Clark Howard

The best ways to deal with out-of-pocket medical expenses

If the perennial debate over U.S. health care has shown us anything, it’s that the price of taking care of ourselves and those we love continues to rise. As a result, many people have fallen into what is called “medical debt,” meaning that they are struggling to pay bills related to health care.

In 2015, the most recent year in which data are available, Americans spent on average $1,054 in out-of-pocket medical spending, according to Peterson-Kaiser, a partnership between the Kaiser Family Foundation and the Peterson Center on Healthcare.

And what's interesting is that the people who are falling into medical debt are not the uninsured — it's the people with health insurance, according to the findings

Report: 27 million Americans paying medical bills via credit cards

Doing the math, if that $1,054 figure was paid for via a credit card with a typical interest rate and the minimum amount due was sent in each month, that debt would accrue $471 in interest and take almost six years to pay off, NerdWallet calculates. The finance website found that as many as 27 million Americans were putting medical bills on credit cards.

A Peterson-Kaiser case study shows that people in various income levels — from those making less than $10,000 a year to those making in excess of $100,000 annually — are susceptible to medical debt.

"The onset of an illness, accident, or pregnancy generated expenses that they did not anticipate and which they were unprepared to pay," the group's analysis said. "Some faced tens of thousands of dollars in medical debt. For others, just a few thousand dollars of bills proved unaffordable, particularly when a chronic illness meant bills would continue year after year."

One thing you don’t want to do if possible is use your credit cards to pay your medical bills. True, you may get your ailment treated, but you’ll be causing a pain in your wallet.

“Charging medical bills to credit cards can seem like a simple solution, but it can actually lead to even bigger headaches down the road,” Kimberly Palmer, NerdWallet’s credit card expert, says. “That’s because many credit cards have high interest rates, which means the amount owed can quickly snowball out of control.”

Here are some options for paying medical expenses

  • Payment plan: See if your hospital or medical professional will take monthly payments, perhaps even free of interest. This way you may be able to save up a little money to go toward the bill
  • Scrutinize your bill: Oftentimes, medical bills can be complicated messes. Ask for an itemized bill so that you can see clearly what the  expenses are for. You may be able to pay for the most important part during your visit, and negotiate more payments later.
  • Check into FSAs: Open a flexible spending account (FSA) which, if employers allow it, can be rolled over (up to $500) to the next year if unused. Money expert Clark Howard says that FSAs are the way to go. "Unfortunately, only one in five or one in six people … who are eligible to do an FSA through their employer actually do it," he writes. "But more people should, because you get to pay for medical expenses with pre-tax dollars instead of post-tax dollars."
  • …and HSAs: Look into opening a health savings account (HSA), which is typically only allowed only with high-deductible health plans. As for an HSA, Clark says this: "Because you have this high-deductible plan, you can put money into a savings account that gives you a current tax benefit. That money earns interest tax free either as an investment or as simple savings account and then you spend it for those deductibles and other medical expenses tax free."

Read the Clark Howard health savings account guide

When it comes to the health of your finances, being coy with your physician about your finances won't help your cause, Jeffery Luther, head of the California Academy of Family Physicians told the L.A. Times. "There is nothing wrong with asking to work something out."

In summary, the economic challenges posed by medical debt can be daunting, but with the right preparation and research into payment options that work for you, there is hope and, alas, good health.

RELATED: How to decide if an HSA is right for you