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Settle Medical Debt: Your Complete Guide to Paying Off Medical Bills

Last updated 03/19/2024 by

Andrew Latham
Millions of people in the United States face huge medical bills. Dealing with crippling debt as well as health issues can be extremely frustrating and disheartening. The good news is there are steps you can take to get your medical bill reduced or even forgiven altogether.

Table of contents:

  • 7 steps to settling your medical debt.
  • What you should know about the statutes of limitations.
  • Medical debt and taxes.
  • Answers to commonly asked questions about medical debt relief.
Medical emergencies, illnesses, and even relatively small accidents can lead to colossal medical debt. A recent study by the Kaiser Family Foundation revealed that half of U.S. families skipped some sort of medical treatment because they couldn´t afford it.
Despite that, the United States spends the most per capita on healthcare costs (around $11,600 a year), according to a report by Johns Hopkins University. Therefore, it isn’t surprising that medical debt can sink you financially. According to Harvard Medical School, six out of 10 bankruptcies were caused by medical costs.
If you are one of the many who are struggling with a mounting pile of medical bills, don’t lose hope. Before you throw your hands up and declare bankruptcy, read on to learn more about how to settle medical debt. Let’s get started!

Key things to remember about medical debt

  • Review your bill for errors.
  • Get help as soon as possible.
  • Negotiate a reduced bill.
  • Work out a payment plan to settle the medical debt.
  • Learn how to deal with debt collectors (and get them to stop calling).
  • Prioritize other debts before medical bills.
  • Medical debt settlements may have tax consequences.

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7 steps to settling your medical debt

With a pile of medical bills and no money to pay them, you’re sure to feel your stress levels rising. Here are the first five steps you can take toward a resolution.

1. Review your bills for errors

First things first, make sure you owe what they say you owe. Billing mistakes are common, and they’re rarely made in your favor. So make sure you aren’t billed for services you didn’t receive from your service provider. This can include incorrect coding for services that could be more expensive than the actual service you received. You could also get charged for a procedure that was planned by your doctor but not performed. Duplicate charges for procedures and medication are also common.
If you come across an error, contact your healthcare provider and ask for an explanation. If you have health insurance, call them to ensure that all items were covered according to your policy. It may also save you money to hire a medical billing advocate.
To illustrate the importance of checking your medical bills for accuracy, consider this example. In 2017, a Texas doctor charged a patient $108,951 for medical care following a heart attack — even after his health insurance had paid them over $50,000. When the patient investigated their claims with the help of a medical billing advocate, they waived most of the charges. In the end, he owed only $782.29.

2. Get help as soon as possible

Whatever your circumstances, help is always available. However, ignoring a medical bill is never a good option. Medical providers are more likely to work with you on the debt — including discounting fees — if you reach out and explain your situation early on. The sooner you contact them and explain that you’re going to have some difficulty paying, the better. There are fewer options available when your debt is handed to a collections agency (more on what to in those cases below).
Call the clinic or hospital that is billing you and ask if you qualify for charity care or financial assistance programs. Just asking for this can often cut your debt in half. It is worth noting that all nonprofit hospitals are legally required to have these programs, and many for-profit hospitals have them also. Even if your income is too high to qualify for charity care, you can still get a reduction of your bill if you can show the medical bills are causing financial hardship.
It’s a good idea to compare the price you are being charged for a procedure or treatment with the average cost in your state. Websites like the Healthcare Cost and Utilization Project and the Healthcare Bluebook provide valuable data on the fair price of medical services in the United States. Use that information to negotiate a reduction if you are being overcharged. Ask how much they charge insurance companies, Medicare, or Medicaid, and request the same price.

3. Negotiate a reduced bill.

Many medical providers will offer you a discount if you show a willingness to pay and explain or prove that paying the entire balance is not possible.
Borrowers who are prepared to pay a lump sum can often negotiate a generous reduction of their medical debt. If you’re offered a 20-25% reduction on your bill, it may make sense to dip into a savings account to make the payment now.
On the other hand, if you don’t have the cash, you may consider using credit cards or getting a personal loan. If you need help finding the right personal loan to cover your bill, SuperMoney’s loan offer engine allows you to get prequalified loan offers with personalized rates without hurting your credit. However, only consider getting a loan or using a credit card if you have tried the next step. Setting up an installment plan with the medical provider is often a much cheaper way to finance your medical debt.

4. Work out a payment plan to settle the medical debt.

If it’s impossible for you to pay off the amount due immediately, explain your financial situation to the medical provider. Ask if you can stretch out payments over the next six months to a year as part of a hardship plan. There is a good chance the doctor or hospital will be willing to work with you.
Make sure you agree to a realistic payment plan you can afford — they will be less likely to give you a break the second time. If you find that you can’t make a payment, call to inform the medical provider and renegotiate your payment plan.

5. Learn how to deal with a debt collector

If you don’t pay your medical debt, it will be sent to a debt collection agency which is a situation you don’t want. Collection agencies report to credit reporting agencies, which can cause a drop of 50 to 100 points on your credit score. Negative items like this can remain on your credit report for up to seven years. But if your debt has already been sent to a collector, don’t panic — there are still steps you can take.
  1. First, find out if your bill has passed the Statute of Limitations (SOL) — Research the period during which the lender can still take you to court to collect payments. This period usually spans three to six years, depending on your state, and starts when your account becomes delinquent.
  2. Ask the debt collector to provide you information on your debt. By law, the collector should provide you with this information within five days of contacting you. Ask for: The name of the company you owe, how much you owe, and the address and name of the original company you owed (if different from the current one).
  3. Make a realistic payment proposal. Be realistic about how much you can pay each month. You don’t want to fall behind on other bills or student loans in your efforts to repay a medical bill in collections.
  4. Offer a lump-sum debt settlement. Debt collectors are usually willing to accept a fraction of the total amount due to settle the entire debt. Start with a low offer. A lump sum for 25% of the original bill is often reasonable. Note that when you settle, the item will still appear on your credit report (as settled for less than the full amount) but will come off in seven years. You may want to enlist the help of a debt settlement company to help you get the best deal.
  5. Record your agreement. Whether it is a repayment plan or a lump-sum settlement, make sure you get the agreement in writing before you start making payments.

Why is it important to know whether you’re within the statute of limitations?

If you make a partial payment at any point, the countdown for the statute of limitations starts over. Therefore, if you make a payment or agree to do so after the SOL has run out, you may still be held accountable for the entire amount owed. For that reason, you should confirm that you’re still within the statute of limitations before you make any payments.

6. Prioritize other debts before medical bills

If you can’t afford to pay all your bills, pay your mortgage and high interest debt first. Medical bills are not as urgent as other forms of debt, such as your mortgage, car payments, or credit cards. To start with, medical debt usually has a lower interest rate and it is not as damaging to your credit score. This is because credit score algorithms weigh medical debt differently than other sources of debt. It also takes longer to appear on your credit report because federal law requires credit reporting companies to wait until medical debt is at least six months late before it can appear on your credit history.
The idea is to give consumers a chance to negotiate with hospitals and doctors without getting a hit to their credit score.

7. Don’t forget the IRS considers forgiven debt as “income.”

Something to consider when negotiating a medical debt settlement is that the IRS considers forgiven debts as income. If a chunk of your debt is forgiven, the company will have to file a 1099-C cancellation of debt form. That amount will be considered income, which means you may have to pay taxes on it.
If a company files a Form 1099-C, you should get a copy. But don’t assume they haven’t just because you didn’t receive one. If you don’t list the income on your tax return and the company reports it, a tax bill or audit notice could be on the way.
The good news is the IRS may waive the taxes on the forgiven debt if you were insolvent when the debt was forgiven. Insolvency means having more debts than assets. So if you received a debt settlement and you figure you had more debts than the value of your assets, include a completed IRS Form 982 with your tax return.
  • You may be able to negotiate a discount if you are ready to pay a lump sum.
  • Medical debts are usually not final. Hospitals are often willing to negotiate your medical bills if you don’t have insurance or are facing financial hardship.
  • Medical debt is not as urgent as other sources of debt and it won’t hurt your credit score as much as late payments on a mortgage or credit card.
  • Debt settlement firms can help you negotiate with healthcare providers.
  • There are government, state, and private financial assistance programs for people who can’t afford their medical debts.

Commonly asked questions about medical debt relief

What is the minimum monthly payment on medical bills?

There isn’t a minimum payment for medical bill payment plans. Unlike other types of debt, medical debt provides plenty of room for negotiation. As long as you agree to pay something and you can prove real financial hardship, you can often make small payments. Since so many people file bankruptcy because of medical debt, it’s often in the best interest of the doctor’s office to work with patients to maximize how much they can collect. If you do file bankruptcy, they may not get anything.

Should I use credit to pay medical bills?

Acquiring some credit card debt or loans to pay off medical debt may be the best solution in some situations.

Credit cards

Credit cards can enable you to split up the cost over a longer period of time. Plus, if you can find a credit card offer with a promotional 0% APR introductory period, you can split up the payments without interest costs. Typically, credit card bills only require you to make a minimum payment which can be less than the minimum payment demanded by the medical provider. However, whether this option is a good option for you will depend on your financial situation and whether you can qualify for a low interest credit card.


As for loans, they often come with lower interest rates than credit cards, so they are also an option to consider. If you can get approved for a good deal, it may enable you to split up the medical costs on a schedule you can afford. A good place to start the search is with your banking institution. Supermoney can then help you compare various options within minutes to find the best possible deal. If you can’t get approved, you may want to consider asking a family member if they will loan you the money you need.
Want more guidance? Learn how to pay off your hospital bill in 3 steps (without going broke).

What happens when a medical bill goes to collections?

When it comes to an outstanding medical balance in collections, a lot depends on the creditors, the amount of money owed, and your credit history. Policies can vary considerably by the lender, but many send unpaid accounts to collections after six months of nonpayment. At this stage, either the company or the collection agency will usually report the delinquent payment to the credit bureaus.

Can medical bills affect your credit?

Yes, they can. If a medical bill is unpaid and goes to collections, it will hurt your credit. How much it damages your credit score will depend on several factors. For instance, the higher your credit score when an account goes to collection services, the more points you can lose. However, late medical bills will not hurt your credit as much as other types of debt. Credit score algorithms weigh medical debt differently. It also takes longer for medical debt to appear on your credit report. This is because federal law requires credit reporting companies to wait a minimum of six months before placing past-due medical debt on credit reports. How much money you owe is another important factor. For example, if the original debt was less than $100, it may not damage your credit that much or even show in your credit report.

What is one way you can get out of paying medical bills?

As explained above, you can often reduce or remove your medical debts if you qualify for financial assistance. Some hospitals, particularly nonprofits, have financial assistance programs that can reduce or even wipe out your debt. Of course, this will only work if you can prove you are a low-income patient and that you cannot afford to repay your medical debt. Contact the hospital administrator to find out about your options.

How much do emergency room visits cost?

According to GoodRx, the average cost for a non-emergency visit to the emergency room is $2,000. Since the average cost for an urgent care visit is closer to $200, it’s much more affordable to go to the urgent care office when you can. However, the emergency room is often required if you experience chest pain, stroke systems, vomiting of blood, broken bones, serious burns, or head or neck injuries. Insurance companies vary in their coverage for ER visits, so it’s good to consider this before you are in an emergency.

What are the medical bill collections laws?

Medical bill collections are regulated by the Fair Debt Collection Practices Act (FDCPA). According to FDCPA, debt collectors cannot use abusive, unfair, or deceptive practices when collecting debts. This means, for instance, that they cannot contact you at inconvenient times (before 8 a.m. or after 9 p.m., unless you agree to it). They also can’t discuss your debt with anyone else except your spouse. Further, they must provide a written validation notice with information on who your creditor is, how much you owe, and what to do if you don’t think the debt is yours.

How to pay hospital bills without insurance?

Hospitals and doctors will typically accept most payment types such as checks, credit cards, and wire transfers. You can often pay at the site or online.

How do you get medical debt forgiven?

You can apply for financial assistance on-site in most hospitals. Some may require you to apply for Medicaid first, but if you can prove you cannot afford to repay your debt, hospitals are usually willing to work with you. If you have a very low income and few assets, they may forgive your medical bills altogether.

Do hospital bills go on your credit?

Not immediately. However, as with most unpaid bills, medical bills will appear on your credit report if you don’t pay them or come to another sort of agreement. This is particularly likely if they go to collections. If you need help, speak with a financial advisor to get personalized advice.

Are medical bills sent to collections without notice?

It varies. Some medical offices will send you a notice. Similarly, collection companies may alert you when they buy your debt from your medical provider. However, there is no guarantee you will receive a notice before your medical bills are sent to collections. Federal law does require credit bureaus to wait a minimum of six months before a past-due medical debt appears on a credit report.

What if I wasn’t told the price of a medical service beforehand?

Unfortunately, in many cases, doctors and nurses take action and send bills later— no questions asked. However, tools like Healthcare Bluebook are helping to give patients more insight. You can use the tool to browse providers near you, along with the prices they charge for a variety of services. Then, you can compare the offerings of one health care provider to another to decide where you will go.

Will my insurance company cover an old medical bill?

It depends. Medicaid will sometimes cover medical expenses retroactively. However, insurance companies will typically not cover costs that occurred before you started paying premiums.

Bottom Line

Medical debt can be frustrating. Knowing how to settle it will help you take control of your finances and get back to business as usual. The steps mentioned above provide useful advice for a debt-free future. However, if you have substantial debt — as in more than $10,000 — and you can’t afford to make monthly payments, you may benefit from hiring a professional company to enroll you in a debt settlement program..
Not sure where to start? Click here for reviews and user comments on the best debt settlement companies.

Further articles

Want to learn more? Here are a few helpful articles on debt settlement:

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Andrew Latham

Andrew is the Content Director for SuperMoney, a Certified Financial Planner®, and a Certified Personal Finance Counselor. He loves to geek out on financial data and translate it into actionable insights everyone can understand. His work is often cited by major publications and institutions, such as Forbes, U.S. News, Fox Business, SFGate, Realtor, Deloitte, and Business Insider.

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