Paying Medical Bills with Payment Plans

Facing unexpected medical expenses can quickly throw personal finances into disarray. Even insured patients get stuck with costly bills for deductibles, coinsurance, copays, and out-of-network charges. Without sufficient savings, medical debt can lead to credit damage or even bankruptcy.

However, requesting extended payment plans from healthcare providers and utilizing special medical credit cards allow managing these large expenses over time. This guide will explore ways to ease the burden of paying overwhelming medical bills through payment arrangements tailored to your budget.

Why Medical Bills Get So Costly

Medical costs in the United States far exceed most other developed countries for several key reasons:

Lack of universal healthcare leads to high uninsured rates and costly hospital charity care
No limits exist on drug prices, surgical fees, hospital charges, etc which continue soaring
Consumers lack ability to compare pricing ahead of time due to opacity
Third party payer system removes free market forces and shared incentives to limit costs
Defensive medicine drives up utilization due to providers’ fear of lawsuits
Inefficiencies like redundant testing and administrative bloat multiply expenses
Aging population with more intensive healthcare needs

With spending two to six times higher than other industrialized nations, our system incentivizes unchecked expense inflation. This cascades in costly, unexpected bills for patients.

Typical Medical Costs Requiring Payment Plans

Medical costs that often end up requiring special payment arrangements due to high dollar amounts include:

Emergency room visits – $1,400 average fee just for walking in the door
Hospital stays – Over $5,000 per day for room alone; intensive care $10,000+ per day
Childbirth – $10,000+ for vaginal delivery, $15,000+ for caesarean including prenatal and postnatal care
Surgeries – Appendectomy about $15,000, knee replacement around $35,000
Diagnostic imaging – MRI scans $2,600 average, CT scan around $1,200
Ambulance transportation – $600 for basic life support, $2,000+ for advanced life support

Even with insurance, the combination of deductibles, copays, and share of costs quickly overwhelms budgets when serious injuries or illnesses occur.

Why Payment Plans Matter for Medical Bills

Without payment plans, medical bills lead to:

Aggressive collections harming your credit
Garnished wages if hospitals win legal judgments
Denied future access to care at accepting facilities
Significant stress and related mental health decline
Bankruptcy if unable to resolve debts
Unpaid hospital bills passed on to other patients through higher costs

Letting medical debts go to collections affects your finances for years. Payment plans allow managing essential health expenses responsibly given limitations.

Talking to Healthcare Providers About Payment Plans

The first step after getting a large medical bill should be requesting an extended payment plan directly from the provider. Tips when asking for installment arrangements include:

Call the billing office as soon as you get the bill – don’t delay
Keep records of who you spoke with and details of the conversation
Ask what payment plan options they make available and how to apply
Explain your financial hardship calmly and request a plan you can afford
If no standard payment plans available, negotiate a custom plan
Get any proposed payment arrangement in writing before agreeing

Open communication and good faith efforts make providers more willing to offer payment flexibility, even if not advertised upfront.

Types of Medical Payment Plans

Healthcare providers may offer options like:

Installment plans – Fixed regular monthly payments like $200 until balance paid off.
Term plans – Payments spread over set timeframe like 24 months.
No interest plans – Providers waive interest charges as courtesy on extended plans.
Low-income assistance – Reduced payments or forgiven amounts based on documented financial hardship.
Cash discounts – Upfront or prompt payment discounts of 10-30% sometimes offered.
Charity care – Write-offs or fee adjustments for eligible low-income uninsured patients.

Don’t hesitate to advocate for yourself in requesting the optimal payment arrangement for your situation.

Medical Credit Cards

If providers won’t extend terms, specialized medical credit cards allow financing large healthcare bills over time. These function similarly to credit cards but with some different features:

Pros

0% deferred interest periods from 6-24 months
Higher credit limits to accommodate hospital bills
Easy and fast approval decisions
Low minimum monthly payments

Cons

Very high deferred interest retroactively applied if not paid in full
Penalties and back interest if 0% period terms not followed
Hurts credit mix and raises utilization initially

Medical cards allow charging essential care when needed but require diligence to avoid heavy back-end interest by paying off in promotional window.

Private Medical Loans

In addition to credit cards, you may be able to qualify for fixed-term personal installment loans to pay healthcare costs:

Benefits

Fixed monthly payments and predictable end date
May offer lower rates than medical credit cards
Doesn’t impact credit card utilization ratios

Drawbacks

Requires good credit score for approval and low rates
Comes with origination fees sometimes
Monthly payment unable to be adjusted if income changes

Personal medical loans create set payment plans but also risk overextending if financial instability arises. Weigh options carefully.

Tips for Affording Medical Payment Plans

Making consistent payments on medical plans requires budgeting. Ways to find room in your spending plan include:

Avoiding new financing like credit cards during repayment period
Increasing income with side jobs or freelancing
Lowering monthly costs by cutting non-essentials
Spending minimally and following a strict budget
Getting a roommate to reduce housing costs
Using savings wisely then rebuilding emergency fund
Negotiating lower payments or bill forgiveness from provider
Borrowing from retirement plan as absolute last resort
Utilizing community assistance resources if income is very low

While medical debts strain finances, make maintaining provider payment plans priority to prevent further damage.

Should You Borrow from Retirement to Pay Medical Bills?

Raiding retirement funds to pay medical debts is risky but can be considered strategically:

Benefits

Avoids high interest costs of other debt options
Retains access to essential healthcare
Prevents credit damage of unpaid debts
Allows repaying yourself over time if borrowing from 401(k)

Risks

Tempts additional non-essential withdrawals later
Loses market gains on invested amounts during repayment
Adds financial stress if job loss occurs before repaid

Only tap retirement as absolute emergency measure. Have a clear repayment budget so borrowed amounts get replenished. Avoid long-term retirement financial health consequences.

Best Banks for Medical Loans and Payment Plans

The most flexible medical lending providers include:

Prosper
LendingClub
Lightstream
Marcus by Goldman Sachs
Citi Health Card
CareCredit
UnitedMedicalCredit
Commerce Bank

Review multiple lender options and prequalify to compare rates and payment terms. Local banks and credit unions may also provide assistance. Avoid high interest subprime lenders marketing medical loans.

Prioritizing Medical Bill Payments

If unable to afford all medical debts and other obligations, consider prioritizing:

Ongoing care needs – Pay current treatment costs first to continue receiving care.
Most recent bills – Focus on latest bills and work backwards. Older debt more likely sold to collectors.
Smallest balances – Clear small bills first to close out accounts.
Collection accounts – Collection activity and interest accumulation threaten credit more.
Necessities – Maintain utilities, housing payments, food, and medication budgets before medical debts.
High interest debts – Compare interest rates and pay those over 20% first as able.

Communicate honestly with healthcare providers about limitations and demonstrate good faith paying what you can responsibly. Seek nonprofit medical debt counseling if overwhelmed.

Medical Debt Payment Plan Q&A

Below are common questions about managing medical obligations:

Does medical debt go on your credit report?

Typically not until an account becomes severely delinquent. Paying consistently prevents credit reporting.

How can I negotiate lower medical bills?

Request an itemized bill and challenge any unnecessary charges. Ask for reasonable prompt-pay discounts. Income-based charity assistance may be available if uninsured.

How long do I have to pay a medical bill?

No set timeline but expect to owe full balance unless you negotiate payment arrangements. Unpaid debts risk collection action.

Should I take money from 401(k) to pay medical debt?

Avoid if possible but can make sense in worst-case scenarios to prevent bankruptcy. Have a set repayment plan.

What is the statute of limitations on medical debt?

Varies by state. Common limits range from 3-6 years but compassionate exceptions sometimes exist for medical debt.

The bottom line is being proactive in communicating with providers and lenders allows managing even large medical bills without destroying your finances. Prioritize ongoing care, prevent collection actions, and pay what you can, when you can. Your health and financial recovery go hand in hand.

Why Medical Costs Are Rising

Understanding why medical expenses keep increasing rapidly helps patients contextually navigate challenging bills:

New Technologies – Cutting-edge drugs, devices, and treatment equipment carry high research costs passed onto consumers.

Chronic Illnesses – Greater lifespan and illnesses like obesity/diabetes require ongoing care driving utilization.

Defensive Medicine – Doctors order extra tests and procedures primarily to prevent lawsuits, not due to clinical need.

Administrative Overhead – Complex medical billing/insurance processes require staffing, hurting efficiency.

Lack of Transparency – Patients can’t compare pricing or make choices to limit spending due to system opacity.

Third-Party Payers – When insurance covers most costs, patients and doctors have little incentive to minimize care consumption.

High Uncompensated Care Costs – Uninsured and underinsured patients force hospitals to inflate other charges to compensate.

Expensive Pharmaceuticals – U.S. prescription medications cost multiples more than other countries due to patent protections.

Aging Population – Senior healthcare consumes vastly more services, driving up utilization.

While complex, understanding key inflation drivers helps patients thoughtfully navigate difficult billing scenarios.

Questions to Ask When Receiving Large Medical Bills

Don’t panic when receiving overwhelming medical bills. Methodically ask questions to understand options:

Is this bill my full responsibility or will insurance cover any portion?
Is the amount billed the allowed amount accepted as full payment by my insurer?
Did any of the care occur out-of-network, triggering higher self-pay responsibility?
Have any amounts been applied to my policy deductible, which must be met before coverage begins?
Why are my coinsurance/copay responsibility amounts higher than expected?
Can I review charges for errors or double-billing for the same service?
Are there any prompt-payment discounts for paying quickly such as within 30 days?
Is there an internal assistance program or process to apply for reduced-charge care based on medical indigence?
What payment plan options do you make available beyond lump-sum payment in full?

Never assume you must simply pay the full billed charges. Seek to understand how your insurance coverage applies, if discounts apply, and what patient advocate resources exist.

Strategies for Paying Large Medical Bills

When faced with overwhelming medical bills, evaluate options like:

Negotiating discounts or fee reductions where possible based on financial hardship
Discussing extended financing payment plans over 6-24 months or longer with low or zero interest
Leveraging medical credit cards with 0% intro APR periods if lump payment unaffordable
Tapping home equity lines of credit which tend to have lower interest rates
Using low-interest personal loans rather than resorting to high-rate options like payday loans
Setting up automatic smaller payments directly from checking account rather than large lump sums
Applying for charity care assistance programs if meeting income eligibility requirements
Fundraising through employer giving programs, crowdfunding campaigns, or reaching out to community groups
Hiring professional medical bill negotiation services that take a percentage of savings achieved

A mix of reducing billed amounts and creating affordable payment timelines helps manage large medical expenses.

Key Steps to Requesting a Medical Bill Payment Plan

To request an extended payment arrangement on a medical bill, proactively:

Contact the hospital or provider billing office promptly about setting up a plan
Get the request authorized in writing before assuming it is approved
Be calm and explain the financial hardship the charges would impose on your family
Provide documentation if requested showing income, assets, expenses, and ability to pay over time
Make good faith partial payments while finalizing a custom payment plan
Clarify all plan terms like: timeline, amounts due, interest, missed payment consequences
Follow up any verbal conversations in writing to document mutual understanding
Set automated payment reminders to avoid missed payments and stay current

You have power in requesting reasonable payment arrangements tailored to your financial means. Most providers want to enable patients to pay responsibly over time rather than sending accounts to collections.

Should Medical Bills Impact Your Credit?

Unlike most regular debts, many advocates argue medical debt and payment history should not affect credit scores and reports given:

Medical costs are often unavoidable emergencies, not a choice like credit cards or other financing.
Even insured consumers can rack up substantial out-of-pocket bills through no fault of their own.
Medical debt is rarely an indicator a consumer is an irresponsible borrower or credit risk.
Damaged credit from medical bills then impairs ability to access affordable credit and housing.
Providers already have incentive via collections to get repaid without credit leverage.

While still impacting reports currently, momentum builds to shield medical debt from influencing credit history and scores going forward. But avoiding default through payment plans remains wise.

Maximize Medical Flexible Spending Account if Available

A useful tool to help cashflow medical expenses is a medical Flexible Spending Account (FSA) if offered through your employer benefits:

FSA allows setting aside pre-tax dollars from paychecks to pay out-of-pocket healthcare costs.
Contribution maximums for 2023 are $3,050 for individual plans or $6,100 for family coverage.
Funds deducted from each pay period are placed in the FSA.
FSA debit card available to tap funds directly at time of care.
Submit other qualified receipts for reimbursement.
Unused amounts at year-end are forfeited so estimate contributions carefully.

When expecting higher healthcare expenses such as childbirth or elective surgery, maximize FSA contributions in the corresponding year to offset costs with tax-free funds.

Other Ways to Pay Down Medical Debt

If you end up carrying medical debt over time, some other methods to accelerate payoff include:

Making extra payments whenever possible, even if only $20-50, to reduce principal faster.
Cut back discretionary spending temporarily to free up cashflow towards medical debt.
Pick up a side gig delivering food or driving rideshare to generate extra medical debt repayment income.
Reduce big recurring costs where possible like calling internet/TV providers for lower rate promotions.
Consolidate other high interest debt through a personal loan or balance transfer card to reduce overall repayment burden.
Follow up with hospital billing departments regularly for any financial assistance resources.
Review your credit card rewards programs for cash back opportunities that can be directed towards balances.

Look for creative ways to scrounge up extra repayment funds until you become debt free.

Key Medical Billing Terms and Acronyms

Learn key medical billing lingo:

Allowable Charge – Maximum dollar amount an insurer will cover for a given service based on contracted rates. Providers bill the full “charged” amount but insurers pay based on the lower contracted allowable charge.

APC – Ambulatory Payment Classification – Medicare’s bundled payment system to reimburse outpatient facility services based on diagnosis and care provided.

Co-Insurance – The percentage of costs the insured patient pays after meeting any policy deductible. 20% co-insurance means the insurer covers 80% of allowable charges.

CPT Codes – Common Procedural Terminology – Codes defined by the American Medical Association to identify thousands of specific medical services and procedures.

DRG Payments – Diagnosis-Related Group – How Medicare reimburses hospitals fixed amounts based on admitted patients’ diagnoses and care required.

EOB – Explanation of Benefits – Detailed statement showing charged amounts, network discounts, amount paid by insurance to provider, and remaining co-insurance or deductible owed by the patient.

HCPCS Codes – Healthcare Common Procedure Coding System – Standardized numerical codes identifying specific medical products, services, and equipment.

HMO – Health Maintenance Organization – A managed care health insurance plan that only covers in-network providers except emergencies. Requires choosing a PCP.

Medicare Assignment – When a provider accepts Medicare’s set allowed payment amount for services as full payment and cannot bill the patient for anything beyond the 20% co-insurance.

PPO – Preferred Provider Organization – Managed care plan where patients can see out-of-network providers but pay more out-of-pocket than for in-network care.

Staying informed on key healthcare financial terminology assists navigating billing situations. Don’t hesitate to ask hospital staff for clarification on unclear charges or bill coding.