New Study Shows Number of Americans with Past-Due Medical Debt Down 6%

Fewer Americans are struggling to pay back medical debt.

The rate of American adults aged 18 to 64 with past-due medical debt dropped from 29.6% to 23.8% between 2012 and 2015, according to new study released by researchers at the Urban Institute.

Not surprisingly, people who did not have insurance were more likely to say that they currently had unpaid bills from a health care or medical service provider (a rate of 30.5%). But with the rise of high-deductible health plans, even people who have insurance find themselves in medical debt — 22.8% of insured consumers had past-due medical debt, according to the study.

When researchers looked at past-due debt by region, the differences were particularly staggering. There was “enormous variation across states,” according to Senior Research Associates Kyle Caswell and Michael Karpman, who authored the study.

Eight of the 10 states with the highest rates of past-due medical debt were in the South, including Mississippi, Arkansas, West Virginia, South Carolina, Kentucky, Oklahoma, Alabama, and Georgia. The other two were midwestern states Indiana and Missouri.

The researchers could not point to a solid conclusion as to why Southerners were harder hit by medical expenses.

“Of course we would like to understand better why, but it does give us a starting point for asking questions as to why the population differs from state to state,” said Caswell.

Why are rates of past-due medical debt dropping? It would be easy to conclude that the drop is due to the implementation of the Affordable Care Act. People today are simply more likely to have insurance, as the rate of uninsured Americans has fallen from 16.6% to 10.5% since the implementation of ACA in 2013, according to the Kaiser Family Foundation.

But Caswell and Karpman said it would be a stretch to give all the credit to the expansion of health care under the Affordable Care Act. The steady drop in unemployment and a general improvement of the U.S. economy over the last few years could also play a role, making it more likely that people can afford to cover out-of-pocket medical expenses.

As the Urban Institute’s report found, simply carrying health insurance isn’t enough to protect consumers against unexpected medical bills. Their findings are bolstered by a recent report by the Kaiser Family Foundation, which found 70% of people with medical debt also have insurance, mostly through employer-provided plans.

How to Tackle Unpaid Medical Debt

In just moments, an unexpected medical emergency can put the average American family in thousands of dollars of medical debt. That can pose a burden, considering about of 47% Americans would struggle to scrape together $400 in case of an emergency according to the Federal Reserve’s 2016 Report on the Economic Well-Being of U.S. Households.

Families with medical debt say the debt undercut their ability to save and afford basic household needs, the Urban Institute’s study found. To cope, families may rely more on credit cards and other forms of debt to make ends meet.

According to the Consumer Financial Protection Bureau, outstanding medical debt makes up more than half of all collection notices on credit reports. Past-due medical debt can seriously harm your credit score. If bills go unpaid for long enough, consumers may wind up facing a lawsuit or even bankruptcy.

To help avoid these types of consequences, follow these tips to tackle medical debt you can’t afford to pay:

Ask for a detailed billing statement and check for errors

You may receive a billing statement from your insurer or medical provider, but it may not give the full picture of services you received. Request a detailed, line item statement and review it carefully for any errors. It’s possible you could have received treatment from an out-of-network doctor without your knowledge. Or, there may be duplicate charges or charges for care you didn’t receive. If you find errors, contact the provider directly and have them corrected and a new statement sent.

Negotiate with your medical provider directly

You might be able to negotiate down your medical debt or arrange a payment plan with the medical provider, whether it’s your doctor’s office, a hospital, or your insurer. Along the way, keep careful records of who you talk to and what was said. Here’s a step-by-step guide on how to negotiate a medical bill with a health insurance company.

Try a 0% APR credit card

If your bill isn’t overwhelmingly large, you could try paying the debt off with a credit card with an introductory 0% interest period. Since you won’t be charged interest, you’ll pay less over the period. Before you apply, make sure you’ll be able pay off the balance before the 0% interest introductory period expires.

Pay off medical debt with a personal loan

If you’ve been unable to negotiate or you are struggling to find a 0% APR credit card deal, a personal loan may be another option. Depending on your credit history, rates on personal loans range from 4.7% to 36%. We’ve pulled together a list of six great personal loan options here.

Negotiate a settlement with a collection agency

Past-due medical debt eventually gets charged off and sold to a collection agency. But that doesn’t mean your window to negotiate has totally closed. If you have access to enough cash, ask if you can settle the debt for a lesser amount and forgive the remaining balance. Just be aware that forgiven debts can be treated as taxable income in some cases.

Seek help from a medical billing advocate

If you’ve been unsuccessful in trying to negotiate down your medical debt, the debt has significantly damaged your credit, or you are on the brink of filing bankruptcy, consider reaching out to a medical billing advocate. Don’t confuse these advocates with debt settlement or repair firms, which should be treated with caution.

You can find a medical billing advocate through the National Association of Healthcare Advocacy Consultants or the Alliance of Claims Assistance Professionals. These services aren’t free, and whether or not it makes financial sense to hire a pro depends on how much money you stand to save by lowering your debts. Advocates typically charge either a flat fee or a percentage of your savings.

Look for a charitable foundation that can help

You may want to consider reaching out to a nonprofit for assistance. If you were diagnosed with a particular condition, look toward organizations such as the Lupus Foundation of America for individuals with lupus or the American Kidney Fund for those with kidney disease. You can also apply for grants from nonprofits that provide more general assistance such as the Patient Access Network and the HealthWell Foundation, which may be able to grant funds toward medication assistance or other medical costs. With these foundations, limits for assistance may depend on your diagnosis and other factors.

Consider bankruptcy as a last resort

If the debt is more than 50 percent of your annual income, bankruptcy might be a viable move to make. Let the hospital know you’re considering bankruptcy first, as they may then be open to negotiation. Be aware the filing bankruptcy can adversely impact your credit for years after the fact.

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Facing a Medical Debt Lawsuit? Take These 10 Steps First

If you’ve ever been sued by a debt collector or service provider over medical debt, you know how stressful it can be. If you couldn’t afford to pay the original debt, you likely still can’t afford it. And if you want to defend yourself, you’ll have to face the additional time and cost of going to court, too.

You should know that you’re not alone. According to staff attorney Chi Chi Wu of the National Consumer Law Center, when you look at debt collection items on credit reports in America, “half of those items are from medical debt. Not credit cards. Not auto loans. Medical debt.”

You may be tempted to ignore the suit since you know you can’t pay, but Wu advises against inaction.

“Always show up,” she says. “Never ignore a lawsuit. If you ignore it, the debt collector or service provider on the other side automatically wins by default.”

What happens when you show up, though? Here are four steps to take if you’re facing a medical debt lawsuit.

  1. Find Out Where the Debt Comes From

You cannot properly address your lawsuit if you don’t understand where the debt comes from. If you look back at your past bills, you should be able to find a date of service and itemized list of services rendered with associated costs.

You may be in debt because you’re uninsured, but even insured patients end up in this boat thanks in part to a rise in high-deductible health plans. Mistakes can happen as well. If a patient visits an in-network hospital, but is unknowingly seen by an out-of-network doctor, they can be charged out-of-network fees. Doctors are independent contractors, so while the hospital may be affiliated with your insurance company, that doesn’t mean your service provider is inherently in-network.

2.Don’t ignore the lawsuit

In most consumer debt cases, consumers don’t have an attorney at all. But hiring an attorney to advise you can be a wise move. It doesn’t have to cost a fortune either, Wu says.

Most lawyers will provide a free consult before taking you on as a client. In this consult, they may be able to help you find your bearings so you can represent yourself.

Wu recommends seeking help from the Legal Services Corporation, a government-supervised nonprofit that provides legal representation at a low cost to low-income households. You can also seek help from nonprofit legal assistance firms in your area.

If you’re uninsured, one way to keep the case from going to court is to contact the doctor or debt collector immediately to negotiate your bill down to Medicaid/Medicare prices — which are often 2-3 times less than that of the gross price you were billed. When a provider refuses to negotiate down to these lower rates, it is called “discriminatory pricing,” and your legal counsel may recommend using it as a defense in court.

  1. Prepare for Court

The first thing you must do is prepare an answer to the lawsuit, including any defenses or countersuits that you want to raise. This will involve filing paperwork at the court, mailing paperwork, and showing up on your initial court date. Again, it’s advisable to get a lawyer to help you through this, or at least get a consult. The National Association of Consumer Advocates has a helpful video explainer on preparing to defend a medical debt lawsuit.

It’s important to make this initial court date. It is very unlikely the judge will grant you a continuance that would move the court date further out.

There are some exceptions to this. If you are being sued in a state in which you no longer reside, it’s easier to mount a defense if you can’t appear in court. In fact, appearing in court could work against you, demonstrating to the court that you have no problem traveling to and from court out of state.

If you’ve been served in a state outside of your own, it is very important to get legal representation.

This is because you must answer the suit, but you must also do so in a way that does not imply that you are submitting to that court’s jurisdiction over you. The process is one that is best handled by someone trained in law.

After you answer the suit, the court will set a date for the discovery part of the trial. You will have to file more paperwork with the court before this date so that you are able to present evidence that you are not liable for the debt.

  1. Understand Wage Garnishment

If you are found liable for the debt, or you fail to answer the lawsuit and the judge rules against you, the court may issue an order giving the lender or collection agency the ability to garnish your wages. By federal law, they cannot leave you with less than 75% of your income or $217.50 per week — whichever is greater. State law may protect you even further.

Medical debt collectors are able to garnish your wages, but they cannot garnish Social Security benefits, disability insurance payments, unemployment insurance payments, VA benefits, pension distributions, child support payments, or public assistance benefits. If you have any of these forms of income, it’s wise to set up a different bank account where those funds are deposited and keep all garnishable wages in another separate account.

You should do this because a court order can go after your bank account balances, too. While that doesn’t make it legal to take money that came from any of these protected sources, separate bank accounts will make the incidence of errors smaller — saving you headaches and potential victimization.

  1. Understand Your Rights Before You go to Court

When it comes to medical billing and debts, you do have rights as a patient. Make sure you understand them so you can lower or eliminate your bill before or after you’ve been sued.

Were You Served Properly?

Sometimes wages are garnished before the plaintiff is even aware that there’s a lawsuit against them. This happens most commonly when you’re improperly served. Examples of using “improperly served” as a legal defense include papers being only mailed to you and not delivered in person, papers being left at an incorrect residence, or papers being mailed to an old address. Being “improperly served” does not mean that the papers were left with a family member or friend at your residence and they forgot to tell you about it. If that happened, you’re still on the hook.

If you have been improperly served, or if you find out that the court mistakenly started garnishing wages because you have the same name as an actual plaintiff, you should contact a lawyer immediately to figure out what possible recourses there may be for your specific situation.

  1. Get Low-Cost or Free Help from Financial Assistance Programs

In 2016, about 58% of community hospitals in the U.S. were not-for-profit, according to the American Hospital Association. This gives them tax-exempt status, but also obligates them to give back to their communities. Under the Affordable Care Act, these hospitals must provide some type of financial assistance program to low-income patients. Even if you aren’t from a low-income household, you should apply, as some hospitals extend their programs far beyond the poverty line. Many hospitals also extend this program to insured patients.

These hospitals have an obligation to let you know about their financial assistance programs within four months of when your bill has been issued.

You have until eight months after the initial bill was issued to apply for financial assistance. You have the right to do this even if the debt has been sold to a third-party collector, and even if that collector is the one suing you in court.

  1. Be Aware of Discriminatory Pricing

We’ve already touched on the fact that you can try to negotiate your medical bills down to Medicaid/Medicare prices. If you are being sued in court and are uninsured, discriminatory pricing can serve as a defense. If you qualify for the hospital’s financial assistance program, they legally must reduce your bill to the amount generally billed to insured patients.

  1. Look Out for Balance Billing

Balance billing happens when your hospital or medical provider bills you instead of or in addition to Medicaid or Medicare. It’s a forbidden practice, and you are not responsible for any amounts due when this happens.

You may be able to identity balance billing if you receive an “Explanation of Benefits” from your insurer that states the amount they covered and the amount you still owe. If this does not match the bill your medical provider sent you, there is a cause for concern. Additionally, if the bill you receive does not show any payment from your insurance when you are, in fact, on Medicaid or Medicare, it may be a sign that you are a victim of balance billing.

  1. Stop Lawsuits Before They Begin

If something about your bill doesn’t look quite right, there are ways to reduce it to its fair amount.

First of all, make sure the hospital didn’t make an error that resulted in a larger bill. One way this could happen is if something they did caused you to have to stay in the hospital an extra night, inflating your costs beyond what they should have been originally.

Another good avenue to pursue is to have your bill examined by a medical bill advocate. They’re familiar with coding and laws that you’re not, making them the perfect people to review your charges. You may find one in your community by asking around, or you can start your search with the National Association of Healthcare Advocacy Consultants.

Debt collectors, hospitals, and other medical providers don’t want to take you to court. It costs them money, and the odds of them actually getting a full payment at that point are very low. They are almost always willing to work with you before issuing a lawsuit. Negotiate. Apply for financial assistance. Set up zero-interest payment plans directly with your health care provider.

Keep the lines of communication open so that no one ends up with the additional costs of litigation.

  1. Weigh Bankruptcy

At any point in this process, you can choose to file for bankruptcy. Filing for bankruptcy may alleviate the medical debt. Just be cautious. Bankruptcy is not a decision that should be made lightly, as it will remain on your credit report for up to 10 years and make it difficult to qualify for new credit.

There are two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 7 requires you to sell off all of your assets to settle what you can of your debt obligations. If you don’t have any or many assets, that aspect of it doesn’t matter much. What will matter is that the debt will essentially disappear after you file.

If you file for Chapter 13, you do not have to sell off any assets, but the debt won’t disappear either. Instead, you’ll be put on a 3-5 year payment plan in order to settle.

This may make sense if the court has already issued an order against your wages, but at any other point in your case, it would make more sense to try to set up a payment plan with the medical service provider or debt collection agency directly. Their last resort is wage garnishment. Don’t let it get that far. Know your rights so you can negotiate with them effectively rather than damaging your credit report through Chapter 13 bankruptcy.

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5 Ways to Avoid a Ridiculously High Medical Bill

high-medical-bills

Of all the things that are stressful about personal finance, medical bills might be the worst.

The events leading up to medical bills are difficult if not impossible to predict. On top of that, healthcare pricing is inconsistent, medical bills are often inaccurate and a lot of people have trouble understanding their health insurance coverage. And if you think it’s something you don’t need to worry about, consider this: About a quarter (26%) of people ages 18 to 64 said they or someone in their home had trouble paying medical bills in the last 12 months, according to a nationally representative survey conducted by the Kaiser Family Foundation and the New York Times from Aug. 28 through Sept. 28, 2015.

Medical expenses are undeniably burdensome and difficult to plan for, but that’s exactly why it’s important to try. We asked some medical billing experts to share their top tips for consumers who want to be prepared for whatever their healthcare providers send them in the mail.

1. Know Your Coverage — & Prioritize Health Savings

Managing medical expenses starts before you get sick or injured. The first place to direct your attention is your health insurance.

“Know your insurance policy inside and out,” said Sarah O’Leary, founder and CEO of ExHale Healthcare Advocates. “The best way to avoid getting overcharged is to know your coverage! Demand 100% of the coverage you’ve paid for – nothing less.”

Even with insurance, you’re likely to have some responsibility for the bills. You can work healthcare costs into your monthly budget, allocate some of your savings for unexpected medical bills or use a tax-advantaged tool like a flexible spending account (FSA) or health savings account (HSA) to cover such bills. (You can find a everything you need to know about HSAs right here.) 

Remember to re-evaluate your coverage and review your health insurance contributions (noted in your paycheck) during open enrollment to make sure your policy suits your needs and your budget. A thorough understanding of your insurance coverage and what you need to save to cover the gaps can make it much easier to absorb the costs of any future medical bills.

2. Get Everything in Writing

When it comes time to actually go to the doctor, ask a lot of questions and get as many details as possible before receiving any treatment. Just like anything else you spend your money on, getting quality, affordable healthcare requires some legwork on the part of the consumer.

“Shop around the cost of your care,” O’Leary said. “An MRI on one side of Main Street might be $3,000, and on the other $300. You can save thousands by shopping around all aspects of your care – doctor visits, lab work, tests, and the costs of non-emergency procedures. Even shopping prescription drug costs can save you money. Negotiate the price with your healthcare provider(s) and get the agreed upon amount in writing.”

Adria Goldman Gross, who runs MedWise Insurance Advocacy in Monroe, New York, also emphasized the importance of written estimates: “Whatever agreed fee amount you have with your medical provider, make sure you have it in writing.”

And as important as it is to get as much information as possible from potential providers, don’t forget to run things by your insurance company. “Make certain you have all necessary pre-approvals from your insurer prior to the test/procedure,” O’Leary said. “If you don’t get proper approvals, the insurer may refuse to pay the claim.”

3. Double Check the Bill

Once you’ve gotten treatment, pay close attention to the paperwork.

“About 80% of all medical bills have errors,” Gross said. (O’Leary said about 60% to 80% of bills have errors.) “I recommend people examine them thoroughly and make sure that they’re not overcharged. On the internet, with some research, people can find usual, reasonable and customary charges for the procedure codes of which they are being billed.”

4. Ask for a Payment Plan

The minute you get an accurate medical bill and realize you can’t afford it, reach out to the healthcare provider.

“In most cases, the healthcare provider will be open to setting up a monthly payment plan with the patient,” O’Leary said. “It doesn’t do them any good to have a patient file for bankruptcy, nor is it to their advantage to hand it over to a debt collections agency.”

5. Make a Backup Plan

If for some reason you can’t work out a payment plan or your budget or emergency savings aren’t enough to help you cover a medical expense, you could consider using a balance-transfer credit card to cover the bill. These cards tout 0% introductory annual percentage rates (APRs) that let you skip the interest for a set period of time. Another emergency funding option? A low-interest personal loan. You can learn more about their pros and cons in our loan learning center

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5 Health Apps That Can Save You Time & Money

Need to vet a doctor? Schedule an appointment? Monitor your diet? These health apps can help.

For many, healthcare costs are higher today than ever before, leaving many savvy people seeking out resources for saving money and time while addressing their health and wellness. Fortunately, with so many free and cheap health management apps available for download on your smartphone or tablet, the information and resources you need are now more accessible than ever before.

Remember, these apps aren’t meant to take the place of medical care, but they can provide supplemental assistance when it comes to vetting doctors, making appointments and managing your diet and exercise regiment. 

With that in mind, here are five money- and time-saving health management apps you can consider using.

1. ZocDoc

Cost: Free

How much time have you wasted trying to find a medical professional who is within your insurance network and has great reviews? Now, you can make finding a new healthcare specialist easier and faster with ZocDoc. This innovative app allows you to search a desired area for doctors and specialists — and you can filter based on reviews, location, insurance network, and more. Plus, once you find the right specialist for your needs, you can even book your appointment through the app and access any necessary paperwork you’ll need to fill out before your appointment.

2. iTriage

Cost: Free

iTriage was created by two emergency room physicians, and aims to help users get a better idea of what their symptoms may be caused by. Essentially, users can enter the specific symptoms they’ve been experiencing and receive a list of potential ailments or other medical issues that could be the cause. Again, this app is not meant to be used in lieu of seeing a doctor for an official diagnosis or treatment. Instead, the app will help you find a doctor or facility in your area who can treat you. Plus, it can tell you the nearest local urgent care or ER facility if needed.

3. LoseIt!

Cost: Free

LoseIt! is a great app for tracking your daily calorie intake, as well as your energy expenditures through exercise and other activities. It even features a handy scanner that allows you to simply scan a food label barcode with your phone and then automatically enters nutritional facts to your daily log. There are also some fun user challenges and contests to help you stay accountable and continue pursuing your health and fitness goals.

4. Doctor on Demand

Cost: Free, but you’ll pay $49 for any video doctor visits you opt for

Have you ever had a question for your doctor but had to wait until your next physical or other appointment to bring it up? With Doctor on Demand, you’re never more than a few taps away from speaking one-on-one with a licensed doctor, pediatrician, or even a psychologist. These specialists can talk with you about your symptoms and even write prescriptions over the phone without you having to leave your home for an appointment. The app itself is free, but be aware that you will be charged for each “visit” with a licensed specialist.

5. Fooducate

Cost: Free

Want to make smarter choices when it comes to your diet and food intake? If so, and if you’re not sure where to start, Fooducate is a great resource. This app can provide you with everything from the calorie content of a particular food to a breakdown of the macro- and micro-nutrients. It also has a handy feature that assigns each food a “grade” from A to D, so you can get a better idea of the nutrition of the food you eat and make smarter decisions.

Health & Money

These are just a few of the health management apps out there that can save you precious time and money. Remember, of course, to read the fine print of any app you’re considering closely so you know, among other things, whether the app collects any data, how it might be stored and what actions in the app may have charges associated with them.

Keep in mind, apps are just one way to potentially improve your wellness and lower healthcare costs. You can find tips for improving your eating habits, for example, on the Centers for Disease Control and Prevention website.

If you already have medical bills, there are some steps you can consider taking to address them more readily. For instance, you could ask the provider for an itemized bill so you can confirm the charges. You can also try negotiating with a doctor’s office for a lower payment (here’s some tips for how to do so.)

Remember, unpaid medical bills can go to collections and do some big damage to your credit. You can see how any medical debts may be affecting you by viewing two of your free credit scores, updated every 14 days, on Credit.com. 

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CFPB Sues Firm for Allegedly Scamming 9/11 First Responders

RD Legal, a settlement advancement company, has been accused of pushing expensive products on NFL concussion victims, as well.

A firm accused of scamming 9/11 first responders and former NFL players into giving them large chunks of their compensation funds via costly advance payment deals has been sued by federal and state authorities.

RD Legal Funding, based in Cresskill, New Jersey, was sued by the Consumer Financial Protection Bureau and the New York State Attorney General’s office, the agencies announced Tuesday. The firm is accused of persuading victims who were awaiting payouts to accept advance payments from RD Legal, then pay large fees when their settlement payments arrived.

In one case the CFPB says was typical, a first-responder victim paid $33,000 for an $18,000 advance on a $65,000 payout from the Zadroga Fund, set up by Congress to compensate 9/11 first responders dealing with high medical costs.

RD Legal also is accused of targeting former NFL players diagnosed with neurodegenerative diseases and thus entitled to payments from a class action lawsuit settlement, the CFPB said.

“It is unconscionable that RD Legal scammed 9/11 heroes and NFL concussion victims out of millions of dollars,” said CFPB Director Richard Cordray, in a press release announcing the action. “We allege that this company and its owner lined their pockets with funds intended to cover medical care and other critical expenses for people who are sick and sidelined. Our lawsuit seeks to end this illegal scheme and get money back to those entitled to receive it.”

RD Legal also is accused of telling consumers they would speed up the payout process by cutting through red tape when the firm had no ability to do so. RD Legal also allegedly failed to provide advances to consumers for months after they were promised.

“The allegations contained in that lawsuit and accompanying press statements are outrageous and without merit,” said David K. Willingham, counsel for RD Legal, in an emailed statement. “Indeed, in January 2017, RDLF was forced to take action and sued both the CFPB and NYAG for engaging in an inappropriate overreach of their legal authority and failing to engage with RDLF on basic legal issues surrounding its contracts for the purchase and sale of the legal receivables at issue in both lawsuits. The claims made today by the CFPB and NYAG misunderstand and falsely characterize clear documents with those parties as “loans,” and falsely state that RDLF is ‘scamming’ the affected parties when it did nothing more than provide immediate liquidity – in the form of an arm’s length transaction – to people who voluntarily sought the benefits of early funding.”

Alleged Actions ‘Simply Shameful’

“The alleged actions by RD Legal — scamming 9/11 heroes and former NFL players struggling with severe injuries—are simply shameful,” said New York Attorney General Eric Schneiderman, in the same press release issued by the CFPB. “RD Legal used deceptive tactics to charge unlawfully high interest rates for advances on settlement and compensation funds, allowing them to profit off the backs of these unsuspecting individuals.”

The “funding fee,” in industry language,  can often be around 100%, as it was in the examples cited above by the CFPB.

This is not the first time RD Legal has caught the attention of federal authorities. Last year, it was sued by the Securities and Exchange Commission for allegedly defrauding investors who had bought into its hedge fund, designed to raise money to make such advance payouts. RD Legal denies those accusations.

The American Legal Finance Association, a trade association that represents consumer legal funding companies, says these payouts should not be regulated as loans because they are “non-recourse transactions,” meaning there is no collateral, and there’s no guarantee that the advance will be repaid.

“Consumer legal funding is used by victims of accidents who are struggling to make ends meet while they wait for a resolution in their case who have typically exhausted other financial options and often do not have access to traditional forms of credit,” the organization says on its website. “Legal funding fills a void in the financial products arena.”

But consumer advocates say it’s critical that federal authorities regulate bank-like activities from non-bank entities.

“Gone are the days when the financial services industry was dominated by hometown banks that served customers well and gave their kids a lollipop. Today, nonbank financial companies offer products to millions of consumers,” said Rohit Chopra, senior fellow at the Consumer Federation of America, in a statement reacting to Tuesday’s lawsuit. “Americans need a strong consumer agency to restore law and order to the financial services industry. This oversight isn’t just a win for consumers, it’s a win for every lender who shouldn’t have to compete against fraudsters.”

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3 Ways to Keep Medical Debt from Ruining Your Credit

Turns out, your physical well-being isn’t the only thing at stake when you go to the hospital. So too is your financial well-being. That’s because no debt is more common than medical debt.

The numbers are staggering in their scope. According to the Consumer Financial Protection Bureau, more than half of all collection notices on consumer credit reports stem from outstanding medical debt, and roughly 43 million consumers – nearly 20% of all those in the nationwide credit reporting system – have at least one medical collection on their credit report.

Now, you might be inclined to think that because you’re young or have both a job and health insurance, medical debt poses you no risk. Think again. According to a recent report from the Kaiser Family Foundation, roughly one-third of non-elderly adults report difficulty paying medical bills. Moreover, roughly 70% of people with medical debt are insured, mostly through employer-sponsored plans.

Not concerned yet? Consider that a medical collection notice on your credit report, even for a small bill, can lower your credit score 100 points or more. You can’t pay your way out of the mess after the fact, either. Medical debt notifications stay on your credit report for seven years after you’ve paid off the bill.

The good news (yes, there is good news here) is you can often prevent medical debt from ruining your credit simply by being attentive and proactive.

Pay close attention to your bills

Certainly, a considerable portion of unpaid medical debt exists on account of bills so large and overwhelming that patients don’t have the financial wherewithal to cover them. But many unpaid medical debts catch patients completely by surprise, according to Deanna Hathaway, a consumer and small business bankruptcy lawyer in Richmond, Va.

“In my experience, it’s often a surprise to people,” says Hathaway. “Most people don’t routinely check their credit reports, assume everything is fine, and then a mark on their credit shows up when they go to buy a car or home.”

The confusion often traces back to one of two common occurrences, according to Ron Sykstus, a consumer bankruptcy attorney in Birmingham, Ala.

“People usually get caught off guard either because they thought their insurance was supposed to pick something up and it didn’t, or because they paid the bill, but it got miscoded and applied to the wrong account,” says Sykstus. “It’s a hassle, but track your payments and make sure they get where they are supposed to get. I can’t stress that enough.”

Stay in your network

One of the major ways insured patients wind up with unmanageable medical bills is through services rendered – often unbeknown to the patient – by out-of-network providers, according to Kevin Haney, president of A.S.K. Benefit Solutions.

“You check into an in-network hospital and think you’re covered, but while you’re there, you’re treated by an out-of-network specialist such as an anesthesiologist, and then your coverage isn’t nearly as good,” Haney says. “The medical industry does a poor job of explaining this, and it’s where many people get hurt.”

According to Haney, if you were unknowingly treated by an out-of-network provider, it’s not unreasonable to contact the provider and ask them to bill you at their in-network rate.

“You can push back on lack of disclosure and negotiate,” Haney says. “They’re accepting much lower amounts for the same service with their in-network patients. They may do the same for you.”

Work it out with your provider BEFORE your bills are sent to collections

Even if you’re insured and are diligent about staying in-network, medical bills can still become untenable. Whether on account of a high deductible or an even higher out-of-pocket maximum, patients both insured and uninsured encounter medical bills they simply can’t afford to pay.

If you find yourself in this situation, it’s critical to understand that health care providers themselves usually do not report unpaid bills to the credit bureaus – collection agencies do. After a certain period of time, most health care providers turn unpaid debt over to a collection agency, and it’s the agency that in turn reports the debt to the credit bureaus should it remain unpaid.

“If you can keep it out of the hands of the collectors, you can usually keep it off your credit report,” says Hathaway.

The key then is to be proactive about working out an arrangement with your health care provider before the debt is ever sent to a collection agency. And make no mistake – most providers are more than happy to work with you, according to Howard Dvorkin, CPA and chairman of Debt.com.

“Trust me, no one involved with medical debt wants it to go nuclear,” says Dvorkin. “The health care providers you owe know very well how crushing medical debt is. They want to work with you, but they also need to get paid.”

If you receive a bill you can’t afford to pay in its entirety, you should immediately call your provider and negotiate, says Haney.

“Most providers, if the bill is large, will recognize there’s a good chance you don’t have the money to pay it off all at once, and most of the time, they’ll work with you,” he says. “But you have to be proactive about it. Don’t just hope it will go away. Call them immediately, explain your situation, and ask for a payment plan.”

If the bill you’re struggling with is from a hospital, you may also have the option to apply for financial aid, according to Thomas Nitzsche, a financial educator with Clearpoint Credit Counseling Solutions, a personal finance counseling firm.

“Most hospitals are required to offer financial aid,” says Nitzsche. “They’ll look at your financials to determine your need, and even if you’re denied, just the act of applying usually extends the window within which you have to pay that bill.”

If all else fails, negotiate with the collection agency

In the event that your debt is passed along to a collection agency, all is not immediately lost, says Sykstus.

“You can usually negotiate with the collection agency the same as you would with the provider,” he says. “Tell them you’ll work out a payment plan and that in return you’re asking them to not report it.”

Most collection agencies, according to Haney, actually have little interest in reporting debt to the credit bureaus.

“Think about it,” Haney says. “The best leverage they have to get you to pay is to threaten to report the bill to the credit agencies. That means as soon as they report it, they’ve lost their leverage. So, they’re going to want to talk to you long before they ever report it to the bureau. Don’t duck their calls. Talk to them and offer to work something out. They’ll usually take what they can get.”

At the end of the day, according to Haney, most people can keep medical debt from ruining their credit by following one simple rule.

“Just be proactive,” he says.

The post 3 Ways to Keep Medical Debt from Ruining Your Credit appeared first on MagnifyMoney.

Three Brain Surgeries Can’t Keep Cancer Patient From Son’s Birth

man-with-cancer-at-birth-of-son

Cagney Wenk and his fianceé, Jessica Li, recently welcomed their son, Levon Robbie Wenk, into the world. It wasn’t all joy for the new family, however. Cagney had been recently diagnosed with inoperable, stage 4 glioblastoma, an aggressive form of brain cancer.

Already hospitalized and with three surgeries already performed, Cagney was still determined to be at his son’s birth. His nurses helped make that not only possible, but even threw in something extra special.

So on Sept. 18, when Cagney made his way from the intensive care unit at Boulder Community Hospital to the delivery room — along with his nurse and all his medical equipment — a videographer also arrived to document the occasion. Cagney’s nurses contacted Now I Lay Me Down To Sleep ― an organization that provides remembrance photography to parents suffering the loss of a baby ― to take photos of Cagney, Jessica and Levon, according to the photographer and videographer, Sarah Boccolucci, who captured the moments.

Cagney’s tears of joy as he hears his son’s cries for the first time are incredibly moving (it’s only fair to warn you that the video below will likely move you to tears).

Because Cagney is no longer able to work, the family is struggling with hospital bills. They started a donation page on GiveForward.com in hopes of raising $50,000 to help them pay the bills and for daily necessities.

Americans Still Struggle With Medical Debt

Despite national health reform, healthcare costs continue to threaten financial stability for millions of American families. There are various consequences that result from unaffordable healthcare costs. Some people simply forego recommended medical treatment because they can’t afford it. This holds true for both insured and uninsured patients. But there are also financial consequences.

A Kaiser Family Foundation/New York Times survey earlier this year found that a majority (58%) of Americans with medical bill problems report they were contacted by a collection agency for unpaid medical bills. These collection accounts can seriously affect consumer credit scores. (You can see if a collection account is affecting your credit by getting your free annual credit reports at AnnualCreditReport.com or by reviewing two of your credit scores for free every 14 days on Credit.com.)

Of even greater concern are the strategies used by people to address their medical bills. Six in ten (59%) of those with medical bill problems used all or most of their savings trying to pay these bills, about one-third (34%) took on credit card debt to do so, and about a quarter (26%) withdrew funds from a retirement or college account in order to pay.

Image: Sarah Boccolucci Photography

The post Three Brain Surgeries Can’t Keep Cancer Patient From Son’s Birth appeared first on Credit.com.

Insured Woman Gets $18K Bill for Using an In-Network Doctor

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“I’ve always paid my bills. I had excellent credit.”

That’s Nancy Gomez speaking with CBS Los Angeles about her ordeal. She’s a Californian with PPO insurance — and thousands of dollars in medical debt.

Though Gomez is fully insured, she says she received an $18,000 bill for a treatment with an Encino pain specialist in her network, CBS reports. Gomez, who went in for an epidural nerve block, received the bill a few weeks later.

Despite its shocking price tag, the bill was perfectly legal, CBS reports. Though the doctor was in-network during her initial visit, when Gomez went back to get the injection she was directed to a surgical suite, which took the physician out-of-network, the station said.

Also legal: The $9,000 bill she received for a surgery after the epidural didn’t work. Gomez says she checked that the hospital and surgeon were in her network. But an assistant surgeon and anesthesiologist who helped with the procedure did not belong to her in-network provider list.

Now Gomez is shouldering “incredible debt,” she says. And she isn’t alone.

According to CBS, one in four Americans have been hit with medical bills from out-of-network providers who offered care without disclosing their fees.

What You Can Do 

It’s important to know what you’re liable for long before the bill is in your hands. That means understanding the difference between terms like “in-network” and “out-of-network” on your insurer’s website and in your plan description, says FAIRHealthConsumer.org, a consumer site dedicated to sharing information about healthcare prices. That also means knowing which specialists, hospitals, labs, radiology facilities and more may fall under your “network” umbrella.

While many plans cover “out-of-network” care, chances are if you go out-of-network, you’ll end up paying more, says FAIR Health. Therefore, the onus is on you to find out whether providers outside your network may charge more and whether your plan may require higher co-pays, deductibles and co-insurance for this type of care. If your plan doesn’t cover out-of-network care at all, you may be left holding the money bag.

Remember, medical debt isn’t unheard of but does require research and action. If you fail to pay what you owe, your bill could could wind up in collections, which in turn can leave a negative mark on your credit report. The last thing you want to do is to lower your credit score at this uncertain time. If medical debt is weighing you down, you can see how it’s impacting your finances by pulling your credit reports for free each year at AnnualCreditReport.com and signing up for a free credit report summary on Credit.com. Working to pay the debt off? Try this handy lifetime cost of debt calculator to see how long it will take.

Image: Dutko

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When Having a Baby Traps Parents in Medical Debt

newborn-baby-feet-wideAs soon as my sister Melissa returned home from after giving birth to her son via cesarean section, the medical bills started poured in. Even with her employer-provided health insurance, she was still on the hook for thousands of dollars. Like an increasing number of Americans 40% of Americans, her plan came with a hefty deductible. She had to pay $3,000 out of pocket before her insurance even kicked in. Once she hit her deductible, she was still on the hook for 20% of her remaining fees. When all was said and done, she owed $8,800.

When she was ready to have her second child two years later, Melissa thought she was ready. She planned for a C-section and braced herself for her first post-delivery hospital bill. But even using the same insurer, she was stuck with an even larger bill than her first delivery. Her total out-of-pocket costs after insurance: $12,700.

This time around, she requested an itemized bill. When she opened it, she found charges for everything from $80 for one dose of ibuprofen to $1,800 to cover an out-of-network nurse practitioner who assisted with the delivery.

“I could have brought my own ibuprofen to the hospital if I knew it was going to cost that much,” she said. “And I never even saw the out-of-network nurse who assisted with my delivery or gave my consent to use her.”

The financial blows kept coming. Melissa realized that her insurer had billed her differently this time. Rather than treating Melissa as an individual seeking care, they automatically added her daughter to the insurance plan and based their coverage off the plan’s much-higher family plan deductible. She knew the bill was incorrect and set out to challenge the charges.

“I spent a year fighting with them and writing them letters,” she said. “I spent every lunch break on the phone with them.”

When insurance isn’t enough

The cost of childbirth in the U.S. is notoriously difficult to predict. Prices can vary from state-to-state and even from hospital-to-hospital. A 2013 Truven Health Analytics report found that average total charges for women and newborns with employer-provided commercial health insurance was $32,093 for vaginal births and $51,125 for cesarean births.

The Affordable Care Act requires maternity care coverage for patients. But the new law does not state which services have to be covered. Individual states can decide what is actually covered and insurance plans tend to be vague about prices. Add that to the fact that deductibles and copays for employer-sponsored and individual plans have been increasing and you’ve got an expensive mess.

“It’s hardly a fair consumer market,” said Suzanne Delbanco, executive director of Catalyst for Payment Reform (CPR), a nonprofit corporation pushing for greater transparency in health care quality. “You would never go into a Best Buy and choose a TV without knowing the price first.”

In addition to the lack of transparency, Delbanco said that consumers often have to share a higher portion of the cost of medical services. Over a six-year period (2004-2010) the average out-of-pocket costs for vaginal and cesarean births nearly tripled, according to the Truven report.

Even if a family knows their policy by heart, some expenses are simply impossible to control in the middle of a delivery.

“One of the biggest pieces, which is not limited to pregnancy and delivery, is surprise medical bills when there are providers inside the hospital that are not in-network,” said Dania Palanker, a Senior Counsel for Health and Reproductive Rights at the National Women’s Law Center. This practice is called “balance billing” in industry speak.

My sister had no idea one of the nurses helping her was not covered by her insurance policy. Hospital staff don’t typically stop a woman mid-contraction to call the 800 number on the back of the insurance card. The consumer rarely finds out about the extra charges until they are at home and receive their bill in the mail.

Some states now have laws that protect consumers against some forms of balance billing and several others are currently working on passing such laws. Healthcare and women’s rights advocates agree that there is still work to be done.

Carol Sakala, director of childbirth connection programs at National Partnership for Women & Families, said the Affordable Care Act could have done more to protect women from exorbitant delivery costs. “Prenatal care is a plus. No cost preventive services is a plus,” Sakala said. “But we’re still not serving women during labor and delivery.

It took my sister one year to smooth out the errors on her hospital bill after her second delivery. Fortunately, she was not stuck with the $1800 bill for her out-of-network nurse. But she still owed a total of $10,000 in bills for both children. She negotiated a payment plan with the hospital’s billing department, paying $400 per month, but it would have taken three years for her to pay it off.

She decided to get rid of her debt and move on instead. Melissa negotiated a lump sum settlement — $7000 — and agreed to pay off her entire balance at once.

“[I wanted] to be done with it,” she said.

How you can avoid sticker shock

  1. Read your policy thoroughly. Do your best to be sure everyone working on your delivery is covered by your insurance plan. Review your policy carefully as well. Some insurance plans have a guarantee built into the contract so that even if an out-of-network nurse or doctor sneaks into the room, consumers won’t be stuck with the bill, Palanker said.
  2. Shop around if you can. If you and your doctors believe you might need a cesarean section, it is possible to find estimates of how much hospitals in your area charge for the procedure by going onto their website. Also, check your insurer’s policy. They may cover your C-section entirely.
  3. Don’t accept your bill if you think it’s wrong. Medical billing errors are increasingly common, with some advocacy groups estimating they are as high as 75 or 80 percent. If you receive a bill for services that you believe are not accurate, request an itemized bill. That way you know exactly what you are being charged for and you can contest any unwarranted charges.
  4. Don’t be afraid to negotiate. Regardless of what your bill says, negotiate. Some billing departments may be willing to settle your unpaid bill for a lower amount. Insurance companies negotiate costs with the hospital all the time. My sister saved $3,000 by negotiating her bill directly with the hospital.  “It’s worth it to negotiate costs,” Sakala said.

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Want to Buy & Forgive Debt Like John Oliver? Not So Fast

When John Oliver announced Sunday night that he’d purchased medical debts as a faux collector and forgiven those debts, the Last Week Tonight host’s actions led to a serious question: Couldn’t this strategy be used on a wide scale? After all, Oliver managed to forgive about $15 million in debt for only $60,000.

It’s a clever idea that has its roots in the Occupy Wall Street movement. Back in 2012, a group calling itself Rolling Jubilee began doing precisely the same thing. It raised money to purchase debts, then told the debtors their bills were forgiven.

While Rolling Jubilee initially focused on medical debt, as Oliver did, the organization now focuses on student loan debt. It claims to have abolished nearly $32 million in debt and raised $700,000.

Oliver actually executed the debt forgiveness by transferring the “paper” to a non-profit named RIPMedicalDebt.org, which was set up to mimic Rolling Jubilee’s strategy, according to the site.

But debt forgiveness using this strategy raises many questions. Chief among them: As Oliver said, his $15 million “giveaway” was really just a drop in the bucket. The Consumer Financial Protection Bureau says that 43 million Americans have an unpaid medical bill on their credit reports. That means Last Week Tonight would have to do roughly 4,777 more episodes to help all those folks.

The Impact on Credit Scores

Debt-buying-and-forgiveness highlights some other interesting issues. As many Credit.com readers know, the real pain from an unpaid bill isn’t necessarily harassment by a debt collector. It’s often the credit score punishment that follows, which can force a consumer out of typical market transactions. Low credit scores can prevent a consumer from buying a home, a car, or even from getting a credit card.

It’s impossible to say what impact this kind of debt forgiveness would have on an individual consumer’s score — scores are calculated using multiple personal factors. But generally we know that when a debt is marked as settled, or anything other than paid in full, that’s very bad for a score. The negative impact shrinks over time, but it can last seven years. According to this chart from FICO, a settled debt can cause up to a 100-point credit score drop.

We know that the debt Oliver purchased was described on the show as “out-of-state medical debt from Texas,” meaning it was older than that state’s statute of limitations for collection — which in Texas is four years. In that case, the impact from the four-year-old-plus debts may be low, but in many cases, it will still hurt those consumers, even after their debt was “forgiven.”

There’s another silver lining about the debt Oliver purchased: Newer formulas used for credit scores, including FICO 9 and VantageScore 3.0, treat medical debts differently, so that should help some of these consumers, too. Those formulas are slowly making their way through the credit industry.

“Assuming that Mr. Oliver’s debt purchasing company reported these debts as consumer accounts to the credit bureaus, and then updated the accounts to reflect that the debts were ‘satisfied’ (for example, that the outstanding balance was zero), then there could potentially be a positive impact on the FICO Score 9 score,” Ethan Dornhelm, principal scientist at FICO, said in an email. “FICO Score 9 ignores paid collection agency accounts, and it takes a sophisticated approach to differentiating medical from non-medical collection agency accounts. This helps ensure that medical collections have a lower impact on the FICO Score, commensurate with the credit risk they represent.”

But it bears repeating: A forgiven debt does not mean there are no consequences for failing to pay the debt.

Paying Old Debt

The fact that debt-purchases-for-forgiveness often involve out-of-statute debt raises interesting questions as well. Generally, consumers have no legal obligation pay such debt. (The statute of limitations timeframe varies by state.) That’s why it is the “cheapest” form of debt for buyers (including Oliver and Jubilee) to buy. When debt buyers try to collect on it, it’s often called zombie debt, and many consumers are tricked into paying when they don’t have to.

Even a small payment towards the debt restarts the statute of limitations, so any consumer who receives a collector call should immediately identify the age of the debt and the applicable statute of limitations.

When Oliver purchased such debt, he was paying a collector who had no right to collect on it. Rainbow Jubilee faced criticism for making such payments, too, which could be seen as helping fund collectors’ illegitimate activity. And the “relief” offered to indebted consumers was already guaranteed by law.

The Tax Implications

Generally, when a debtor forgives a consumers’ debt — say, through debt settlement — the amount of forgiveness is considered income by the IRS. It can be a real kick in the teeth to consumers, who obviously are in no position to pay income tax on the amount they couldn’t pay to a debt collector. But for now, this is the law.

This is sometimes referred to as the 1099-C problem. Financial institutions must issue 1099-C forms to consumers any time they agree to accept at least $600 less than they are owed, and consumers must “claim” that amount on their tax returns.

When Rainbow Jubilee began its debt purchases, the organization said it had consulted with the IRS and was told there was no 1099-C problem. At the time, not everyone agreed. Writing on the blog NakedCapitalism.com, Yves Smith argued that many complex tax issues aren’t settled with the IRS until it makes a formal ruling, and any issues with this kind of novel debt forgiveness were unclear.

While a non-profit may not be required to issue a 1099-C for the “gift” of debt forgiveness, it’s still possible that recipients would have to declare the amount as income. Smith wasn’t saying these consumers had a tax problem, she was merely questioning Jubilee’s certainty that they wouldn’t have one.

On his show, Oliver said that RIPMedicalDebt specialized in debt forgiveness “with no tax consequences.” It is unclear how, however. The organization’s website doesn’t seem to address it. A phone call and an email to the organization were not immediately returned. (That’s not necessarily suspicious — the non-profit’s website was down Monday afternoon, no doubt because it was flooded with traffic in the aftermath of Oliver’s segment). Attempts to reach Rainbow Jubilee have been unsuccessful.

An email to Yves Smith about the issue has also gone unanswered. It’s worth noting that we were unable to find any complaints about unexpected tax issues for recipients of this kind of debt forgiveness.

Can’t Target the Benefit 

It’s also worth noting that while buying up debt for pennies on the dollar and forgiving it is definitely good news for the beneficiary, it would be very hard to “target” such debt relief to a particular person. You can’t buy a specific individual’s sold-off debt, for example. The purchases generally involve large spreadsheets with thousands of consumers’ personal information; a good amount of luck would be involved in buying a set of debts that includes a particular person you might be trying to help.

Still, Oliver’s show highlighted many of the absurdities of debt collection, and the alarming practices of some collectors – a subject we’ve covered extensively in the Credit.com Debt Collection Files.

More Money-Saving Reads:

Image: Halfpoint

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