Financial advisers need to check up on clients’ medical debt

With half of all debt identified on credit reports coming from medical claims, financial advisers should be helping clients stay on top of their health care bills.
About 52% of the collections reported by credit agencies are owed to hospitals and other medical providers, the Consumer Financial Protection Bureau said in a report Thursday.
That works out to one of every five consumers’ in the credit reporting system having a medical debt claim, or nearly 43 million people, said Richard Cordray, director of the CFPB, in a speech in Oklahoma City.
“Getting medical care should not make your credit report sick,” Mr. Cordray said.
Many with outstanding bills said they didn’t understand exactly what they were being charged for, which isn’t surprising, given that a single visit to the emergency room can trigger separate bills from the hospital, doctors, labs and ambulance company, the report said.
Additionally, patients needing care rarely are told how much treatment will cost ahead of time, the report said.
As American health insurance continues to move toward requiring people to cover more of their own costs, confusion is likely to increase.
(More: Health savings accounts: Transforming health care, forcing hard choices)
Financial advisers said clients who have large health care bills can take some steps to limit the impact the debt has on their fiscal health.
“If the bills are big, call up the provider and talk to them and explain the situation and see what you can work out for payment,” said James Kinney, an adviser and owner of Financial Pathway Advisors. “They may be more flexible than you expect.”
One of his clients accumulated a large amount of medical debt from a hospitalization when she wasn’t insured, and she negotiated terms with the providers “that you would never see from a normal creditor,” Mr. Kinney said.
The CFPB recommends checking all medical bills carefully and making sure providers have up-to-date health care information. Verify which bills genuinely are due and dispute any others as quickly as possible to avoid hits to a credit score.
If a hospital is not willing to negotiate the total amount due, it may at least agree to an installment plan, the CFPB said in a consumer advisory.
Mr. Kinney said a home equity line of credit can be used to pay for medical costs, allowing the person to at least have tax-favored interest payments.
Otherwise, it may be time to talk to a lawyer about options, including personal bankruptcy, he said.
Medical bills are the leading cause of bankruptcy, according to a study by NerdWallet Health, which analyzed U.S. Census and other data.
Although medical debts top the list of claims on credit reports, the amount most people owe for medical bills is typically less than other debts, according to the CFPB report. Medical unpaid collections average $579, compared with $1,000 on average for nonmedical debt, which includes student loans and credit cards, the report said.
But for those with high health care claims, a financial adviser’s help in managing that debt is invaluable.