How To Protect Your Assets From Medical Bills

Every 1 in 3 individuals reportedly has difficulty paying their medical bills. According to the American Journal of Medicine, almost 50% of people who experienced medical bankruptcy blamed hospital bills as their biggest expense. The U.S. has considerably high costs for hospital stays than most other countries. For instance, the average price for a hospital stay in the U.S. is $5,220 per day, while it is only $765 in Australia. These high medical costs point to the financial issues that most people face due to lifestyle diseases, injuries, accidents, and other illnesses. The high costs of healthcare coupled with rising medical inflation in the country can come in the way of your financial goals and even cost you your assets, such as your home, retirement savings, jewelry, and more. To avoid such a situation in the future, it is important to know how to protect your assets from medical bills.

A financial advisor can help you protect your assets from medical expenses by recommending ways to save enough for medical emergencies, act promptly when you have growing debt, and more. This article will explore the different ways you can safeguarding your assets and preparing for unexpected financial adversities due to medical issues in the future.

9 ways to protect your assets from medical expenses

Protecting assets from medical expenses can seem challenging, given the exponentially high costs of healthcare in the country. But following a proactive approach can be helpful. Here are some things that you can follow:

1. Know your insurance coverage in and out to avoid surprises later 

The first step in protecting your assets from medical bills is to understand your health insurance coverage. There are different types of health plans, such as disability insurance, long-term care insurance, basic health insurance, etc., and each can differ in terms of the protection they offer. Review your policy and understand what is covered and what is not. Evaluating your needs and selecting a policy that meets your requirements is also important. For instance, most insurance policies have a maximum out-of-pocket expense limit. Understanding your coverage needs will help you make informed decisions about your healthcare and expenses. 

2. Negotiate medical bills to lower your expenses

Medical bills can be negotiated. You can bargain with your healthcare provider to reduce the amount you owe. Many healthcare providers are willing to work with patients to lower medical bills. You can also hire a medical billing advocate to negotiate on your behalf. A medical billing advocate is a professional who can help patients and healthcare consumers negotiate their bills. These professionals ensure that you are not overcharged for services. They review medical statements, insurance claims, and other healthcare-related documents to help you understand your rights and responsibilities and identify errors or discrepancies that may be cost you money. However, it may cost you to hire a professional. So, take this step after understanding the expenses involved.

3. Use a Health Savings Account (HSA) to save for future medical costs

A Health Savings Account (HSA) is a tax-advantaged savings account that can be used to pay for medical expenses. If you have a High-Deductible Health Plan (HDHP), you may qualify to use an HSA. You can contribute your pre-tax dollars to the account, which can be used tax-free to pay for qualified medical expenses. HSAs are a great way to protect your assets from medical bills. Moreover, since they offer tax benefits, they help you maximize your savings, which can further help you save more and be prepared for unexpected financial emergencies.

4. Consider supplemental insurance to be fully covered

A supplemental insurance plan can cover out-of-pocket medical expenses that may not be covered under your regular health plan. There are several types of supplemental insurance, such as accidental insurance, critical illness insurance, and others. These policies can provide additional protection for your assets in the event of a medical emergency and ensure you get the medical attention you need without worrying about expenses.

5. Protect your home and other assets by creating an irrevocable trust and other measures

If you are worried about medical bills, it is vital to protect your assets, such as your home, from creditors. Hospitals and other medical facilities can come after your assets if you cannot clear your medical bills. You may lose your home and other savings in the process. Setting up an irrevocable trust can help protect your assets from medical expenses, as the assets covered by the trust cannot be claimed by creditors. Another way to protect your home can be by transferring the ownership to a family member. This can protect your home from being seized to pay medical bills. If you are suffering from an ailment and expect to incur high bills in the near future, this may be suitable. It is essential to consult with a financial advisor or attorney before taking any of these steps.

6. Use retirement accounts like 401ks to save for your future needs

The IRA and the 401k have their unique benefits to offer, and you may use them at your discretion. But it may help to keep your retirement accounts separate from your other assets to ensure they are protected. Since retirement accounts like the 401(k) are set up under the Employee Retirement Income Security Act (ERISA) of 1974, they are protected from creditors, including medical bill collectors. Non-ERISA plans like the traditional and Roth Individual Retirement Account (IRA) are not protected from creditors. This means that the retirement accounts you use can, to a large extent, determine your future financial security.

7. Plan ahead and always maintain an emergency fund

One of the best ways to protect your assets from medical expenses is to plan ahead. This can be done by creating an emergency fund. Medical emergencies can be some of the most unexpected and financially draining events in your life. Setting aside a financial reserve specifically for unforeseen expenses, including medical emergencies, can help. Even with health insurance, medical bills can quickly add up. There may be services or treatments not covered by your insurance plan. An emergency fund can help cover these unexpected expenses. Health emergencies can also come in the way of your work and ability to earn. If you or a family member becomes seriously ill or injured, you may need to take time off work. This can lead to a loss of income. An emergency fund can help bridge the gap so you can focus on your health without worrying about how you will pay your bills.

8. Use tax exemptions to lower your taxable income and save money

Apart from protecting your assets from medical expenses, you can also claim tax exemptions to lower your tax bill and save money. This may decrease the financial burden of your medical expenses to some extent. For instance, you can deduct your medical expenses that exceed 7.5% of your adjusted gross income as itemized deductions under Schedule A (Form 1040). The list of qualified deductions includes a wide variety of expenses, like dental treatments, organ transplants, ear and eye conditions, diabetes treatments, alternative treatments like acupuncture, weight loss programs, etc. 

9. Consult with a financial advisor or attorney to discuss your options

If you have significant assets and are concerned about protecting your assets from medical expenses, consider consulting with a financial advisor or an attorney who specializes in debt management and asset protection. These professionals can help you understand the legal options available to protect your assets and develop a customized plan that caters to your specific needs. You may also hire a financial advisor for holistic financial planning. This can include multiple components of financial planning, such as savings and investment planning, tax management, debt management, retirement planning, etc. Having a financial advisor can ensure you have enough savings and investments to rely on in your hour of need. Moreover, you are less likely to be buried in debt when you have sound finances with adequate savings and investments.



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What happens if you are unable to pay your medical bills? 

Hospitals and other healthcare facilities may take legal action against you if a medical bill goes unpaid. This can lead to a court case or seizure of assets. Many health facilities may also levy interest for late payments in some cases. This can increase your debt and impact your credit score, making it more difficult to qualify for loans in the future. If you have unpaid medical bills, some healthcare providers may refuse further treatment until the debt is paid. This can be especially challenging if you have a chronic health condition, such as cancer, heart issues, kidney problems, etc., that require ongoing medical care.

Therefore, it is essential to pay your bills on time or always have backup options like health insurance and other savings and investments to tackle any financial situation.

What to do if you have medical debt

If you are buried in medical debt, there are several steps you can take to manage and potentially reduce your debt. Here are some things you can follow:

1. Review your medical bills

Review your medical bills and make sure they are accurate. You may often be billed for services you may not have used or overcharged for a facility. If you find any errors in the charges, contact the medical provider’s billing department to correct them as soon as possible.

2. Negotiate with your medical providers

Contact your medical providers and negotiate a payment plan or ask if they offer any financial assistance programs or discounts. Many medical providers have programs in place to help patients with medical debt. This can help you set up a long-term payment system where you can pay a fixed part of the bill each month. This can help manage your debt along with other financial liabilities, such as rent, groceries, insurance premiums, etc.

3. Consider using a medical credit card

Some banks offer medical credit cards that can be used to pay for medical expenses with low or no interest rates. This can help you pay the total cost in a lump sum and then repay the balance in installments, making the debt much more manageable. However, be sure to read and understand the terms and conditions of the arrangement carefully before signing up for one of these cards. Remember that a credit card is also a form of debt, and you will have to pay off the borrowed money sooner or later.

4. Look into assistance programs

Several government programs and non-profit organizations offer financial assistance to individuals with medical debt. These programs include Medicaid, Medicare, and the Health Resources and Services Administration (HRSA) program. See if you qualify for any of these and then choose an appropriate option.

5. Consider filing for bankruptcy

If your medical debt is overwhelming and you have no other options, you may consider filing for bankruptcy. This may ideally be regarded as a last resort, as it can have long-term adverse effects on your credit score. Hence, it is essential to discuss it with your financial advisor.

To conclude

Medical bills can quickly pile up and cause financial stress and hardship for you and your family. Even with insurance coverage, out-of-pocket costs can still be high, leaving you concerned about protecting assets from medical expenses. However, you can save from an early age to ensure you always have enough money to fall back on when things go south. It also helps to buy adequate insurance and invest in plans dedicated to medical expenses, such as HSAs. Additionally, you can talk to a financial advisor and start planning for your potential medical expenses in the future.

You can use the free advisor match service to hire a financial advisor who can help you understand how to protect your assets from medical billsAnswer a few simple questions based on your financial needs, and the match tool will help connect you with 1-3 financial advisors that are best suited to help you reach your financial goals and requirements.

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