Medical Debt Consolidation: Can You Consolidate Medical Debt?

You can often consolidate medical debt by using a personal loan or a credit card, but you should compare all options carefully before making a decision. You’ll want to start by making sure your medical bill is accurate before moving forward with payment, and the best payment plan for you will depend on interest rates, fees, and any available financial assistance. 

Key Takeaways

• Medical debt consolidation rolls multiple bills into one payment: usually through a personal loan, a balance transfer credit card or a provider payment plan, ideally at a lower rate than you're paying now.

• Confirm the bill before you consolidate: Request an itemized statement and dispute errors like duplicate charges, wrong dates or services you didn't receive before you borrow.

• Fees can eat into your savings: Personal loan origination fees can run as high as 8% and are deducted from your proceeds, while balance transfer fees typically range from 3% to 5% of the amount moved.

• Free or low-cost help may beat borrowing: Nonprofit hospitals are required to offer financial assistance to eligible patients, and provider payment plans may carry little or no interest.

• Consolidating can strip away medical-debt protections: Credit bureaus removed unpaid medical collections under $500 and apply a 12-month grace period before a collection can appear, but moving the balance to a loan or card converts it to regular debt that doesn't get those protections.

• A new loan or card triggers a hard inquiry — which may lower your credit score by a few points for a short time.

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How Medical Debt Consolidation Works

You may be able to consolidate your medical debt if you have outstanding hospital and doctor bills that must be paid down.

What Is Medical Debt Consolidation?

Medical debt consolidation involves streamlining multiple medical bills into a single account so you have fewer payments to keep track of, and ideally a lower interest rate than you were previously paying. 

Some of the most common medical debt consolidation options are personal loans, medical loans and balance transfer credit cards. A credit counselor may suggest a tailored debt management plan, though not every medical provider or collection agency is required to participate. Depending on your healthcare provider, you might also have access to a provider payment plan, which allows you to pay off your bill in installments.

Before you do anything, make sure your medical bills are correct. If you see any inaccuracies, you'll want to reach out to the provider to correct them before taking any steps toward repayment. Additionally, if your medical bills are still being processed by your insurance company or they're eligible for any financial assistance, wait until those separate processes have concluded before you take steps to consolidate your debt.

Here are some situations where medical debt consolidation may make sense:

• You have multiple, high-interest medical bills

• Your bills aren't covered by insurance or eligible for other assistance

On the other hand, medical debt consolidation may not be helpful if:

• You have just one medical bill

• Your bill may be covered by your insurance or financial assistance

Medical Debt Consolidation Options Compared

Debt consolidation can take several different forms. Here's an overview of how the main medical debt consolidation options stack up.

Medical Debt Consolidation Loan

If you have several medical bills that are overdue and accruing interest, a debt consolidation loan could help you reduce your interest rate and simplify your approach to repayment. Instead of worrying about multiple payments, your bills will be rolled into one single loan payment per month. 

The predictability of a fixed payment can make it easier to stay on track, though you'll want to make sure you’re actually getting a lower interest rate. You could also be on the hook for an origination fee when you open the loan. For example, LendingClub personal loans may charge origination fees of up to 8% based on factors like your income and credit history.

Provider Payment Plan

Medical provider payment plans aren't the same as consolidating through a loan, and they're not always available. But if your healthcare provider does offer a payment plan, it may waive interest rates or charge lower interest rates while letting you make payments at a pace that fits your budget. This isn't always the case, but it's worth asking to see what options are available. 

Debt Management Plan

If your medical debt is one of several debts you're currently holding, it may be worth consulting a credit counseling agency to help you come up with a payoff plan. A credit counselor can help you prioritize which debts you pay off first and decide on a payment schedule that makes sense for your budget. 

However, creditors aren't required to participate in a debt management plan, and a healthcare provider or medical collection agency may not agree to the proposed terms. That said, they may be willing to if it appears to be the best way to collect payment on the debt you owe.

What To Do Before You Consolidate Medical Bills 

Confirm the Bill Is Accurate

Before consolidating your medical bills, make sure you've carefully reviewed all your bills for accuracy. Request an itemized bill that breaks out each charge separately.

Medical bills can include errors, such as duplicate charges, wrong dates, missing insurance information or services you didn't receive. If you find any of these, address them with your healthcare provider immediately to get a corrected bill.

Ask About Financial Assistance or Charity Care

Contact the hospital or provider's billing office to ask about financial assistance or charity care options. Nonprofit hospitals are required to offer financial assistance to eligible patients, and it's worth determining whether you're eligible before taking out a loan or opening a balance transfer card.

Try To Negotiate Before Borrowing

It’s also worth asking the healthcare provider or hospital about any discounts that are available. Check whether the billing department is able to offer a reduced payoff amount or a monthly payment plan that breaks your payment into smaller chunks as well.

Get the Agreement in Writing

No matter which option you move forward with, get all the details in writing. This includes the payment amount along with due dates, account numbers and any other settlement terms. This is especially important if your medical debt is in collections. 

Not only will having all this information help you stay on top of payments and avoid fees, but it can also serve as proof if the provider disputes any of the terms of your agreement.

When Medical Debt Consolidation Makes Sense — and When It Doesn't

When Medical Debt Consolidation Makes Sense

• You have medical debt spread across multiple accounts, and it’s getting difficult to manage.

• You're able to secure lower interest rates compared to your existing financing option.

• Consolidating your medical debt will result in a more affordable monthly payment.

• You've verified that your bills are completely accurate.

• You've already explored all your hospital financial assistance and provider payment options and aren’t able to move forward with any of them.

When Medical Debt Consolidation May Not Make Sense

• Your medical bills have inaccuracies or are still being disputed.

• Your insurance provider hasn’t finished processing your medical claims.

• Your income may qualify you for charity care or medical financial assistance.

• You’re able to take advantage of a low- or no-interest provider payment plan.

• The only medical debt consolidation options available have high interest rates or unfavorable repayment terms that don’t fit with your budget.

Bottom Line: Should You Consolidate Medical Debt? 

Medical debt consolidation can be helpful for simplifying your payments and locking in a lower interest rate, but it’s important to run the numbers before assuming it's the right option. Compare how different options translate into monthly payments to see which one works best for you, and before you take any action remember to confirm that your medical bill is accurate and free of errors. 

FAQs

Can medical bills be included in a debt consolidation loan?

Yes, medical bills can be included in a debt consolidation loan, and you’d have a single monthly payment rather than multiple.

Is it better to pay medical bills with a loan or a payment plan?

Whether it’s better to pay medical bills with a loan or a payment plan depends on the terms of each option. If your provider offers a payment plan without interest, that’s likely the better option, but that’s not always available.

Can medical debt in collections be consolidated?

Yes, medical debt in collections can be consolidated or you can use a loan to pay it off. However, if you wish to settle for a smaller balance or set up a payment plan, you must make sure the collection agency will agree to the new plan.

Does consolidating medical debt hurt your credit?

Consolidating medical debt can hurt your credit score due to the hard credit inquiry required to open a new personal loan or credit card. It’s also worth noting that medical debt is treated differently than other debt — unpaid amounts under $500 don’t go on your credit report, and there’s a grace period before anything appears. So consolidating medical debt can remove some of these protections.

Can hospitals reduce or forgive medical bills?

Hospitals can reduce or forgive medical bills. They may offer assistance programs to families, though each hospital needs to have a written financial assistance policy that clearly states who can receive free or discounted medical care.

Key Terms

• Medical debt consolidation: Combining several medical bills into a single account so you have one payment to track, ideally at a lower interest rate than before.

• Debt consolidation loan: A personal loan that rolls multiple debts into one new loan with a single fixed monthly payment.

• Balance transfer credit card: A card that lets you move existing balances to a 0% intro APR period so you can pay down debt without new interest for a set time.

• Origination fee: A one-time fee a lender may charge to process and fund a loan, often deducted from your loan proceeds before you receive the money.

• Provider payment plan: An arrangement that lets you pay a medical bill in installments directly to the provider, sometimes with little or no interest, though it isn't always offered.

• Debt management plan: A repayment schedule set up with a credit counselor; creditors, including healthcare providers and collection agencies, aren't required to participate.

• Charity care: A nonprofit hospital program, required under IRS rules, that offers free or discounted care to eligible lower-income patients under a written financial assistance policy.

• Hard inquiry: A credit check that occurs when you formally apply for credit and may lower your score for a short time.

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