How To Get Help With Medical Bills You Can’t Afford

Last updated on May 2, 2019 by Mark Cussen in Life Settlements, Retirement Planning

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Incurring health care bills in your later years can result in a nasty surprise if your health insurance won’t cover them. Here’s what you can do about it.

Like many Americans, you may think that your health insurance plan will cover all of your bills for medical care as long as you can pay all of the deductibles and copays. But, as many people have rudely discovered, this is not always the case.

If you are undergoing medical treatment for a given condition and discover that your insurance will not cover the entire bill, then you may be left with a nasty financial surprise that could wreck all of your other retirement plans.

In fact, unpaid medical bills are the leading cause of bankruptcy in America today. And perhaps the most frightening part is that a large percentage of those who were forced to file for Chapter 7 or 13 bankruptcies had health insurance.

Fortunately, you have a few options to choose from if you find yourself in this dilemma, especially if you own any form of cash value life insurance.

When Insurance Won’t Cover Medical Bills

If you have to stay in the hospital for a certain number of days and your health insurance company won’t pay for all of them, your medical bills can add up in a hurry. You may be left with bills for thousands of dollars of medical expenses that you did not anticipate.

If you are diagnosed with a major critical illness, such as cancer, lupus, cirrhosis of the liver or heart disease, and you don’t have a critical illness policy or rider on your life insurance policy, then you could be looking at hundreds of thousands of dollars of doctor bills that could easily wipe you out.

Take the time today to review your current health coverage to see what the dollar limits are for treatment of various ailments, especially those that have run in your family.

Steps You Should Take to Pay Your Medical Bills

If you are surprised by a large medical bill that is not covered by your health insurance, knowing what to do can save you a great deal of headache – and money in many cases. Here are the steps you need to take:

1. Don’t Ignore It – It will not help you to ignore a bill from your healthcare provider when you receive it. But first, make sure that the notice you received is actually a bill and not just an explanation of benefits. Most medical professionals will only try to bill you for a few months before sending your account to a collection agency. When that happens, then your credit score will drop.

2. Read The Fine Print – Go through your medical bills to make sure that you actually incurred the goods and services that they’re billing you for. Medical bills can be complex in many cases, and errors do happen on occasion. Verify that you haven’t been double-billed for something or were charged the wrong rate for a hospital room.

Don’t just assume that the bill is automatically correct.

Medical providers typically assume that you will not understand what they’re billing you for. Prove them wrong by inquiring about any items on your bill that you’re not sure about.

3. Check Your Insurance – Again, don’t just assume that your health insurance company is right; call them and ask them directly why the specific item in question isn’t covered by your health insurance policy. Make sure that your doctor or hospital billed your insurer correctly and that you are covered to the fullest extent of your policy.

4. Don’t Be Afraid to Negotiate – Many doctors’ offices, health centers and hospitals are more willing to negotiate than you may think. Many providers charge much higher rates to those without insurance, because health insurance companies can use their clout to negotiate lower rates with providers for medical costs.

Call your provider’s billing department and try to work out a payment plan with them or negotiate a lower rate.

You may be surprised by how much money you can save with this approach, and you can also often prevent your bill from going to collections. If Medicare or your insurance company won’t pay for a specific charge, then perhaps you shouldn’t either. You have everything to gain and nothing to lose by contesting some or all of your bill with your provider.

There are also services out there who can do your negotiating for you (for a fee).

5. Ask About Assistance Programs – If your income is at or below the poverty line, then you may be eligible for financial assistance from one or more programs designed to assist low-income people like you with their medical bills.

Nonprofit hospitals are in fact legally required to offer assistance programs, and the federal government has medical assistance programs such as Medicaid and the Children’s Health Insurance Program (CHIP). These government programs and state programs may be able to cover some of the health care costs that you have already incurred, depending upon the circumstances (but you have to file as soon as possible, because there is a statute of limitations on how far back they can go). And if your medical bills were incurred by one of your children, he or she may qualify for Medicaid even if you don’t, so be sure to explore this option if necessary.

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Larger hospitals that receive plenty of funding also often charge their rates on a sliding scale based on the patient’s level of income and the size of their family. In some cases, they may waive their fees altogether if you can prove to them that you’re experiencing financial hardship. There are also many charities that work with patients to help them pay their medical bills at both the national and local levels.

6. Pay Off What You Can – If you have several small unpaid medical bills in addition to one or two large ones, then it would be wise to pay the small ones off as soon as possible so that they don’t go to collections.

If you have a cash value life insurance policy, then you may be able to either withdraw cash directly from the cash value or take out a loan against it and use the proceeds to pay bills.

When your medical provider sees that you have paid some of your bills, then they may be more willing to work with you on your remaining bills. You can put your medical bill on your credit card if necessary, which would at least prevent it from going to collections.

Your medical provider may offer medical credit cards or personal loans that you can use to pay your bills, but be sure to compare the terms of these items to other loans and cards that are available to you.

7. Negotiate with Collection Agencies – If your bill has already gone to collections, then you may be able to settle your debt for pennies on the dollar via negotiation with the collection agency. Again, you can hire professional services to do this on your behalf if your negotiating skills are poor.

You can also send the agency a cease and desist letter prohibiting them from contacting you again, but remember that they have the power to garnish your wages and sue you if you can’t pay them.

8. Look Outside the U.S. for Care – If you need to have a major medical procedure done and it won’t be covered by insurance, consider having the procedure done in a foreign country where it will be much cheaper, such as India or Singapore. Many expensive procedures in the U.S. can be done at a relatively low cost elsewhere.

If you choose this route, make sure that the doctors you work with have the same credentials and expertise that a U.S. doctor has. It would also be wise to bring someone with you whom you trust to look out for you during the procedures and to help with paperwork and other details.

You may also be able to get lower prices on prescription drugs from other countries such as Mexico or Canada.

9. Consider Crowdfunding – If your bills are stacking up, consider starting a crowdfunding page so that all of your friends and family can make donations toward your expenses. Websites like provide a means for you to solicit donations online, where you might find donors that you don’t know personally.

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An example of a GoFundMe success story

Sites like these have raised millions of dollars since their inception.

10. Search for Charity Care – There may be local hospitals and clinics in your area that provide medical services on a pro-bono basis for those who qualify. An online search may be able to point you in the right direction here.

11. Take Advantage of Tax Deductions – If you rack up substantial medical bills that you will have to pay out of pocket, then you can claim all expenses that exceed 7.5% of your adjusted gross income on your tax return. This may eliminate any tax that you would otherwise have to pay on your Social Security income.

12. Look for Prescription Assistance – There are many discount programs on the market today that can help you to defray prescription drug costs. Find one that offers discounts on the medications that you need. The cost of membership care programs can be far less than the cost of the drugs in many cases.

13. File for Bankruptcy – This should only be done as a last resort, but for many people, it’s the only alternative that they have available. If your medical debt absolutely requires you to file, try to file a Chapter 13 bankruptcy instead of Chapter 7, as Chapter 13s are considered a less severe form of bankruptcy, and may allow your credit score to recover sooner.

The Life Insurance Settlement Solution

The aforementioned steps can help you to manage your medical bills wisely and reduce them to the lowest possible amount in many cases. But if you own a cash value life insurance policy, then you may have another option that you haven’t thought of. There are many companies today that buy life insurance policies from policy owners who no longer need their policy or who need access to cash now and have no other source of assets and are interested in cashing in a life insurance policy.

In a life insurance settlement, you sign your life insurance policy over to the settlement company and they then assume the obligation of paying premiums on the policy. They will then receive the entire death benefit when you die instead of your beneficiaries. But they will pay you a substantial amount of money up front (much more than the cash surrender value of the policy) in order to do this, and you can use this money to pay some, if not all of your medical bills.

Recommended: How Does Life Settlement Taxation Work?

The life settlement industry is relatively new, but it is maturing rapidly. Many consumers in the past were very leery about these arrangements, because of the extensive amount of paperwork and bureaucracy that was required, as well as high broker fees and other costs. But there are many companies out there now that provide an easy, turnkey program that is faster, cheaper and much more transparent than what was available ten years ago.

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Some companies such as Mason Finance can now give you an instant estimate of benefits on your policy, a firm offer within a matter of hours and payment within a week. This alternative may be considerably more appealing than declaring bankruptcy or having your medical bills sent to collection agencies.

The Viatical Settlement Solution

If you are terminally or chronically ill, then you may be able to sell your policy in a viatical settlement. This essentially mirrors the life settlement process, where a buyer, known as a viatical provider, purchases your life insurance policy from you and pays you cash up front. One of the key differences between life and viatical settlements is that the latter form of transaction usually pays considerably more than a life settlement.

Related: What’s the Difference Between Viatical Settlements and Life Settlements?

In order to qualify for this type of transaction, you must either have a life expectancy of 24 months or less, or be unable to perform at least two out of the six activities of daily living (ADL), which include eating, bathing, toileting, transferring, dressing and continence.

Accelerated Death Benefit Riders

If you have yet to incur substantial medical bills but think that you might incur them in the future, consider adding an accelerated benefit rider to your existing life insurance policy. There are riders for critical illness, chronic illness, disability and long-term care. While they come at an additional cost, they can substantially defray any medical bills that you might accumulate in your later years.

Accelerated benefit riders will pay out some portion of the death benefit up front to you in cash, thus relieving you of having to sell your policy in a life settlement or viatical settlement transaction. Or, you may get an accelerated payout and then decide to go ahead and sell your policy in a life or viatical settlement. The course you choose to take will depend upon the circumstances of your situation and your needs and objectives.

Summary: What Can You Do When You Can’t Afford Your Medical Bills?

There are several courses of action that you can take to pay for unexpected medical bills, but if you own a cash value life insurance policy, then a life or viatical settlement may be the best alternative in many cases. There are many life settlement companies that offer convenient turnkey packages to consumers to streamline the settlement process and provide the former insured with a quick payout. Consult with your financial advisor for more information on life and viatical settlements.

  • Double check with your insurance company
  • Negotiate with hospitals or collection agencies
  • Search for cheaper alternatives
  • Leverage your life insurance policy through a settlement, viatical or death benefit rider

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Mark Cussen
Mark Cussen is a financial counselor with more than 13 years of experience and has professional designations as a CFP®, CMFC and AFC. Mark has worked in all segments of the financial industry from investment management to mortgage loan origination, life insurance and annuities, financial planning and income tax preparation. He currently works with the U.S. military, helping service members transition financially into civilian life and in other capacities. Mark also sells life insurance and annuities on the side. He graduated from the University of Kansas with a Bachelor’s degree in English.

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