Living with credit

Unclear medical charges make it tough to stay out of debt

Kelly Dilworth

The other night, my husband and I pored over our budget for 2015 and carefully itemized our expenses. We had our first baby a little over six weeks ago and are now trying to make do with the tightest budget we’ve had since we were students.

After a few hours of crunching numbers and downsizing our wish lists, we finally managed to come up with a decent plan for how much to spend over the next 12 months and avoid going deeper into debt. But there’s just one problem with the modest budget we’ve come up with: We have no idea how much we owe for medical expenses from our hospital stay and we’re afraid if we overspend, we could wind up with more medical debt than we can afford.

Unclear medical charges and debt

We have yet to receive a single bill from the hospital. Based on previous experience, it could be months before we finally know how much we’ll be charged. The last time I spent the night in the hospital, for an appendectomy, I received a succession of bills that were often weeks apart, making it hard to keep up with how much I owed.

This time, I was able to get a vague idea of how much we’d have to pay since our hospital is one of the few to post a comprehensive price list online. But I still don’t know how much our insurance will ultimately cover — especially since we had to stay an extra night in the hospital after a doctor ordered a last-minute test. I also have no idea whether any additional charges that aren’t included in the price list — such as medicine that was administered in the hospital — will substantially inflate how much we owe.

An easy path to debt
In remarks to reporters last May, Consumer Financial Protection Bureau Director Richard Cordray outlined some of the problems consumers face when they’re forced to undergo treatment and aren’t told ahead of time how much they’ll have to pay. “In many ways, medical bills are unusual,” said Cordray. “When you take out a loan, typically you know how much you will owe and the interest rate you will be charged upfront. But with medical costs, you have less visibility. Costs are often unknown until after treatment.” In many cases, consumers don’t really know what they will owe until weeks or months later when they receive a flurry of bills.

That can make it tough to plan ahead if you’re trying to save up enough cash to pay for the treatment in the first place — or if you’re trying to assess how much an emergency treatment will cost. “When people fall ill and end up at the hospital with unexpected bills, they may not have the money to pay for the doctors, procedures and medicine,” said Cordray. “Sometimes insurance does not cover everything. Sometimes they do not know what they owe because of how complicated the billing process can be. Other times they may not even know they owe anything, thinking that their insurance will cover the bill.”

It’s no wonder so many people wind up with medical debt on their credit reports. According to a December 2014 CFPB study, medical debt now makes up more than half of all overdue debt recorded on people’s credit reports. Sometimes, people wind up with overdue medical debt because of a billing dispute with their insurance company. Other times, people simply can’t afford the treatment they needed.

I’m willing to bet that many consumers incur more debt than they can quickly repay simply because they aren’t given enough information ahead of time to financially prepare themselves for the charges. As a result, they’re blindsided by the bills once they finally do receive them.

In our case, my husband and I did everything we could to avoid going into debt for our routine child delivery … check that: the ordinary delivery of our extraordinary child. But since we still don’t know how much we’ll ultimately owe, we too could find ourselves battling debt we couldn’t prevent.

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  • I’m very fortunate to live in Canada, where public health care is paid by Medicare. It’s unfortunate that a lot of people end up with unknown medical bills. Healthcare is tough if you don’t have good insurance coverage.