How Does Medical Debt Create Prolonged Financial Problems?

NPR approximates that over 100 million Americans grapple with medical debt, hindering financial progress. Surprisingly, having insurance doesn’t entirely resolve the issue. Whether insured or not, the financial repercussions of medical debt persist. 

Despite the absence of a definitive solution from the government and business sectors, this article will delve into how medical debt perpetuates enduring financial challenges for Americans. 

Eviction and Foreclosure 

Housing, a fundamental necessity, suffers when medical debt strikes, compounding financial woes. Homelessness due to medical debt forces individuals to confront the dual challenges of securing shelter and settling bills. A survey reveals that 1 in 12 Americans with medical debt lost their homes due to foreclosure or eviction, underscoring the severe impact on people’s cherished residences. Given the current affordable housing crisis, losing one’s home contributes to both financial and psychological instability. 

Lawsuits 

Legal proceedings in the US are costly, and incessant calls from collections agents become more burdensome when compounded by healthcare providers’ lawsuits. Medical debt lawsuits further drain those already financially strained. Despite regulations against some hospital lawsuits, not all adhere, exacerbating the financial strain on individuals. 

Bad Credit Score 

Those grappling with medical expenses not only face immediate financial concerns but also endure lasting issues such as damaged credit ratings and diminished savings, per the Commonwealth Fund. A substantial medical debt on your credit history significantly impacts your credit score, limiting opportunities for future loans and financial flexibility. The inability to use credit cards compounds the challenges posed by medical debt, marking individuals as less favorable borrowers. 

Offer incentives – One technique to acquire payment, particularly when granting financing, is to offer a discount if the debt is paid off on time or earlier. 

• Clarify penalties – Customers should be aware of when and how much they will be fined for paying late. If you have a pre-determined collections policy, explain it clearly in your agreement so that clients are aware that their past-due account will be referred to collections at some point.

Bankruptcy 

Facing relentless litigation over medical debt often drives individuals to seek solvency through bankruptcy. One in eight adults with medical debt resorts to bankruptcy, jeopardizing efforts to rebuild credit scores and relying solely on the support of friends and family. 

Rationing Health Care 

A study by the Urban Institute establishes illness as the foremost predictor of medical debt at the county level. Consequently, individuals in medical debt must ration healthcare due to financial constraints. Two-thirds of Americans with medical debt admit to limiting healthcare access due to affordability issues, leading to enduring health problems and financial hardships. 

Your firm will determine whether to negotiate with your customer or send the account to collections. Sometimes, it’s best to negotiate first, especially when a relationship is at stake. However, determining the best time to negotiate can be difficult because you don’t want to fear that your customer will take advantage of more relaxed payment conditions. Here are some things to think about: 

Conclusion 

For healthcare institutions seeking to recover long-standing medical dues, the challenge is formidable. Engaging a third-party debt collection agency emerges as a prudent option in such circumstances.