Short answer: before you borrow to pay a medical bill, ask about financial assistance and a payment plan. A nonprofit hospital must have a written financial assistance policy, and must make reasonable efforts to see whether you qualify before taking extraordinary collection actions (26 U.S.C. 501(r)). A payment plan from the provider may cost little or nothing; a loan or medical credit card adds interest. The CFPB has warned that patients who should get reduced or free care may instead be signed up for a medical card or loan (CFPB).
Step 1: ask for financial assistance
- A tax-exempt hospital organization must have a written financial assistance policy that says who qualifies, whether help means free or discounted care, how amounts are figured and how to apply (26 U.S.C. 501(r)(4)).
- For emergency or other medically necessary care, a patient who qualifies cannot be charged more than the amounts generally billed to people who have insurance for that care (26 U.S.C. 501(r)(5)).
- You can apply during the application period, which starts on the date of care and runs until at least the 240th day after the first billing statement after discharge (26 CFR 1.501(r)-1(b)(3)).
- The hospital generally may not start extraordinary collection actions, such as reporting you to credit bureaus or selling the debt, for at least 120 days from that first post-discharge statement (26 CFR 1.501(r)-6).
These federal rules apply to nonprofit hospitals. For a doctor's office, a for-profit hospital or a lab, ask the billing office whether it has its own assistance or discount program. Ask for an itemized bill too: the CFPB notes patients may be billed an inflated amount, for services they never received, or for care that insurance or a financial assistance program should have covered (CFPB).
Step 2: ask for a payment plan
The CFPB found that medical credit cards and installment loans have largely replaced the low- or no-cost payment plans that providers once offered directly (CFPB). It is still worth asking the billing office for one, in writing, with the monthly amount and any interest or fees stated. Patients who sign up at a provider's office may think they are on the provider's payment plan without realizing they have taken out a third-party credit card or loan (CFPB). Read what you sign.
Medical credit cards and deferred interest
Many medical credit cards offer deferred interest for six to eighteen months. If any balance is left when the promotion ends, you are charged all the interest that would have built up since the purchase (CFPB). Between 2015 and 2020, people were charged interest on 20 percent of the healthcare purchases they made on deferred interest cards or loans, and on about 34 percent for people with credit scores below 619 (CFPB).
The cost on a $2,000.00 bill
Assumptions: a $2,000.00 bill after any assistance. A no-interest payment plan over 12 months, if the provider offers one; a personal loan at 24% APR for 12 months; and a 12-month deferred interest card at 26.99%, the rate in the CFPB's example, paid at $150.00 a month. All are examples, not quotes.
| Option | Monthly | Interest | Total |
|---|---|---|---|
| No-interest payment plan | $166.67 | $0.00 | $2,000.00 |
| Personal loan, 24% APR | $189.12 | $269.44 | $2,269.44 |
| Deferred interest card, paid off in time | Varies | $0.00 | $2,000.00 |
| Deferred interest card, $200.00 left at the end | $150.00 | About $317.13, all charged at once | Bill plus that interest |
Loan payment: P x r / (1 - (1 + r)-n), with r = APR / 12, rounded to the cent. Deferred interest estimate: 26.99% / 12 on the balance at the start of each month ($2,000.00, then $150.00 less each month), added up over 12 months; your card agreement sets the exact method. The card costs nothing extra only if you clear it in time. A loan's cost is fixed and shown up front on the disclosure (how to read a loan disclosure).
Before you borrow
- Ask for the financial assistance policy and application, and apply before you pay with credit.
- Ask for an itemized bill and check it against your insurance statement.
- Ask the billing office for a payment plan in writing.
- If you use a deferred interest card, divide the balance by the months in the promotion and pay at least that each month.
- If you borrow, compare APR and total of payments across offers, and avoid putting the bill on a payday or title loan.
If you are already behind, see what happens if you miss a loan payment, and for lower cost credit union options see payday alternative loans.
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Disclosure: Modern Lending Solutions is not a lender, loan broker or agent for any lender or loan broker, and does not make credit decisions. Any compensation we receive is paid by participating lenders, only for advertising services. This guide is general information, not financial or legal advice.