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Managing Medical Bills


Managing Medical Bills

Seeing medical bills trickling into your mailbox can feel pretty scary. Unlike other services where you know the costs upfront, doctors don't usually give estimates. And how many of us have the time to ask for pricing in advance when our health is at stake?

If you find yourself in a sea of medical bills and don't know where to start sorting through them all, here are five steps to help you get a handle on your medical bills.  

1. Make Sure the Bills Are Correct

Medical billing isn't perfect, so it's entirely possible that there are mistakes on your bills. Make sure that your bills are accurate by requesting itemized bills from your insurance company or medical provider. If you spot something that looks funny, call and ask about it. A disputed medical bill is typically flagged for audit, which should extend its due date while the provider figures out if there's been a mistake.

2. Sort Bills by Due Date

Sort the bills by due date to make sure you have enough money to cover what you owe. It may be tempting to pay lower bills first, but if you have a bill of $200 due on the 30th of this month, and another smaller bill of $50 due on the 15th of next month, you should pay $200 to avoid additional fees or interest charges. By the time the $50 is due, you'll have completed another paycheck cycle.

3. Use Your Flexible Spending or Health Savings Accounts

Flexible Spending Accounts (FSA) or a Health Savings Accounts (HSA) can help you set aside money for medical expenses and avoid taking on debt to pay medical bills. Deposits to FSAs and HSAs are made automatically from each paycheck and sent to a tax-free account that you can use for medical expenses. You earned this money, so don't forget to use it when you need it most.

4. Set Up a Payment Plan

If you're like many people, it's just not possible to pay off a large bill all at once. Once you determine how much you actually owe, the next step is to figure out how much you can pay, either on a monthly or per-paycheck basis. Then, call the medical billing department, tell them what you can afford to pay, and ask to set up a payment plan. This is also a good time to ask if they have any financial assistance programs. Their priority is to get that bill paid, so as long as you communicate with them honestly, they may be willing to work with you to figure out a repayment plan.

5. Deduct Medical Costs on Your Tax Return

According to the IRS, any medical costs that equal more than 10 percent of your adjusted gross income (AGI) are deductible if you itemize your tax deductions. Your AGI is the income remaining after all of your deductions are taken out. So if, for example, $4,000 is 10 percent of your AGI, and you are eligible to itemize deductions, then any amount you paid above that is deductible.

Medical bills can feel overwhelming, but they are something that everyone has to deal with at one time or another. If you take a deep breath, get organized, and make a sound plan, the cost of medical care won't derail your finances.

Tools to Help

Finding Money for an Emergency Fund

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Cash Flow Budget Worksheet


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What You Can Do Right Now

Information is great. But taking small steps now can lead to big changes.
  • Today
  • Make sure you know exactly how much you owe and what you owe the money for. Request an itemized bill from your health care provider. If there are charges you do not recognize, ask about them.
  • Next Week
  • Check with your insurance provider to find out which portions of the bill it was supposed to cover. This goes for Medicaid, State Children’s Health Insurance Programs, and Medicare.
  • If you don't earn very much money, see if charity care can be applied to hospital bills.
  • Set up a payment plan. Make sure it’s one you can afford. Make sure all of your living expenses and higher priority debts are covered before you commit to a payment plan for medical debt.
  • In the Next Few Months
  • Continue to make payments on your debt. Be sure that you pay on time.
  • Deduct any applicable medical expenses on your taxes.
  • Consider setting up an emergency savings fund to cover future medical expenses.