Many people face major problems if they have unpaid medical expenses. These expenses can become a threat to your home, savings or income. Without any medical insurance an extended stay at 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 treatment begins, the unpaid bills will become a major collection action shortly after the treatment period ends. Depending on the state in which you live, your home, savings or other personal property can be attached to offset the unpaid medical bills.
Even if you do have insurance, the financial risk of co-pays, large deductibles and uncovered treatment can be significant. There are instances in which out of network physicians are brought in during any procedure without the knowledge of the patient or their approval. Some policies cover only a small portion of these charges. Although the Affordable Care Act requires insurers to pay these charges, there have been instances in which portions of what should have been covered was not.
What happens if you obtain medical treatment which costs tens or hundreds of thousands of dollars and your insurer rejects the claim because of an unmet deductible, a co-pay, an out of network physician, or for a treatment or medicine that is not approved? Who pays the doctor and the hospital? If there is no insurance or the amount is limited, your doctor, hospital or other medical facility will compel you to guarantee full payment of the costs billed, less any amount actually reimbursed by your insurer. Whatever amount 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 can’t be paid? Usually the result is a lawsuit filed by the hospital or a collection agency with a judgment and a lien filed against the patient’s home and accounts. In most states, a portion of the debtor’s employment earnings can be garnished. Many times before this point is reached, the patient files a personal bankruptcy to stop the wage garnishment and eliminate the medical bills and other debts. This requires forfeiting all assets including savings, real estate and equity in real estate. Some of these assets are exempt in a bankruptcy will be turned over to the court and divided among the creditors.
How Patients Protect Against These Events
Family Savings Trust
Asset protection with an expressly designed Family Savings Trust can often shelter savings from these events. A Family Savings Trust is exceptionally flexible in form and can incorporate provisions, which merge the features of many domestic arrangements within the language of the plan documents. All of your assets can be contained in the trust-but be administered by special terms appropriate for that asset.
For those concerned with protection against unforeseen medical bills, a trust can be customized to specifically to address the issue of medical expenses. The trust may be planned to hold your home, savings and brokerage accounts with the aim of shielding these assets from unexpected medical expenses. It is often designed to safeguard the tax benefits associated with the home (including the mortgage interest deduction, property taxes, and avoidance of gain on a future sale), while carrying out proper estate planning and asset protection goals for family wealth.