policy can help you to not just reduce the chances of getting into medical debt, it may help you dodge it entirely.  5 Money behaviours that can push you into debt


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