What is medical debt?

Medical debt is a debt you owe for medical services. This includes, for example, hospital care, doctor visits, prescriptions, or other similar goods or services. Even if you have health insurance, it may not cover all costs for medical services. You can still incur medical debt.

By law, when you apply for credit, lenders can’t treat your medical debt differently from your other types of debts. The lender is allowed to reject your loan application because your debt is too high. 

A lender may not reject your application just because your debt is medical debt.  

Dealing with medical debt  

If you’re having problems paying your medical debt, talk to the hospital or your healthcare provider. They might be able to give you options for your particular situation. Simply ask what financial assistance programs are available. They might have a repayment plan that’s more affordable for you. They may help you suspend payments temporarily if you are on medical leave from your job. 

Many hospitals are classified as not-for-profit. When that is the case, they are held to a charity care standard. That means they are required to tell you about these options even if you don’t ask. If you are having trouble paying, it's important to speak to someone in the billing office at the hospital or other healthcare provider. Some medical providers have programs to excuse some of the debt from the full amount owed. To see if you qualify, you'll need to provide them with information, such as income tax returns and pay stubs. You may also be able to file a letter of financial hardship to show your inability to pay. 

Starting July 1, 2024, hospitals will need to check to see if patients without insurance can get help through public health insurance or the hospital itself. Before a hospital tries to get money through a collection action, they must check to see if uninsured patients could qualify for help. If an uninsured patient does not want to apply for public health insurance because of immigration-related concerns, the hospital can tell them about free resources to help with their concerns.  

Bankruptcy and medical debt

You may be considering filing for bankruptcy to help with medical debt. It’s possible to use bankruptcy to discharge your medical debt. But you should learn about the different types of bankruptcy you can file first.

It’s important to understand that filing bankruptcy is not a perfect solution. It will have a negative effect on your credit score. It may make it harder for you to get credit in the future on affordable terms. Moreover, the bankruptcy process is complicated, time-consuming, and expensive. If you have medical issues that will result in more bills, you may not be able to use bankruptcy to get rid of those future debts. Talk to a lawyer or other experienced advisor to understand these issues in making decisions on whether and how to file a chapter 7 or chapter 13 bankruptcy.

Learn more about bankruptcy.

Medicaid and medical debt

If you have Medicaid coverage, your medical debt may be paid back using Medicaid payments. When applying for Medicaid, there is a part of the form that asks about unpaid health care costs. This is called medical backdating of eligibility. If you meet the Illinois residency requirement for the months before your application, you may check the box that you have unpaid medical bills from the 3-month period before your application. Do this if you want your Medicaid coverage to include your medical debt.