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Don't let your hospital harm your financial health

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En español | Everyone’s heard the old adage that hospitals can make you sick. But lately more and more Americans are learning the hard way that hospitals can harm their financial health too. Medical billing errors and insurance company payment delays can be dangerous to your finances. Here’s what you can do to help protect yourself.

As the health care system has become more complex, deciphering a hospital bill has become a bigger challenge. How often have you set a hospital bill aside—whether it’s for a simple diagnostic test, a minor procedure or major surgery—assuming that your insurer will read the fine print and work it all out? Increasingly, billing errors are hiding within that fine print. And insurance companies have been known to make mistakes as well. In 2011, one in five claims was processed incorrectly by insurers, according to the American Medical Association’s National Health Insurer Report Card.

"Americans often get sticker shock when they receive a hospital bill. But patients who review their bills and ask questions can end up paying less."

– Neel Shah, founder and executive director, Costs of Care

Meanwhile, financially pressed hospitals have become quicker to refer unpaid bills to collection agencies, says Dr. Alan Balch, CEO of the nonprofit Patient Advocate Foundation. “Even a small delay in addressing an outstanding medical bill can wind up impacting your credit report.” In March 2015, amid rising concern over damage to people’s financial lives, the nation’s three largest credit reporting agencies agreed to revise their processes for addressing billing errors and resolving disputes. They also agreed to wait six months before reporting medical debts on their credit reports, which will give people more time to address these concerns.

Even with this new protection in place, there are still many good reasons to be as watchful about the financial side of your treatments as you are about the medical side. “A financial advisor can work with you to help you meet medical expenses,” says Debra Greenberg, director of Personal Retirement Strategy and Solutions at Bank of America Merrill Lynch. “But first, make sure that the amount you’re being asked to pay is accurate.”

“Americans often get sticker shock when they receive a hospital bill,” adds Neel Shah, founder and executive director of Costs of Care, a not-for-profit that aims to help patients and caregivers deflate medical bills. “But patients who review their bills and ask questions can end up paying less.” The following checklist could help you spot and prevent potential problems.

Six preventive (financial) health tips

1) Find out about the hospital’s billing practices – Do they expect payment in 30 days? 60 days? Be sure to ask if any doctors involved will be out-of-network, including those you may not think about or even encounter in person, like radiologists and pathologists. “Gather cost information in advance by asking for an estimate for the procedures you’re about to have and compare this to your health plan’s deductible and out-of-pocket maximum,” says Balch. “Knowing all this detail up front can help you anticipate your expenses and avoid unexpected bills.”

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2) Ask for an itemized bill – When you get it, double check the charges to make sure they’re accurate. “If a bill is incorrect and it’s sent to your insurance company, you may end up having to pay more,” said Pamela Banks, senior policy counsel for Consumers Union. Or there might be a delay in payment that could cause the hospital to send the bill into collection. Often it makes sense to reach out directly to the insurance company, notes Greenberg. “Sometimes a bill is coded incorrectly, and if you get the insurers involved, you can have it straightened out.” She adds that on a bill she recently received, two digits in her member number were transposed, resulting in higher charges—until she successfully contested them.

3) Negotiate – This applies even if you have insurance. “If there is a remaining balance after the insurance kicks in, it’s an appropriate thing to do. And whatever you do, make sure you get it in writing,” says Banks. Most hospitals will allow patients to pay off their bills monthly on an extended payment plan, which typically lasts 24 months, but “negotiate a longer term if you think you need it,” says Banks.

4) Use credit cards sparingly – In particular, avoid “health care” credit cards that may have high interest rates, advises Banks. “Instead, use a general purpose card with a low rate. And if you plan to negotiate your bill, be sure to do so before putting the charge on a credit card.” Otherwise, “you lose your leverage. They have their money, so they have no interest in reducing the amount.”

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5) Monitor your credit report – This is always a smart idea, and even with the credit bureaus pledging to revise their processes, it still makes sense to double check that an unpaid or disputed medical bill hasn’t been reported in default by mistake. An easy way to do that is by using AnnualCreditReport.com. You’re entitled to a free report from the three major credit-reporting bureaus—Experian, TransUnion and Equifax—every 12 months. “Instead of asking for reports from all of them at once, stagger your requests so that you can get a free report every four months from a different one of the bureaus,” says Banks.

6) Never ignore a medical bill—even if it’s clearly incorrect – “It won’t go away on its own,” says Mark Rukavina, principal at Community Health Advisors in Chestnut Hill, Massachusetts. “If the hospital doesn’t hear from you, it will send the bill to collection.”

Learn more and take action

Ask your financial professional the following questions:

  • Is there a way to estimate what my future health care costs might be?
  • I’m worried about my parents’ ability to keep up with their medical bills. What are some ways I can help?
  • Are there ways I could cover a large medical expense without selling investments?
 
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