How to survive your hospital bills

By Liz Pulliam Weston

A hospital stay can be traumatic. If you don't have adequate insurance, though, the real pain comes when the bills arrive. To wit:

You may face a wildly inflated bill. As backward as it may seem, hospitals often charge uninsured patients far more than the discounted prices given to insurance companies and government programs such as Medicare and Medicaid. The "sticker price" for rooms, drugs and medical care for an uninsured person can be two or three times the price paid by insurers, according to the National Consumer Law Center.

The hospital may not tell you that you could qualify for free care or discounts. Most hospitals have some kind of financial aid for strapped patients. A typical charity program would erase bills entirely for people whose incomes equal 200% or less of federal poverty limits, and it would offer discounts for those with incomes up to 400% of those limits. But hospitals may not publicize these programs or provide much guidance on how to apply.

Federal poverty limits
People in family	Contiguous U.S.	Alaska	Hawaii
1	$10,210	$12,770	$11,750
2	13,690	17,120	15,750
3	17,170	21,470	19,750
4	20,650	25,820	23,750
5	24,130	30,170	27,750
6	27,610	34,520	31,750
Source: Federal Register, January 2007

You may face increasingly aggressive collection tactics. Swelling amounts of bad debt have led many hospitals to remove the kid gloves. Collection calls and a trashed credit rating are just the start; you may face lawsuits, wage garnishment and liens on your home.

Such heavy-handed techniques have led a few states, including California, New York and Illinois, to place limits on the prices hospitals can charge the uninsured and on how debts can be collected. But those laws are the exception, not the rule.

"A handful of states have put into place some protections for the uninsured and the underinsured," said Chi Chi Wu, a staff attorney for the National Consumer Law Center. "In the majority of states, there are no legal protections."

7 ways to handle the hospital

With that the case, you need to know how to protect yourself if you're facing a big hospital bill and your insurance is inadequate or nonexistent:

Don't stick your head in the sand. It may be human nature to wish problems away or to hope some windfall like a winning lottery ticket will bail you out of your financial problems. Failure to act on your hospital bills, though, is just dooming yourself to trouble. The hospital may interpret your silence as an unwillingness to pay your debts rather than an inability to pay them.

Check your bills for errors. Hospital bills are notorious for being riddled with mistakes. You may have been charged for drugs you never took or for a full day of care when you checked out at noon, or charged twice for a single procedure. You won't be able to tell all that, however, from the summary bill that's typically sent to patients. To get the goods, you need to ask for three documents (all of which you're entitled to):

• An itemized copy of your bill.
• A copy of your medical chart.
• A copy of your pharmacy ledger. This shows the drugs you were given during your stay.

Compare your chart and ledger to the itemized bill to see if there are any discrepancies. Also, look for charges that are the result of hospital error, such as an X-ray that had to be redone because a technician goofed. You shouldn't have to pay for someone else's mistakes.

Other errors, such as "upcoding," are more insidious. Upcoding is a fraud that involves pretending a condition is more serious than it actually was, in order to charge more.

If the bill is too baffling, you don't necessarily have to wade through it alone. Some hospitals offer auditors that will help you review your bill. You also could use an outside service; Medical Billing Advocates of America offers referrals.

You'll almost certainly see some eye-popping prices, like $8 for an aspirin. Those aren't errors but the inflated "sticker prices" I referred to earlier. We'll deal with those in a minute.

See whether you qualify for charity, government help or discounts. Many hospitals have financial counselors who can review your financial situation and check whether you qualify for any help, either from the hospital itself or government agencies. You can pursue this possibility even if your debt has already been sent to collections. Make sure the collectors get a copy of your applications for aid so they're on notice that you're in financial straits.

You may have to negotiate directly with doctors, specialists or other medical providers who bill you separately. Hospital charity programs may not cover their services, and their willingness to discount their services may vary.

Negotiate for lower prices. Ask the hospital to charge you the same prices it charges Medicare, Medicaid or its biggest insurance customer. If the resulting bill is manageable, you can go on to work out a payment plan with the hospital. Make sure to get a written copy of your agreement before you start payments so that the hospital can't later claim there was a mistake or that the sums you paid were inadequate. If the negotiated bill is still too high, try negotiating a lower settlement. It can help to have an attorney, particularly one versed in credit and bankruptcy law, to help with these discussions.

Stand up to heavy-handed tactics

Don't be pressured by hospital bill collectors into making stupid choices. Collectors want to get paid -- now -- and they may not particularly care that the money you're sending them should have gone to paying the mortgage or the light bill. Prioritize your bills and make sure the essential ones, including your mortgage or rent, car payment, utilities, food and insurance, are covered before you pay any so-called unsecured debts such as medical bills. Also:

Avoid borrowing to pay your bill. Collectors may urge you to pay off your hospital bill with a credit card or a home-equity loan. Try not to bite. Your credit card probably carries a much higher interest rate than you'd incur if you arranged a payment plan directly with the hospital; if you fall behind on your credit card payments, your interest rate could soar even higher, and you could wind up with collectors who are even nastier. (Most, though not all, hospitals try to avoid really hardball collection tactics for fear of tarnishing their images.) A home-equity loan, meanwhile, would turn unsecured medical debt that could be erased in bankruptcy into secured debt that could cost you your home if you couldn't keep up with the payments.

Finally, if all else fails:

Consider bankruptcy. If you can't pay your hospital bill in three to five years, or if collectors are threatening to garnishee your wages or put a lien on your house, a bankruptcy filing may be the best of bad options.

A Chapter 7 liquidation would allow you to erase unsecured debts such as medical bills and credit card balances, while a Chapter 13 repayment plan would require you to repay some of your debt over the next five years and erase any remaining bills after you completed the plan. You can find more information at MSN Money's Bankruptcy Guide. A bankruptcy attorney can review your financial situation and describe your options.

Remember, though, that you shouldn't file prematurely. If you're likely to incur more medical bills, you might want to delay filing until the worst is over because you're allowed to file only one Chapter 7 case every eight years. If you file to discharge your debt and then wind up incurring more, you may face eight long years of collection actions before you can file again.

Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published March 19, 2007