8 Ways to Pay for Unexpected Medical Bills without Spiraling Into Debt

Out-of-the-blue medical expenses can impact anyone at any time. However, the older we get, the higher our odds we’ll face costly medical expenses that can deplete savings and throw off retirement plans.

As noted in a 2019 Hometap study on Homeowner Stress, many Baby Boomers underestimate the cost of healthcare or don’t factor it in their retirement expenses at all. It’s a risky gamble when healthcare averages out at $55,000 a year for 65–74-year-olds, many of whom are living on a fixed income after retirement. Plus, Medicare does not cover most long-term care needs.

Even if you have healthcare, the costs can add up. A visit to the ER can cost hundreds of dollars, if not more (if it’s not life-threatening, consider an urgent care center first to mitigate costs). Ongoing cancer treatments can cost thousands. Even having a baby can cost $5,000 to $11,000—significantly more if you require a Cesarean birth or there are other complications—and these costs fluctuate depending on the state.

Hit with a higher-than-average expense, homeowners face tough decisions when medical bills start showing up; many are forced to consider selling items in their homes or even selling their homes and still facing the possibility of debt.

But there is good news: you have additional options you’ll want to explore before taking these extreme measures. You may find that combining several options allow you to tackle your medical expense without spiraling into debt.

1. Dispute Incorrect Medical Charges

When you get your bill, you’ll want to first check for errors. Common billing mistakes include duplicate billing and billing for the wrong procedures. If you find errors, you’ll want to call your healthcare provider and insurer as soon as possible. Consumer Reports recommends keeping a paper trail of any interaction and, if you speak to someone on the phone, ask for the name of who you speak with and ask for a reference number.

Pros: You can avoid paying for services you didn’t receive.

Cons: The process is time-consuming. You’ll want to maintain constant communication with your provider and insurer to ensure you don’t begin receiving collection notices while charges are disputed.

2. Negotiate Your Medical Bills

Beyond potential errors, you’ll want to see if your insurer can negotiate for lower rates. You can also directly talk with your healthcare provider to see if any charges are negotiable. Do some research on the procedure(s) you received to see if there’s an average rate. This may help back up your argument.

Pros: Your provider may offer a discount for paying your bill within a certain period.

Cons: The worst-case scenario? Your provider says the bill is non-negotiable and they don’t offer any discounts for paying within a certain period.

3. Discuss Payment Plans with the Hospital

When you’re faced with a large medical bill you can’t pay at once, you’ll want to talk to your provider as soon as possible. Many will work with you to set up a payment plan that allows you to pay a portion of your bill each month.

Pros: They may have interest-free options, but you’ll want to confirm this, as well as any other fees they may add.

Cons: The provider may require you to make higher payments than you can afford. You can try and talk them down.

4. Explore Medical Credit Cards

Before you put major charges on your existing credit cards, look to medical credit cards and whether or not your provider accepts them. You’ll want to fully understand the terms of the card to see if it makes sense for you.

Pros: Depending on the bills you have to pay, you may find you can pay off your medical debt during an initial interest-free period, if the card offers it.

Cons: You may find the interest rates are still extremely high—and end up saddling you with more debt.

5. Opt for a Home Equity Investment

Unlike home equity loans, a home equity investment allows you to access a portion of your home equity in exchange for a share of the future value of your home.

Pros: Since it’s an investment, not a loan, there are no monthly payments or interest. You get the cash you need without taking on additional debt.

Cons: If you want to stay in your home indefinitely, you’ll need to settle the investment once the term is up (typically 10 years).

Compare Your Options for Accessing Equity

6. Consider a Reverse Mortgage

If you’re age 62 or older, you have the option of taking out a reverse mortgage if you plan to spend the majority of time in your home (versus a nursing home, for example).

Pros: You get immediate cash and don’t make monthly mortgage payments.

Cons: If you planned to leave your home as an inheritance, you may not be able to do so. While you don’t make monthly mortgage payments, you do pay property taxes and homeowners insurance. Whomever you are leaving your home to will need to secure funding to pay off the principal, as well as the interest and fees that accumulate each month. You’ll also want to think twice if you have someone else living with you. You cannot list anyone under age 62 as a borrower, so if you have a child, grandchild, friend, or other relative living in your home, they’ll have to pay the loan if you pass.

Because your home needs to be your primary residence, you need to consider your health. Are you paying off one major expense or do you anticipate ongoing medical issues that may require you to live at an assisted living facility or nursing home for more than one year? If the latter, your lender will consider this a permanent move and it may result in foreclosure.

What is a Reverse Mortgage?

7. Downsize Your Home

Moving from a larger home to a smaller, less expensive home can give you the cash you need to cover your medical expenses.

Pros: In addition to gaining needed cash, you may also find downsizing your home allows you to purchase a home better equipped for aging in place, such as single-floor living, guard rails, or handicap accommodations.

Cons: If you’re battling an ongoing medical condition, you may not want to add to your stress with a move. Depending on how long it takes to sell your home, you may need to continue to make payments on your medical bills while you wait for your cash.

8. Apply for a Home Equity Loan

As a homeowner, you don’t necessarily have to sell your biggest asset to get cash. If you have equity built up in your home, you may qualify for a home loan or home equity line of credit (HELOC).

Generally, a home equity loan makes more sense if you need one lump sum of money. If you had an unexpected medical expense and don’t anticipate additional charges, this may be the more attractive option. With a HELOC, you get access to cash for a set period, called the draw period. This period can last up to 10 years during which your home acts much like a credit card with you using your home equity as a source of funds. A HELOC may make sense if you know you have ongoing medical expenses, but aren’t sure of the costs.

Pros: Accessing your equity allows you to gain cash without selling your home.

Cons: With either option, your home is collateral, meaning if you can’t keep up with payments, your home and go into foreclosure. You’ll want to see if the loan will cover the cost of your medical expense and that you’ll be able to make the required monthly loan payments in addition to any remaining medical payments.

If your credit score is already negatively impacted by your medical expense, you may have a hard time qualifying for either option.

HELOCs and Home Equity Loans: What’s the Difference and is Either Right for You?

No matter how you choose to pay your bill, the key is to try to pay some portion of it. This will help you reduce the amount of interest you owe and prevent you from getting hounded by collection agencies. With each of the above options, do the math to determine which method(s) make the most sense for your finances and for your lifestyle.

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