• Wiser Medicare

Alternatives to Using Credit Cards to Pay Medical Debt

Updated: Oct 27

Seniors in their early sixties look forward to Medicare as if it’s a year-round Christmas present. Finally, they can start saving money on their health insurance.


But Medicare is not a “Get Out of Medical Debt Free” card.


Some seniors try to get a better handle on costs by paying up-front for supplemental coverages to their Medicare. Or they have a Health Savings Account (HSA). But others don’t have the extra income for an HSA, can’t afford the supplemental plans or they don’t know about them. Those people quickly learn that Medicare may not cover all of their costs.


According to a new survey by MedicareGuide.com:

  • 37% of seniors between 60-65 find it difficult or worse paying for healthcare.

  • Once they reach 65, 27% of Americans have less than $500 in savings to pay for medical bills.

  • Because of that, 28% of respondents say they would use retirement or non-retirement savings to pay for a severe illness.

  • And less than 2% say they have a tax-advantaged Health Savings Account.

  • That’s why 24% of elderly Americans carry medical debt.

So, what do many American seniors do? They finance their health care with credit cards and/or medical savings cards, and since these are people who need their credit cards to pay essential bills, they’re probably not getting the cards with the lowest interest rates.


They therefore also look to medical credit cards, which tend to have nice brochures with happy customers and are available at dentist’s and doctor’s offices, usually right next to the window where you get your bill. A medical credit card is . . . a credit card. It has no special powers and carrying one will not make you healthier. It could, however, make your bank account unhealthier.


Like regular credit cards, medical credit cards often come with low promotional interest rates for a period of time. If your medical bill is low enough that you believe you can pay it off before the promotional rate ends, then a medical credit card may be a good option. However, if you have, say, a $5,000 bill and the interest rate on your spiffy new medical credit card is going to jump to 20% after six months, you’re likely to be paying hundreds of dollars in interest every year until your bill is paid off.


The Wells Fargo Health Advantage card presently has an interest rate of 12.99%, if you qualify. Not a great rate, but not terrible. A CareCredit card functions a bit more like a loan with a fixed period of time to pay off the amount, but the longer the term, the higher the interest rate – with a 17.9% rate on a 60-month payback over $2,500. You may only have to pay $63 a month for the 60 months, but you’re going to end up paying nearly $3,800 for your $2,500 medical expense – and it’s likely that sometime within that 5-year payoff you may have another large medical expense.


Here are some tips, if your medical expenses exceed what Medicare will pay:


  • Always speak first with your medical provider about a lower rate or the ability to pay off your bill in installments. A hospital or large medical practice may be willing to work with you interest-free, especially if you can prove a financial hardship.


  • If your medical debt has already been turned over to a collection agency, you may have a better chance negotiating with them. Depending on the arrangement the collection agency has with your provider, the debt may have already been written off so 50 cents on the dollar is better than nothing.


  • If you believe your bill is incorrect or unfair, most large medical providers have specific administrators to whom you can appeal the costs.


  • If you’re uncomfortable arguing with your medical provider, you can hire a medical bill advocate – that’s an expert who can fight the fight for you. Just factor in the cost of the advocate – you don’t want to spend $500 to save $300.


  • Speak with your bank or check online bank rates for a loan that may have an interest rate considerably lower than a credit card or medical credit card.


  • Look into a small home equity loan, if you own your home. Those rates are likely to be considerably less than credit card rates since the loans are collateralized.


  • If you’re forced to borrow, borrow on as low a balance as possible to keep your payments down and allow you to pay off the loan faster.

 

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