Medical Debt Explained: Why It's Different and How to Handle It

Medical debt is different from every other kind of debt because it is not planned. Ryan frames it as one of the big five debt categories, alongside mortgage, car, credit card, and student loans, but points out that no one wakes up choosing to incur it. Bills are often delayed, confusing, error-prone, and arrive from multiple providers at once.

The practical advice here is worth the listen. Ryan explains that medical providers are among the most willing to negotiate. A simple phone call can open up payment plans, discounts, or hardship programs. He also warns against the common mistake of paying medical bills with high-interest credit cards or a 401k withdrawal. Building an emergency fund is the best long-term buffer. Talk to your financial advisor if a large medical bill is affecting your broader financial plan.

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And, as always, Stay the Course!

Transcript

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Welcome And Show Setup

SPEAKER_00 0:01

Welcome to the Fiscal Physical Podcast. Jonathan Cweey is Mr. Tan with the founder of Alchemy Wealth Management and author of your Festival Physical, Ryan Nelson. Tune in to gain valuable insights and practical tips as we simplify complex financial concepts into digestible lessons. From budgeting to retirement planning, this podcast is your go-to resource for mastering financial literacy.

Aaron Hoisington 0:33

Welcome everybody to this week's episode of the Fiscal Physical Podcast. My name is Aaron. I am here with the founder of Alchemy Wealth Management, Mr. Ryan Nelson, one of my good pals. Um happens to be my financial advisor too and uh published author, all sorts of stuff. Ryan, uh, can keep going on. But uh uh main thing is uh how are you today? I'm doing really well. How are you doing? I'm doing solid. I'm doing solid. I hope everyone out there listening is doing well too. Appreciate you guys taking the time to uh make us part of hopefully your weekly routine. We love uh love doing these here, love doing these episodes, bringing you guys some you know, financial topics, increasing your financial literacy, if you will, and uh um let's get started on this week. Ryan, you uh you ready? I'm ready. Awesome.

Today’s Focus: Medical Debt

Aaron Hoisington 1:16

So today we are going to talk about the financial side of healthcare, understanding medical debt. Um now you've if you've been with us for a while, we've we've had several episodes related to debt previously, but I really thought that this was a good one to dive into a little bit deeper. We've we've mentioned like some debt payoff strategies, like you know, if you haven't gone and checked those out, please do. I think that they're they're very insightful. But um, you know, I I when I when I think about debt, and honestly, up until I read your book, Ryan, I I didn't really think about medical debt. Like I and I you know, I think of when people say, Oh, I have a lot of debt, I think credit card, you know, maybe for your mortgage, your car payment, these certain things, student loans, but I didn't really think about medical debt, but I think it was like one of the the pillars, if you will, that you kind of talked about in there. So um today I'm I'm excited for you to kind of dive in, talk about how you know important it is to be aware of this, be thinking about this, and kind of what medical debt is and why it's a little bit different than say like a credit card debt or something like that. So um with that, I'll kind of take a back seat here and let you uh let you do your

The Big Five Types Of Debt

Aaron Hoisington 2:23

magic.

Ryan Nelson 2:23

Yeah, I always kind of think of the big five when it comes to debt, and like you find it. That's what it was, yeah. It'd be like mortgage, car payments, credit card debt, um, student loans, and then medical debt. Um and so yeah, so to me, the main difference between medic or medical debt and those other four is medical debt is not planned. Right. Right? So if you're gonna go buy a house, you're preemptively preparing to buy that house. If you're gonna go buy a car, you're preemptively preparing to buy the car. If you're buying something on your credit card, even if it's sushi, like you're planning to go to sushi, right? You have like you have um say in the decision that's being made. You decide if you're what house you're gonna buy and how expensive it is and if you've prepared for it or not. So you prepare, you decide if you're buying a UX car and or a new car, you're

Why Medical Debt Is Different

Ryan Nelson 3:10

deciding if you're going to sushi or to Taco Bell or buying groceries. Um, you don't always have a say when it comes to medical debt, right? So that's the biggest thing to me is just the fact that it is not planned. So you don't wake up one day and say, I'm gonna go get some medical debt today. Right, right. Um it's gonna come from like an emergency or an injury or a surprise bill. Now, um what's unique about that is yeah, if you end up finding yourself in, you know, $100,000 of credit card debt because you over have overspent over the last couple of years, you know, that's something again that has a root cause that you can address and you can change and you can tighten up and you can fix, and it was avoidable. This medical debt is like I'm saying, it's it's different, right? So it doesn't mean that you're bad with money. Um, you could have great insurance, you could have good savings, um, you could have a good job, you could be well prepared, you could be on track for your retirement plan and still end up with this medical debt. Right. So it is unique, I think, in a lot of ways.

Billing Confusion And Errors

Ryan Nelson 4:06

Um, the other thing that's interesting with medical debt is man, it is confusing. Yes, right? Oh yeah. It's delayed, it's inaccurate, you get you can get invoice, you know, you could get invoices months later from multiple different uh people. You get one from the hospital, one from the doctor, one from the I don't even know. But who are you? You could end up getting multiple different bills, you get things from your insurance, you're like, do I have to pay this, or is this just a statement, right? So it can be very confusing, it can be delayed, it can be inaccurate. You might get multiple bills for the same thing. Um, so it it's it's interesting, whereas like when you have your mortgage or your car payment, it's clean, it's tidy, you know what you owe it, you know when you owe it. Um whereas medical, you may leave the hospital and have zero idea how much you're gonna end up paying. Sure. Like you just don't know is this what's being covered by insurance, what's not. Like so it's just far more, I think, confusing and convoluted um than the other four elements of uh of the big five when it comes to debts. Yeah. No, I think that's a that's a great point.

Aaron Hoisington 5:08

I think the the enigma that is like medical debt or like the bills you get from the hospital, I think are so like annoying, but they're also like, what are we what are we doing here? Like, oh wait, you're an independent contractor, but the other person actually is employed by the like what what who am I paying? Like with this kind of thing. So yeah, it's a it's a it can be quite overwhelming when you start getting those from multiple sources, and sometimes those numbers are you know have you know five figures, six figures in them, and then that gets like, whoa, all right, what am I doing here?

Ryan Nelson 5:38

Yeah, it it really can be crazy.

First Steps Before You Pay

Ryan Nelson 5:41

Um so before if you get medical debt, before you pay any of it, right? There's probably some best practices to kind of slow down, review the bills. Um, they are there are known to be errors in these bills, so make sure that it's correct. Try to get a grasp of understanding what what you're being billed. Did it go through insurance? Should it have gone through insurance, right? Try to get a grasp of all of that stuff, try to get itemized bills, um, uh again, get a talk to your insurance, understand what insurance should be covering, what they are covering. Um, so kind of I think first step would just be take a step back, try to wrap your hands or your head around what the heck is happening, what is actually owed, who is it owed to. Um again, like we just said, it's easier said than done, probably. But either way, that'd be the first step.

Negotiating And Payment Plans

Ryan Nelson 6:28

Um and the other thing would be is to remember we've talked about this on a few episodes, but a lot of these medical providers are willing to negotiate, which is intro, you know, maybe interesting. Right, yeah, yeah. So um, you know, you you there's n there's not a lot of times um maybe with some of this other debt where it's just up for negotiation. And so what's interesting, you get this medical debt, don't be afraid to call the providers and ask them for discounts or play payment plans or financial assistance or hardship or you're right, depending on your situation, just ask the questions and see what tools or resources they have to help make this a little easier on you. Um and you might be surprised just by a simple phone call, you might be surprised what discounts they can apply or what things they can do. Yeah, exactly.

Avoid Credit Cards For Bills

Ryan Nelson 7:12

Um so then you'd also want to maybe avoid uh maybe uh for some people a uh uh a quick solution is they get medical debt and they go pay it off with a credit card. So they say, Oh my goodness, I'm in over my head. This is confusing, convoluted. They pay it off with a credit card. And that can be a mistake for some people because maybe their credit card is paying them 20 or is charging them 20 plus percent interest, and maybe the medical institution was paying them something very little or even nothing for a period of time, or maybe they could have talked, like we just said, and negotiated with that um medical institution to maybe negotiate a zero percent interest or give them a payment plan. Um, so again, before you pay this off with a credit card and transfer the debt from maybe something low interest to something high interest, have those conversations with the medical company uh or medical provider to see if there's any options um sort of to to work

Real Example: Zero Percent Plan

Ryan Nelson 8:07

with you.

Aaron Hoisington 8:07

Yeah, no, and and it like we mentioned a couple of definitely call and ask. Like I I have a personal example. I my wife went to a hospital a while ago, and uh she was right in between insurances, so it was like a weird like time, like, and so she had it was just it was weird, and so like nobody really knew what to do. We got it all figured out and everything, but she had like a thousand dollars in medical debt that she had to pay. And we we were going through our finances and we're like, oh shoot, do we just do we pay this off? And she's like, Well, I was like, Well, let's give them a call, see what they'll say. And like it was it was wild. They were just like, Yeah, okay, we'll set you up on a payment plan where you pay like you could minimum's $25 a month, but no interest. Yeah. And we were like, What? Yeah, like because we were like thinking, do we pay this off with a credit card? Do is this gonna go to collections? What's this gonna happen? And the person on the phone just was just like $25 a month, like no, and you could pay it off early, no penalty fees. But and I I asked the person, like we were on speakerphone, I was like, How is that like profitable? They're like, they're like, if you guys are actually going to pay this debt, like we're going it that's a win. Right. I was like, Oh, okay, cool. Like, and they gave us like some examples, but like I think it's a really important thing of like, cool, when you're finalizing and prioritizing what debts to pay off, like definitely see, like, because a lot of times you can get those for uh quite a bit lower than say a 20% credit card or a car loan or something like that, too. So it was really it was quite eye-opening when that kind of happened.

Credit Score And Collections

Ryan Nelson 9:36

Yeah, they they seem to be known for oftentimes having zero percent interest. Uh like you said, they just want to get paid. Right. Yeah. Uh so oftentimes they'll have like zero percent interest or really flexible payment plans. Um another thing is it medical debt impacts your credit differently than credit card debt. Oh, okay. So if you leave it as medical debt, it it's gonna reflect on your credit score differently than if you transfer it over to credit card debt. So something to think about as well. Um also for whatever reason, collections agencies for medical debt are often more more able to negotiate as well, um, similar to the the medical um institutions originally. Um but so there's you know, again, it just seems that medical debt seems to be more flexible in general. Right. Um so just take advantage of that flexibility,

Don’t Ignore It; Seek Flexibility

Ryan Nelson 10:21

I guess. If if there's one thing you take away from this, understand that yeah, this was a debt that you can't usually be planned for, um, but it's also probably the most flexible. So the issue is when people just ignore it. Right, right. So it's this big number, it's scary, they just kind of what's it? Is it ostriches that stick their head in the sand? Yeah, exactly. So you just pull like an ostrich, stick their head in stand sand. Like you don't want to just ignore this. Like w this is typically gonna be flexible. Work with the institutions, um, and you might be shocking, shocked or surprised.

Aaron Hoisington 10:52

Yeah, exact exactly. With those kind of and and I think that uh you know, I do want to call out for our because we are a global podcast, there's people listening in multiple different countries. Like, you might just be

Global Context And HSAs

Aaron Hoisington 11:02

like, What what do you mean medical debt? Like that could be like a question that people might be asking somewhere wherever they're listening. So uh it might be more more specific to the United States, but depends on where you're where you're at there. But I was just thinking about that for our hundreds of thousands of listeners all over the globe of like, hey, like, what do you mean you have to pay for these things? Yeah, so that's an interesting kind of piece to take with a grain of salt when you kind of think take a step back on it.

Ryan Nelson 11:26

Exactly. Yep. And then the other thing to think about in like almost so while so so I've said that you can't prepare for like oftentimes you're right, you're not going out and saying, hey, I'm gonna go get some medical debt today, right? Right. The flip side of that coin is I can st I know I don't I'm not I didn't wake up today saying I'm gonna go get medical debt. But what I did do is I've preemptively planned and created an emergency savings account so that I know that I don't I don't know when I'm gonna get medical debt, but there's might be I I I think there's gonna be some point in time in my life where some unexpected event's gonna happen that I'm gonna be on the hook for. And so by creating this emergency savings, it can allow me to weather some of these storms. So now if tomorrow I have a big medical debt

Emergency Funds For Unknowns

Ryan Nelson 12:07

uh an event that creates medical debt, now I have emergency savings. That's gonna help me weather this, figure this out. So, like you know, emergency savings isn't just for like a job loss or something like that. It helps weather some of these storms as well. So even though you can't you're not planning necessarily for a specific medical debt, sure, you can plan for the unknown, if that makes sense. Yeah. Um, so definitely having a robust, intact emergency savings um can help mitigate a lot of the the things we talked about throughout this process. Um but I think that's that's that's medical debt in a nutshell, I think.

Aaron Hoisington 12:40

Yeah, I think that that's awesome. And then once again, like uh if you guys haven't looks listened to some of these other podcasts we've had episodes, please go back and check them out. I can't remember the numbers of them, but if uh um you know that we also talked about a health health savings account previously too, which is a good way to prepare for these certain things. Uh um there's a lot of different topics we've covered that can kind of, you know, if you're navigating those waters, obviously probably check with like your situation's gonna be personal, check with the the proper channels, but at least you can have some resources on where you can kind of get started with it at least

Light Segment: Exotic Pets

Aaron Hoisington 13:09

to kind of determine what it is, what it isn't, and when you're making those decisions, hopefully you can uh reflect back on that. But uh awesome, Ryan. Appreciate it, man. And uh we'll go ahead and take a quick pause here and uh we'll be back on the other side of this. Uh everybody hang tight.

SPEAKER_00 13:21

And now to put the personal in personal finance.

Aaron Hoisington 13:28

Welcome back, everybody, the side of the physical physical podcast. Still here with Mr. Ryan Nelson. And uh, Ryan, correct me if I'm wrong, you're a you're a you're a pet lover. Oh yeah, absolutely. You grew up with uh cats, dogs, like I don't know if you had any other I don't know if you were a guinea pig guy or if you guys had every any any other thing.

Ryan Nelson 13:46

Oh nice cats, dogs, fish.

Aaron Hoisington 13:48

Nice. Love a good love a good fish, a nice aquarium. Oh, yeah. It's awesome. Some lizards in there, turtles. Not lizards, newts, I think they're called. Sure, sure. Um, but my question today, and uh I'm curious, if you could own any exotic animal as a pet safely, what would it be and why?

Ryan Nelson 14:07

Yeah, I I would own a honey badger. Yeah, God, those things I think they're so cute. Uh have you ever seen a honey badger like walk like jaunting, like walking slash rolling, running? I I they're like they kind of like skip. Skip. Yeah, they're like they're they're so cute, I think. And then their faces, they kind of look like little dogs. Like I just I just think in and they're just funny animals, I think. Um I love watching videos on honey badger. So yeah, I would say uh a honey badger's my answer. I uh you could have given me a hundred guesses.

Aaron Hoisington 14:34

I don't think I would have guessed he would have picked a honey badger, but they're also just like fearless too.

Ryan Nelson 14:40

Like, yeah, yeah. Oh dude, I saw this video of a honey badger I just probably this week. Yeah, yeah, I I I get lots of honey badger videos. But uh this these like uh I don't know, wild dogs, whatever were like this pack of like eight wild dogs got around this honey badger and were like lifting it, pulling it, you know, one had its leg, one had its head, they're like ripping it apart. And it just like squirms out of it and just like takes off. Like they like they're so tough. Yeah, they're their skinners, something I don't know. They're they're like impenetrable. Yeah, it's crazy.

Aaron Hoisington 15:14

Like that's what that's that's a that's a good that's a good one, man. I I I I mean

Wrap Up And Listener CTA

Aaron Hoisington 15:20

I I think for myself, like if uh turning the question back on me here, I I you know I I I like pets. I they're a lot of work, obviously, but like I mean, if you could have like a like a a a lion or a tiger and you could like safely own something like that, like now, not that I would say I would, but if I could, I might look into that. Like, how cool would it be to be like, oh, it's uh you know, let's go feed the tiger tonight. Like, you know, be like it'd also be like pretty like scary too, because you're like, what if this goes wrong? Or you know, you ever see the movie like The Hangover? Like there's like a the the the Mike Tyson's tiger that they have to run into. But I think one of those big cats, even like a cheetah or a jaguar or something like that, have like a nice habitat for it, I think would be would be awesome. And I'm a I'm a big cat guy just in general, too. So yeah, I think something along those lines, it would be uh probably my go-to there. Yeah. Uh uh a friend for Reggie. Yes, absolutely, yes. Yes, a friend that Reggie, Reggie, my cat, could bully. Yeah, yeah, yeah. Yeah. With no claws. Like it's crazy. But um anyway, yeah. I uh I'm I'm gonna have to watch some honey badger videos after this. Oh, you do. I went through a big craze of that like a while ago. Honey badgers? Yeah. I was actually pretty everybody has a honey badger face. Yeah, they do, and I was like pretty late to I and I like these people started saying like honey badger sayings and such, and I was like, I don't know what that means. I was like a year late to the party, and then I got I was like, oh, these are pretty cool videos. Like I watch it like they just like attack like poisonous snakes. They're so fast. They'll just like if they get like bitten by one, like their their antibodies like just can take care of the poison really quickly. Yeah, they just have to like fall asleep to do it. So it's like this weird kind of they're they're crazy animals. Yeah, they really are.

Ryan Nelson 17:06

Yeah, it's yeah, yeah. I I guess they're yeah, I guess they're badgers. I don't even know what they're I mean. I don't know where the honey piece of it comes, but oh they love honey.

Aaron Hoisington 17:13

They love is that where it's yeah, yeah. You should wash me the honey then. They're just going wild for honey.

Ryan Nelson 17:18

Yeah, that's that's when I I feel like that's when they're at their most vulnerable and they get some honey.

Disclaimers And Resources

Aaron Hoisington 17:22

They just black out and then awesome, man. Well, I appreciate it, Ron. I I'd love to hear uh uh from our various group techs we're in and uh all our listeners out there. What's your uh what would be your go-to exotic animal if you could uh own it as a pet safely, legally, naturally. So um let us know. Let us know what you guys think. And uh um I think that's all we got for today, Ryan. So I'll let you uh wrap us up. As always, stay the course.

SPEAKER_00 17:49

Thank you for joining us for the Fiscal Physical Podcast. Until next time, happy listening. And as always, stay the course. If you have a question or topic suggestions, please email us at podcast at alchemywealth.com. If you enjoyed today's discussion, subscribe to the podcast to ensure you never miss an episode. And consider leaving us a rating and review on your favorite platform. This helps other listeners like you find the channel. For more resources, you can visit Alchemy Wealth Management website at www.alchemywealth.com or find your physical physical deposit on Amazon. We'd be remiss if we didn't mention the personal finances just too. First of all, please don't take anything we say as advised. The pre-setting content is for informational and entertainment purposes only. It's not an offer or a solicitation, nor should it be construed or relied upon for tax, legal, or investment advice. It doesn't consider your personal financial situation or objectives and may not be suitable for you.