Medical debt can be one of the costliest obligations consumers face. While something as small as a broken arm can run an uninsured household hundreds of dollars, more serious ailments and accidents can cost tens of thousands of dollars. To make matters worse, millions of individuals lost their health insurance as a result of layoffs, leaving a significant number of Americans in financial jeopardy.
While a $40,000 medical bill can be daunting, Americans have several paths they may follow to cut down their costs. First, it’s crucial to try to negotiate with the hospital. Medical providers, similar to lenders, want to get paid for their services, and most offer consumers repayment programs that allow them to make monthly payments. In addition to signing up for an installment program, many hospitals also provide financial assistance programs to those with limited income or facing financial hardship. It may be helpful for families who are seeking care to research the different hospitals in their area. This may alert them to different programs that best accommodate their needs.
Adults who lose their job and collect federal or state unemployment insurance for 12 consecutive weeks may qualify to use funds from their individual retirement accounts to cover healthcare costs. Those who use IRA withdrawals to cover medical bills for themselves, their spouse or dependents will not face an early withdrawal penalty. However, they must take the distribution during the year they received unemployment compensation or the following year, and no more than 60 days after they have been reemployed. Prior to taking this course of action, adults should ensure their other payment options are exhausted. While they may not face an early withdrawal tax penalty, consumers will still be losing out on the opportunity to maximize their retirement growth if they are forced to take early distributions.
Finally, finding ways to drastically cut costs and rebalance spending may be imperative. Working with a credit counselor can help households prioritize their medical debt and organize their finances around this goal. While adults may have to make financial sacrifices during the repayment period, finding new ways to stretch their income and pay off their medical bills completely may help consumers keep their credit intact.