Are your doctor’s bills making you sick? According to a 2022 LendingTree survey, nearly a quarter of all Americans carry medical debt[1]. Meanwhile, the cost of medical care is rising, with a 4% increase during 2022 alone[2].
Many patients find themselves with bills that they can’t afford to pay. Some of them solve this problem by using a personal loan or credit card to pay their medical bills.
While these options are possible, they are not a good idea. Here’s why.
Reasons Not to Use a Loan or Credit Card to Pay Medical Debt
Admittedly, there can be advantages to paying your medical bill with a credit card. Not only is it convenient, but you might also receive reward points in the process, depending on the card.
But if you pay your medical bill with a credit card or loan, your medical debt becomes consumer debt. You’ll lose many of the protections that apply to medical debts.
Consider the differences between medical debt and consumer debt.
Medical Debt Interest Rates
Unlike consumer debt, medical debts don’t typically carry interest. Even if your debt carries a financing charge, many states place a cap on the maximum interest rate, and a federal cap may be in the works.
Arizona, for example, recently approved a proposition that caps medical interest rates at 3%. More states may follow suit, though senators Chris Murphy (D-CT) and Chris Van Hollen (D-MD) have been pushing for legislation known as The Strengthening Consumer Protections and Medical Debt Transparency Act. If this measure passes, there will be a nationwide cap of 5% interest on all medical debt.
These protections vanish the moment you transfer your debt to a credit card or pay it off with a personal loan. The average credit card interest rate is currently 24.1% — as much as eight times the rate of the protections being proposed[3].
The lower your interest rate, the lower your monthly payments, and the sooner you can get out from under your medical debt.
Restrictions on Medical Debt Collections Lawsuits
As medical debt garners more attention, Americans can expect to see increased restrictions on the statute of limitations. This refers to the period of time during which creditors can file a lawsuit to recover unpaid debt.
It’s likely that states will begin adopting different statutes of limitations for medical debt compared to other forms of consumer debt.
For example, lawmakers in Virginia recently proposed a bill that would lower the statute of limitations of medical debt to just three years — which would make it less than the 5-year statute that applies to credit cards.
Though the bill was unfortunately vetoed by the governor, it shows that some states are making progress toward greater restrictions on medical debt collection.
Protections from “Surprise” Medical Bills
As of January 2022, Americans are protected by the No Surprises Act. This legislation protects against surprise medical bills. For example, if you received care at a medical facility, you may not have been aware that it was out of network, leaving you on the hook for the cost.
⚕️ As long as you have health coverage, the No Surprises Act (NSA) protects you from surprise out-of-network costs, including those incurred for emergency and supplemental medical care. If you receive a surprise bill from your insurance provider, you can appeal this decision — and this can prevent you from getting into medical debt.
👉 What if you’re uninsured? The NSA requires that caregivers provide you with a “good faith” estimate before administering care. Once you receive care, you should receive a bill within 120 calendar days. If the final total is more than $400 over the initial estimate, the NSA provides for a dispute resolution process.
Medical Debt Does Less Damage to Your Credit Score
Did you know that medical debt under $500 doesn’t appear on your credit report? As of July 2022, the three major credit bureaus — Equifax, Experian, and TransUnion — announced that low amounts of medical debt will no longer appear on consumer credit reports.
The same announcement also changed the reporting window. Medical debt is not reported as overdue for one full year. And that’s if your medical provider reports your debt at all. Many healthcare facilities don’t bother reporting your debt to the three major credit bureaus, shielding you from damage to your credit history.
The same can’t be said for credit card debt or personal loans. Credit card debt can lower your credit score, especially if you’re unable to make on-time monthly payments. And even if you pay your personal loan in a timely manner, it can alter your debt-to-income ratio.
Carrying excess debt can jeopardize your eligibility for other types of financing, such as an auto loan or mortgage.
Alternative Ways to Pay Medical Bills
Credit cards and personal loans are not your only options when it comes to paying medical bills. Here are some ways to cover your bills safely and effectively.
Request a Discount
Hospitals and private practices deal with mountains of unpaid medical claims, which may make them more willing to negotiate a lower amount rather than risk losing the total sum. They’re actually quite used to patients asking for a discount, so don’t be afraid to call with a respectful request.
Patients are typically charged the “master rate”, which is the standard rate at which a procedure is performed. If you want to see a list of these rates, you can check out the Healthcare Bluebook and search for procedures in your area. To get a lower rate, ask for the “Medicare rate,” which your healthcare provider will already be familiar with.
👉 The exact discount can vary, but patients can expect to receive as much as 20% to 30% off of their final bill, which can make it easier to manage.
Set Up a Payment Plan
Medical providers are used to dealing with individuals who struggle to pay exorbitant medical expenses. They may be able to set up a low-interest (or even zero-interest) payment plan, allowing you to pay your bill through a series of monthly installments.
You may even be able to work out a plan that fits comfortably into your budget. Assuming the monthly payments are manageable, you can pay them automatically with your credit or debit card to ensure you make your payments on time.
Just make sure to monitor your credit card balance, or you’ll only replace your medical debt with credit card debt.
Contact a Patient Assistance Organization
If all else fails, you may want to contact a third-party patient assistance program for support. For example, the Patient Advocate Foundation is a non-profit entity that assists those with serious health conditions, helping to negotiate payment plans or discounts.
Your state government may be of assistance in connecting you to agencies that offer assistance with medical debt. You can find your state’s social service agencies through the online directory.
📚 Learn more: There are several places to look for help with your medical bills.
Stay in Control of Your Debt
While it may be possible to use a loan or credit card to pay medical bills, it’s rarely advisable. If your care costs more than you can manage, the above tips can provide some relief.
Be cautious. Healthcare providers often partner with third-party financing companies to offer their patients financing or even credit card plans. But some of these plans and medical credit cards can charge as much as 11.5% interest[4]. They don’t exactly qualify as low-interest financing options.
Instead, contact your provider about discounts, payment plans, or other options to help you repay your debt.
