Smart Money Podcast: Author Emily Maloney on How to Manage Medical Debt

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.

This week’s episode features a conversation with Emily Maloney, author of “Cost of Living” — essays about the cost of health care in this country. Personal finance Nerd Kim Palmer talks with Maloney about her own experience working in an ER as well as dealing with medical debt she accrued as a teenager.

Check out this episode on any of these platforms:

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• Spotify

Our take

Medical debt is a common financial burden for Americans: The Consumer Financial Protection Bureau reports that about 1 in 5 U.S. households carry it. In her book “Cost of Living,” Emily Maloney explores the personal side of the debt, and she paints an unsettling picture of how much financial stress it can cause.

In some cases, there are steps consumers can take to avoid taking on exorbitant amounts of medical debt in the first place, largely by negotiating in advance and checking carefully for billing errors. Recent changes to how credit reports handle medical debt will also help many people.

Advocating for yourself, especially during or after a health crisis, can be challenging. If you need extra support, you can hire a medical bill advocate to help you negotiate and find errors and communicate with your health insurance provider, but you’ll want to make sure any fees charged are less than the savings generated.

Our tips

• When possible, ask in advance about the cost of medical procedures: In an emergency, it’s not possible to do advance research, but if you are planning in advance for medical treatment, it can be helpful to talk to the provider about the cost and payment options in advance. You can also ask your health insurance provider about expected out-of-pocket costs. When you receive a medical bill, it’s worth checking it carefully for any mistakes and taking the time to contest errors.

• Compare different payment plans: Many providers, including hospitals, offer payment plans that allow you to make monthly installments — in some cases, without charging interest or fees. Credit cards, on the other hand, often come with high interest rates, unless you are able to pay off the balance within an introductory 0% APR offer period.

• If you are managing medical debt, know how it impacts your credit: The three major credit bureaus — Experian, Equifax and TransUnion — recently changed the way they report medical debts on credit reports. Additionally, the Biden administration changed how the government uses medical debt to make lending decisions. These changes should help the many Americans carrying medical debt.

More about medical debt on NerdWallet:

How to Pay off Your Medical Debt: 6 Options

How to Deal with Medical Bills on Your Credit Report

I Can’t Afford My Medical Bills. Should I Put Them on a Credit Card?

Have a money question? Text or call us at 901-730-6373. Or you can email us at [email protected]. To hear previous episodes, go to the podcast homepage.

Episode transcript

Sean Pyles: Welcome to the NerdWallet Smart Money Podcast, where we typically answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Sean Pyles. We have a special episode in store for you today. Regular Smart Money guest and personal finance Nerd Kim Palmer is kicking off the next episode in our Book Club series, where she talks with authors of personal finance books about their advice for how you can manage your money. So, Kim, welcome back onto Smart Money.

Kim Palmer: Thank you so much for having me.

Sean Pyles: Who are you talking with this episode?

Kim Palmer: I am speaking with Emily Maloney, author of “Cost of Living,” a series of essays based on her own experiences about the cost of health care and the impact of medical debt in this country. She shares her insight into what goes on behind the scenes from the perspective of both an ER worker and a patient.

Sean Pyles: Sounds great. Well, I will let you take things from here.

Kim Palmer: Thank you, Emily. Welcome to Smart Money.

Emily Maloney: Thanks so much for having me.

Kim Palmer: In this book, you share your own experience — both as a patient who accrues a lot of medical debt and also as an ER technician where you really observe firsthand how much money can impact the care that people receive. This is such a personal story on so many levels. Why did you decide to share your experience?

Emily Maloney: When I first started working on pieces about the ER and about my medical debt, I kept running into people who had experiences that mirrored mine. I would speak to a friend, and they would say, "Oh, yeah, I have some medical debt." Or, "Oh, we got a bill and we just ignored it." That sort of thing. It just seemed really common, but it also was highly stigmatized, right? Especially because my debt was mental health care related, but I do feel that any medical debt can be highly stigmatized. I'm hoping that in offering my book to the world, I can try and break down some of those stigmas.

Kim Palmer: In your job as an ER tech, were you surprised by how much money played a role in treatment decisions? This is something that really jumped out at me when I was reading your book. I mean, you write about being told to use fewer supplies or to conserve money in other ways that might not always put the patient first. At least, that's how it seemed to me.

Emily Maloney: A lot of small hospitals, like the one I worked at, can be in debt themselves, because they're not able to collect the bills on their patients. So, especially if you're working in an area of high need and low insurance, you're ending up with potential for the hospital itself to be in debt, which was true for the hospital that I was working at.

Kim Palmer: In the chapter "Heartbroke," you talk about what happened when an EKG machine gave faulty readings. EKG machines, of course, monitor electrical signals from hearts, and one day the one you were using in your ER gave everyone the same reading. It sounds like that machine was admitting people who maybe didn't need to be there and clearing people who might have needed to be there. Did you see a lot of this kind of thing happening where understaffing, undertraining, maybe older equipment led to expensive mistakes when you worked in the ER?

Emily Maloney: Absolutely. I think what actually happened here was user error, not a broken machine explicitly, if that makes sense. So the leads are swapped, and that can yield false information. I don't know what happened with these patients who were admitted under false or incorrect information from the EKG results. But I do know that user error is very common in any setting like this. Because you're constantly making hundreds of small decisions, and because of the lack of human capital, you're understaffed or undertrained, it's very common to end up in this situation. I know that what occurred in the ER wouldn't have happened had we had newer equipment.

Kim Palmer: I mean, it's pretty disturbing to think that you can enter the ER, you expect a certain level of care — you might not receive it as this situation shows. Then, at the same time, other people, you could end up paying a lot for care you don't need or might not need.

Emily Maloney: Right. Right. Absolutely, I think that can be true. There's so many opportunities for error. We don't have a nationally standardized electronic medical record system, and so what gets entered in one hospital system's EMR might not match up with another hospital system's EMR. So if you travel or if you go to a different hospital system, the information that they might have for you might be out of date or incorrect. So there's so many different places that I think we could improve. But in the meantime, it's costing patients a lot of money.

Kim Palmer: I want to talk more about your medical debt too, which is such a common experience. The Consumer Financial Protection Bureau reports that 1 in 5 U.S. households owes medical debt. You share that a suicide attempt when you were 19 led to a large amount of medical debt as a result of your treatment and related care. I want to stop here briefly to share that there are resources available for people having suicidal thoughts, such as the Suicide and Crisis Lifeline at 9-8-8. People might be wondering how you accrued so much debt during your recovery. Can you tell us a bit about that — did you have health insurance at the time?

Emily Maloney: I did, but it didn't cover mental health care.

Kim Palmer: How much of a financial burden was that for you?

Emily Maloney: It was huge. It was something I tried to ignore and was basically unsuccessful at ignoring. It weighed heavily on everything I did, from the work that I chose to do, to I was routinely getting called by a collection agency. They were trying to get me to increase my payment. It was very stressful at the time, and I feel like my experience, unfortunately, is a common one.

Kim Palmer: Did it impact your ability to do other things, like I imagine, maybe impacted your credit score or your ability to afford things like a car, or home, or just general everyday life?

Emily Maloney: Absolutely. My medical debt showed up on my credit report for many, many years.

Kim Palmer: Yeah. That's one thing I wanted to ask you about. So as of July 1st of this year, there have been some changes in how medical debt shows up. Equifax, Experian and TransUnion have agreed to remove most medical debts from consumers credit reports within the next year. Specifically as of July 1st, paid medical debts no longer show up on credit reports. In addition, no new medical debts will show up on credit reports until 12 months have passed, and that's up from the current six months. By June 30th, 2023, the three bureaus will also stop reporting unpaid medical debts under $500. The Biden administration has also reduced or eliminated medical debt as a factor in government lending decisions, which does impact people's ability to get home and business loans. Do you think overall that is a positive step and something that will really help people?

Emily Maloney: I hope so. We'll see how it plays out.

Kim Palmer: Going back to your situation for a second, I know you shared your medical debt was significant. It was, I think, five figures. How did you eventually succeed in paying it off?

Emily Maloney: Well, the fact is I didn't. A strange thing happened. I had been banking at this same bank forever, and the bank was sold, and so I had to reach out. I thought, "I'll be proactive. I'll reach out to the collection agency and let them know about the change in the routing numbers or whatnot, and so that way they can start debiting my account from the new bank." When I called, it turned out that it was beyond the statute of limitations.

Kim Palmer: In your book, you tell this story, and it is probably unusual that a collection agency would alert you to this fact. You write that the collection agency went ahead, they removed your autopay information from your account. So you were able to stop making payments. We should also talk here about the different rules that affect debt. Each state has its own rules about how long a creditor can sue someone over a debt. This is known as the state statute of limitations.

Once the statute has expired, technically the collector can't force you to pay using a lawsuit, but it can continue other collection efforts. There's a whole separate set of federal rules about how long a debt can be reported on your credit reports. Typically, it's seven years and 180 days after the date the debt first went delinquent. It is worth noting, though, that having a debt fall off your credit report doesn't mean the collector can't keep trying to collect it. So your situation was probably somewhat unusual, and even you say you were surprised by it.

Emily Maloney: I'd been paying it for so long, I just figured I'd be paying it for the rest of my life, and it was mid-five figures. Originally, my bill was somewhere in the $50,000 range. I had telemetry bills. I had a bill for the ambulance. I had a bill for the ER doc. I had a bill for the emergency department care. They billed several cardiologists, who are expensive people, and so it was just a litany of things that I just anticipated paying indefinitely.

Kim Palmer: Wow. That's incredible. Well, I wanted to also ask you about people's ability to negotiate because I think this is also an area where people might not really know what power they have, if any. Is it something you would encourage people to do, to negotiate their bills with the hospital, with the other providers? I mean, how much power do people have there?

Emily Maloney: I think people have more power than they may think. Something sort of ironic about my own situation is that there were two hospitals in the area. There was the hospital where my psychiatrist had privileges, and that was the hospital that I went to. But had I been taken to the other hospital on the other side of the river, I would have not been subject to this medical debt because it's a public hospital, and the state can pick up the difference if you're declared indigent. So there's different plans like that in public hospitals and public health care, where you might not be paying as much or at all, depending on what your personal financial situation is like.

Then I think if your health care isn't comprehensive, if you have health insurance, but it's just not covering everything, then you might consider negotiating directly with whatever office that you're working with — whether it's a medical office for private practice or something along the lines of a hospitalization or something like that. I think the other thing to consider is that if you do have health insurance, start with calling them before you make any plans for if there's a surgery or something like that that you need taken care of. I would definitely start by calling the customer service line for your health insurance.

Kim Palmer: What about once a bill is already in collections? Can you negotiate at that point? Do you have leeway to negotiate bills in collections more versus the ones that are coming to you from the provider?

Emily Maloney: I do think you have more power in those kinds of scenarios because those are debts that have already been written off. John Oliver, famously on "Last Week Tonight" a couple of seasons ago, bought up a bunch of medical debt and forgave it. And you can do that for basically pennies on the dollar. So at the point at which you're at a collection agency, I think you do have a lot more power than you would otherwise.

Kim Palmer: If you do get a bill in the mail, and it's just shockingly large, and you feel like you can't pay for it, is one thing to check if mistakes were made? I mean, do hospitals and providers make mistakes and bill people more than they should?

Emily Maloney: All the time. I think it's really important to make sure that your insurance has been billed. I have now a pretty good health insurance plan through my husband's work. Recently, I ordered a medication that had to be sent from a different pharmacy, like a mail-order pharmacy. They initially quoted me like $10,000, and I said, "Well, did you run it through insurance?" They said, “No.”

Kim Palmer: Wow.

Emily Maloney: So I said, "Can you call me back once you run it through insurance?" Because my heart stopped at that point. I just thought, "Oh, my gosh, $10,000 for this medication. Maybe I don't need this medication after all." So yes, absolutely. It happens all the time. I think the thing that makes it so frustrating is that even if you think of yourself as savvy and able to manage complex personal finance issues, you still have to spend a lot of time on the phone, in email, making sure that if you do have health insurance, that your health insurance is covering what it is that they said that they would cover and that they're being appropriately billed, that they have the right codes and so forth. So it can be really tricky, and especially if you don't have a lot of time to work on that kind of thing.

Kim Palmer: I think it speaks to how people do need to speak up for themselves. But also we have to acknowledge, I mean, not everyone has that ability, especially when you're having major health challenges. It's not as easy as it sounds, probably.

Emily Maloney: Right, right. Not at all. I've worked in the industry, in health care. I know some of the codes that need to be used for certain things. I have that experience. I have that lived experience, but a lot of people don't, or they don't have the time to sit on the phone all day with their insurance company. So I do think that we're going to need to make some dramatic and drastic changes.

Kim Palmer: I wanted to ask you what else you think should change? Are there other changes in regulation that would help people?

Emily Maloney: I am a big proponent of a single-payer health care system. I wrote this book basically as a treatise or a love letter to a single-payer health care system that we just, unfortunately, don't have in this country. But barring that, there are a lot of different things. I think that, for example, we don't have enough residency spots for physicians. But if those spots were funded, then people would have more access to health care, because there would be more physicians and more people providing care, and so people would be able to get their basic needs met. But yeah, if we could have a single-payer health care system, I think that would be fantastic.

Kim Palmer: What about for consumers, assuming we're working within the same system and there aren't other big changes, what else can consumers do just to make sure they're as protected as possible if they do suddenly face a situation like this, or a huge bill that they weren't expecting? Are there other things you can do in advance to sort of be prepared and to protect yourself?

Emily Maloney: Being as informed as you possibly can about your condition, about your needs, being able to advocate for yourself. These are all things that would result in better health care and also lower costs. Being able to sort of sit down with your health care plan, study the fine print, see what's covered, and what's not covered, and be able to make decisions from there while advocating for yourself and your needs as a patient. I think those are probably the best things I can potentially offer someone. I wish there was more, unfortunately.

Kim Palmer: I learned so much about how hospitals charge from reading your book. Thank you so much for being on our podcast. Do you have any final thoughts to share? What you’d like listeners to take away from your book?

Emily Maloney: If you are in a position where you have medical debt or you've had medical debt, just know that you're not alone. There's a lot of other people out there, and there are some potential strategies and plans you can put into place to just be less stressed and hopefully less in debt.