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How to Ease the Burden of Medical Debt

Medical debt sucks. And if you’ve ever had to take a trip to the emergency room, you know exactly what we’re talking about. Some visits to the hospital are routine and planned, such as your dad’s knee replacement. Others? Not so much. Maybe you’re a first-time parent needing some peace of mind when those fevers get dangerously high. Or maybe the latest game of The Floor Is Lava went haywire, ending in a broken bone and lots of tears.

There are a million reasons you might be dreading the moment that medical bill hits your mailbox. And the burden of medical debt can be pretty overwhelming. But it doesn’t have to be. So . . . take a deep breath—it’s going to be okay. We’ll show you how to tackle that mountain of medical debt and get on the path to financial peace.

What Is Medical Debt?

Medical debt is one of the worst kinds of debt (we’re looking at you, IRS). It’s the kind you don’t sign up for on purpose. Unlike credit card debt, medical bills are often outside of your control. It’s debt that adds up when there’s an accident, an illness or even kidney stones. It’s the debt you rack up when your wife goes into premature labor and your little one has to spend the first few weeks of life in the NICU. Or it’s the debt accumulating as your loved one fights through cancer or hospice care.

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If that sounds like you, you’re not alone. In fact, you’re just one out of 137 million U.S. adults who are carrying the burden of how they’re going to pay for their medical bills.1

How Do I Pay Off Medical Debt?

Medical bills can add up so quickly. And before you know it, you’re buried under a $200,000 bill and not sure how you’ll ever be able to pay it back. If you don’t have the funds to cover those big costs like visits to the emergency room, lengthy hospital stays or an emergency surgery, it’s easy to lose hope.

But don’t let fear and worry lead you to make rash decisions—like emptying your retirement account, signing up for a medical credit card, or even declaring bankruptcy when you’re not really bankrupt.

1. Put your family first.

When you’re dealing with a medical emergency, it’s hard not to see dollar signs every time you visit the urgent care center or emergency room. But don’t let money stop you from taking care of your family—or yourself. If you’re experiencing a medical crisis, the last thing you need to do is worry about those impending bills when your family is still hurting.

Do everything you can to stay calm. Wait until the dust settles, your family is back in good health, and all of your bills are in your hands. Then you’ll be able to create a plan for how you’re going to tackle them.

2. Review your bills.

Review each bill carefully to make sure you’re not being overcharged (or unfairly charged) for medical care. If your family member went to the ER for a broken arm but you’re billed for a three-night stay, you might have an error there.

If you have medical insurance, make sure your doctor’s office sent the bill to them first. And always make sure you follow up with your insurance company to ask why they didn’t cover something.

As you begin to work your way through your bills, take inventory of your assets (anything of value that you could sell). If you don’t have assets, it’s going to be even harder to pay back a $200,000 hospital bill. That’s where a budget comes in handy.

3. Make a budget.

If you’re not using a zero-based budget, now would be the time to start! And now that you have all your bills in hand, you can create a plan that tells every single dollar where to go. But before you start paying on your medical bills willy-nilly, you need to make sure your Four Walls are covered:

  • Food (Keep the fridge—and your bellies—full.)
  • Utilities (Keep the water running and the lights on.)
  • Shelter (Make sure you’re up to date on your rent or mortgage payments.)
  • Transportation (Keep enough money in the bank for a tank of gas or bus fare to get you to and from work.)

Here’s the bottom line: If you only have $50, you want to make sure you have food in the fridge before sending that to cover your medical bills.

4. Start negotiating with your healthcare administrator.

Thankfully, many people in the field of medicine are merciful—they’re in the business of helping people.

If you can’t fully pay your debt, set up a meeting with the hospital administrator or billing department. Leave your pride at the door, because you’re asking for mercy. Explain your situation to them in person. Show them your income, assets, budget, and what you can realistically pay. Tell them how grateful you are for the service they provided. Then ask if they’re willing to settle for a lower amount or work out a payment schedule.

Remember: You aren’t trying to get out of paying. You’re just asking if they’ll accept less money based on what you can afford to pay. Administrators can be pretty understanding and compassionate when you’re thankful, honest and realistic about your situation. Many times, they’re happier to get some money than none at all.

5. Use the debt snowball method to pay off medical debt.

It’s time to make a plan. Now that you have your total amount and maybe even an agreement with the hospital, it’s time to start attacking the debt. And the best way to attack medical debt (or any type of debt) is by using the debt snowball method.

  • List your debts smallest to largest, regardless of interest rate. Pay minimum payments on everything but the little one.
  • Attack the smallest debt with a vengeance. Once that debt is gone, take that payment (and any extra money you can squeeze out of the budget) and apply it to the second-smallest debt while continuing to make minimum payments on the rest.

Once that debt is gone, take its payment and apply it to the next-smallest debt. The more you pay off, the more your freed-up money grows and gets thrown onto the next debt—like a snowball rolling downhill.

Keep repeating these steps as you plow your way through that debt. The more you pay off, the closer you’ll be to freedom.

How Do I Deal With Medical Debt Collectors?

Debt collection typically begins when you’re already past due on your medical bills. If you haven’t paid anything toward your bill for at least three months, the hospital might send your account to collections.

But you should try to avoid this at all costs by communicating (and negotiating) with your hospital or doctor’s office first! Try to do everything you can to keep your bill out of the debt collector’s office.

However, if they still send you to collections, you should expect this in writing. Typically, they’ll send a letter in the mail saying your bill is in collections.

Dealing with debt collectors is the last thing anyone wants to do. But the best way to deal with them is by knowing your rights and what they can and can’t do before you ever give them a penny. 

1. Know your rights.

It’s important to know what collectors can and can’t do when it comes to trying to get you to pay your bill. Remember: Their sole job is to get you to pay up. So they’ll use every tactic under the sun to get you to pay—even if it means lying, trying to embarrass you, or telling you they’ll garnish your wages (without taking you to court first). Listen: No one can take your wages from you without a court ruling.

2. Know what you owe.

Know how much you owe on your debt—to the penny. And make sure to get it in writing before you give them anything.

3. Know how to negotiate.

Like we’ve said before, don’t give them any money until you have the settlement offer in writing. And once you do, don’t give them access to your bank accounts—because they will wipe you out. Send a check or a prepaid debit card with the amount you agreed to until the debt is paid.

If you have debt collectors harassing you or you think they’re breaking any rules when it comes to the Fair Debt Collection Practices Act, you can report them to the Federal Trade Commission and your attorney general’s office.

Does Medical Debt Qualify for Bankruptcy?

Medical debt does qualify for bankruptcy. But you don’t get to pick and choose what debts get to be wiped out. That’s the court’s job.

Listen closely: Bankruptcy is a wrecking ball. It makes a mess of everything in your life. While some think it’s an answer to their problems, it actually causes a lot more. Not to mention what it does to you emotionally as you invite the courts to investigate your family’s every financial move over long periods of time.

When you’re faced with a mountain of medical debt—or any kind of debt—things can look bleak and feel pretty hopeless. But before you call a lawyer, consider doing everything in your power to avoid bankruptcy.

If you absolutely need to file, that’s okay. But it’s not your only option. Start negotiating, use the debt snowball method, and attack those debts with a vengeance!

What Happens to Medical Debt When You Die?

You know how the old saying goes: You can’t take it with you when you die. And in most cases, that includes medical debt.

When it comes to taking care of a loved one’s estate (especially a parent or grandparent), it’s natural to worry about any debt they left behind. Who pays it? Do you get stuck with their old medical bills? Will their estate cover the debt?

What Is an Estate?

Great question. An estate is all of the money, property, and assets your friend or family member owned before they passed. There are two types of estates: solvent and insolvent.

With a solvent estate, debts are paid and there’s still money left to be used as it says in the will. With an insolvent estate, your loved one’s assets aren’t able to cover their debts. Most often, their home and other property like cars or land are sold to cover any outstanding debts. If they didn’t have much, these debts often go unpaid.2

Am I Personally Responsible for My Loved One’s Debt?

The short answer? No. Depending on what state you live in, debts are usually taken care of by your loved one’s estate. But just in case, let’s go over the few times you might be held responsible:

• You cosigned on a loan with the deceased

• You had a joint account (such as a credit card)

• If you owned property with the deceased (each state is different)

• If you live in a community property state (state law will require spouses to sell any assets to pay for the debt)3

What About the Will?

If your loved one’s estate is used to pay old debts, whatever’s left gets given out as they directed in their will. And if there’s nothing left, then you might not get that inheritance you thought was coming your way.

That’s why it’s so important to stay as far from debt as possible.

The moral of the story? Debt sucks. Whether it’s medical debt, credit card bills, car payments, student loans, or even debt from the IRS, it drains the life out of your future and leaves you stuck paying for your past—or your loved one’s past.

If you’re feeling the heavy burden of medical debt, there’s hope! With a plan, hard work and a few sacrifices, you can stop worrying and start living. Debt-free and worry-free living is on the other side of this mountain, and a free trial of Ramsey+ can help you get there. Are you ready?

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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