Many people face major problems if they have unpaid medical bills. These expenses can become a threat to your home, savings, or income. Without any medical insurance, an extended stay in a hospital can become a financial burden amounting to tens of thousands or even hundreds of thousands of dollars. If a reasonable payment plan is not initiated before processing begins, unpaid bills will become a major collection action soon after the processing period ends. Depending on the state you live in, your home, savings, or other personal property may be seized to make up for unpaid medical bills.
Even if you have insurance, the financial risk of co-pays, large deductibles, and uncovered treatments can be significant. There are cases where out-of-network physicians are brought in during a procedure without the patient’s knowledge or approval. Some policies only cover a small portion of these costs. Although the Affordable Care Act requires insurers to pay these fees, there have been instances where parts of what should have been covered were not.
What if you get medical treatment that costs tens or hundreds of thousands of dollars and your insurer denies the claim due to an unmet deductible, copayment, out-of-network doctor or unapproved treatment or drug? Who pays the doctor and the hospital? If there is no insurance or the amount is limited, your doctor, hospital or other medical institution will require you to guarantee payment in full of the charges billed, less any amount actually reimbursed by your insurer. Any amount that your insurance company does not pay will be the responsibility of the patient.
What happens when a patient cannot pay?
What happens when a large medical bill cannot be paid? Usually the result is a lawsuit filed by the hospital or a collection agency with a judgment and lien filed against the patient’s home and accounts. In most states, a portion of the debtor’s employment income can be garnished. Many times before this point is reached, the patient files for personal bankruptcy to stop wage garnishment and eliminate medical bills and other debts. This requires the confiscation of all assets, including savings, real estate, and home equity. Some of these exempt assets in bankruptcy will be turned over to the court and distributed among creditors.
How patients protect themselves against these events
Family Savings Trust
Protecting assets with a purpose-built family savings trust can often protect savings from these events. A family savings trust is exceptionally flexible in its form and can incorporate provisions that merge the features of many national arrangements into the language of the plan documents. All of your assets can be contained in the trust, but be administered by special terms tailored to that asset.
For those concerned with protection against unexpected medical expenses, a trust can be customized to specifically address the question of medical expenses. The trust may be set up to hold your home, savings, and brokerage accounts to protect those assets from unexpected medical expenses. It is often designed to protect the tax benefits associated with the home (including mortgage interest deduction, property taxes, and avoidance of the gain on a future sale), while achieving appropriate estate planning and asset protection goals. assets for the family patrimony.