Download Medical Debt

NU 508 – Healthcare Policy, Finance & Organization
May 6, 2010
Tracy Hill
Tricia Neis
Miriam Slaugh
Allison Veeder
Medical Debt: unpaid medical expenses
owed to a health care provider, hospital,
pharmacy, laboratory or medical supply
company.
Medical Debt affects:
 uninsured, underinsured, insured,
health professionals, insurance
companies, state and federal
government
 individuals, families and healthcare
entities.




1960’s Medicare & Medicaid
Consolidated Omnibus Budget Reconciliation
Act of 1986
Health Insurance Portability and Accountability
Act (1996)
State Children’s Health Insurance Program
(SCHIP)
US has seen a substantial increase in aggregate
health spending relative to income
 Health Care costs account for 16% of nation’s
GDP – an increase from 13.8% in 2000.

Health Insurance tied to employment
 Medical condition affects ability to work→
lapse in health insurance→pre-existing
condition→ no affordable insurance→leads to
medical debt
 29 million adults have medical debt
(Zeldin & Rukavina, 2007).
 One in five citizens struggle with medical debt
and adults with chronic illness skip medications
because of finances
 47 million Americans were uninsured in 2005
( Zeldin & Rukavina, 2007).







Insurance premiums ↑ 73% between 2000 and
2005, while wages ↑ 15%, inflation ↑ 14%.
(Seifert & Rukavina, 2006)
Another study showed insurance premiums
increased 131% between 1999 and 2009, more
than 3 times salary rate increase. (Cramer,
2010).
2/3 of US Adults under age 65 (116 million)
have medical debt (Cramer, 2010)
Higher Premiums with increased out of pocket
expenses
Many have turned to credit cards to pay for out
of pocket medical expenses.
10% unemployment

Individuals delay medical treatment due to fear
of medical debt

Affects access to care

In a recent survey (n =100),10% of
underinsured Kansans reported they or a family
member postponed surgery, office visit, lab
work, and prescriptions due to cost.
(Britt, 2010)
Hospital Emergency Dept required to care for
everyone.
 EMTALA
 More Bankruptcies:
 In 2001, over 700,000 bankruptcies listed
medical debt as a major contributing factor
(Columbo, 2007)
 Bankruptcies due to medical increased from
46% in 2001 to 62% in 2007 (Tamkins, 2009).
 1.5 million Americans filed bankruptcy in 2009
(Tamkins, 2009)

HR 3421, The Medical Debt Relief Act
1.Requires medical debt that is fully paid off or
settled to be removed from the individual’s
credit record within 30 days.
2. Goal is to prevent individual credit scores to
be compromised by medical debt
Expanding health care coverage for more
individuals and families will prevent medical
debt.
Eliminating pre-existing clause
What
actions can the
government and the
healthcare industry take to
assist Americans in reducing
their medical debt, thus
ensuring a healthy
population and a strong
economy?
Patients
At some point nearly all Americans will be
a patient in the healthcare industry.
 Barrier to access: Those who are
uninsured or underinsured and already
have medical debt may become hesitant to
seek further care which will increase their
debt.
 Patients with debt more likely to not fill a
prescription or skip needed testing or
follow up visits.
 Delay of care leads to more complicated
and expensive conditions.

 Healthcare
Providers
Overwhelming paperwork, insurance red
tape and slow reimbursement making it
difficult for independent providers to
function.
 Many patients who received care default on
paying.
 Providers are forced to pursue collection of
debts by hiring expensive outside agencies
 Patients who have delayed care present
sicker.

 Hospitals
When patients delay healthcare long
enough, they often present to Emergency
Department.
 EMTALA prohibits refusal to treat patient
due to ability to pay.
 Emergency Departments provide very
expensive care that may not be reimbursed.
 Facing backlash for charging uninsured “list
prices”, harassing patients for debt
collection, and not providing enough charity
care.
 Some hospitals face revocation of property
tax exemption due to these factors.

Additional
 Financial
Stakeholders
institutions
 Communities
 Global economy
Goal
is to help citizens
recover from their current
medical debt and prevent
the incurrence of future
debt by making changes to
healthcare system.
Policy
Objectives
 Universal Healthcare
Improve pricing policies
and debt collection by
hospitals.
Medical Debt Relief Act
Do
Nothing Option
Incremental Change
Option
Major Change Option
 Continue
with the current
healthcare system that is
inefficient and inaccessible to
many of the population;
 Deny some form of universal
healthcare
 Ignore the need to develop
policies that assist people in
reducing their medical debt.
 Differentiate
medical debt from
consumer debt;
 Limit the entry of medical providers
into financial services by requiring
hospitals and other medical
providers to apply fair pricing and
payment schedules for the
uninsured and underinsured;
 Enact a Borrower’s Security Act
 In
 Enact
addition to the incremental
change option:
the Medical Debt Relief Act
 Increase oversight of lines of credit
attached to health savings account
products
 Improve screening for eligibility in public or
private financial assistance programs
 Ensure adequacy of insurance coverage
by providing universal healthcare.
1.Likelihood of eliminating medical debt and
implementing universal healthcare, by
acknowledging that the healthcare system
is inefficient and inaccessible for many.
2.Size and availability of funding options for
reducing or eliminating medical debt.
3. Ability of current policies to meet current
and future demand for medical debt relief
to consumers.
4. Political feasibility of reducing and
eliminating medical debt.
 Criteria
1:
Maintain the status quo –
nothing will change that isn’t
already being addressed
 Con- Increasing medical debt
leads to continued use of credit
cards to pay for medical bills
and to some, even bankruptcy.
 Pro-
 Criteria
2 - Pro:
 Contributing factors for the high costs of
medical care, include advances in
technology, new devices, techniques,
medications and research.
 High cost of medical care for elderly
 Complications r/t smoking/obesity
 Medical malpractice lawsuits and
cumbersome gov’t regulations
 Unnecessary use of ED’s continues to
rise, leading to more “bad debt”.
 Criteria 2 – Pro (con’t):
 Higher labor costs and
healthcare worker
shortages only expected to grow.
 United States will continue the current
quality of medical care that is not accessible
to everyone.
 Healthcare will continue to be funded by:
pharmaceutical and medical research
companies
 individuals paying for health insurance
premiums
 health insurance companies
 Medicare, Medicaid and State Children’s
Health Insurance Programs (SCHIP).

2 – Con:
 High cost of healthcare
 Criteria

alarming social and economic problems
 Greater
number of underinsured and
uninsured;

either ration or completely avoid the care
 Medical

debt
use credit cards to pay for medical expenses
 results
in outstanding credit card balances
 potential to deplete personal assets.
 Criteria
3 – Pro:
 Rational
individuals would rather have
the best care available to increase their
probability of a healthier, productive life,
even if their decision is financially
disruptive.
 Current policy - Increased cost-sharing
by consumers lessens health care costs

provision of less expensive essential
insurance policies to make insurance more
affordable.
 Criteria


3 – Con:
growing disparity between the care a person
expects to receive, what is affordable, and the
care offered
Healthcare providers need to do a better job
screening their patients for Medicaid and
SCHIP.
 Clarify and publicize financial assistance
programs for those without resources to pay
 Many already forgo medical care because of
out of pocket expenses.
 Criteria
4–
 Pro:

Those that feel system works just
fine :
 strong political voices
 actively lobby politicians to
support their views
 Pressure policy makers to
preserve the status quo
Criteria 4  Con:
 Current healthcare system does not
work.
 Will continue to rely on national, state
and local gov’t to pay for and regulate
expensive and burdensome policies
 The need for policies relating to
medical debt must not be ignored or
overlooked.
 Criteria
1:
 Pro-
Medical debt paid by a credit card is
lumped in with all consumer debt.
 Not always properly identified as
medical debt
 Need to improve health care providers’
policies related to billing, collection, and
screening for eligibility in public or
private financial assistance programs.

Criteria 1Pro- (con’t)
Patients not informed about the
availability of financial assistance
programs.
 Improve patient screening strategies
for eligibility for public programs such
as Medicaid and Health Wave
 Implement and publicize charity care
programs that provide access to care
for those without the resources to pay
 Criteria

1:
Con-
 Individuals
may not support a
universal health care plan because
of increased government oversight.
They may feel that decisions to
pursue or not pursue medical
treatments will be determined by
financial cost alone without regard
to personal wants.
 Criteria
2
 Pro-
Maintain and expand safety-net clinics.
 Maintain and expand public insurance
programs such as Medicaid and Health
Wave
 Implement a guaranteed loan program
for medical procedures and treatments
(models student loan programs)

Criteria 2 –
Con Discourage medical providers from
entering the financial services area
 Transforms the patient/provider
relationship into a debtor/creditor
relationship
 Criteria
3
 Pro Medical
credit cards
Still have high interest rates and fees, making
it difficult for people to pay – end up paying
more!
 More regulating of the credit card industry is
needed to protect consumers from medical
credit card debt
 Research is needed to determine if
households devoting high percentages of
income to medical expenses use credit cards
for other basic necessities.

 Criteria
3
 Con Downward
spiral of economy
 Rise in healthcare costs
 Premiums up 131% in last decade
 Businesses struggling = decreased
profits = cost to employee/consumer
 Responsibility of the individual to budget
for out of pocket expenses.
 Criteria




4–
ProIndividual making a good faith effort to pay their
medical bills shouldn’t have to pay >high interest
rates > penalty fees
Government must step in and help protect
consumers from deceptive credit card terms and
exorbitant interest rates and fees.
National and state hospital associations need to
take steps to increase the net yield to hospitals
from the uninsured population

More equitable pricing and better medical debt
repayment terms
 Criteria
4-
 Con

Credit card companies are reluctant to
separate medical debt from consumer
debt
 time and labor issue
 separating the two would be very
tedious and potentially confusing
 Lumping all the debt together
potentially benefits the credit card
companies
 Criteria
1
 Pro
Twin problems of health care cost and
coverage must be addressed
 Protect American families from financial
insecurity and harmful health outcomes
that sometimes result from current
system
 Ultimate solution will provide universal
access to comprehensive benefits


Criteria 1
 Con Difficult to fully analyze:
 Impact of the medical debt relief act
 Impact of universal healthcare
 Patients with access to care will increase
 Question feasibility
 Specialists fear reimbursement will reduce
salaries
 Insurance companies will use power to protect
their turf by lobbying and influencing legislators
to maintain the status quo

Criteria 2
 Pro
 Ensuring health insurance coverage that
provides policy holders access to care and
protection from financial ruin can avoid and
eliminate medical debt
 Borrower’s Security Act can help people who
have medical debt negotiate with insurance
companies, hospitals, and other health care
providers:
 fee reductions
 affordable payment plans
 more equitable treatment
 Criteria
2-
 Con New health
benefits + increased
healthcare needs = higher health care
costs
 Rate of cost increases will be
unsustainable over time =
 major policy changes:
 raise costs
 increase the federal deficit
Not likely to be accepted by policy makers.
 Criteria
3
 Pro-
Borrower’s Security Act restores the
current practices and balance of power
in lending institutions
 Limitations on credit card companies
 Raise the minimum payment
requirement to five percent of a
cardholder’s balance to curtail
excessive debt loads.


Criteria 3
 Con Health savings accounts (HSAs), high deductible
plans, and limited benefit policies:
 attribute to consumer-driven health care
 increase individual risk and
 challenge the notion of health insurance

Businesses often face double digit premium
increases
 Pass along more of the cost of the coverage,
 Put the employee at risk of incurring significant
medical debt

Criteria 4:
 Pro
 Government should consider :
 Policies that restrict the reporting of medical debt
to credit agencies
 Health Care Loan Program that parallels student
loan program:
 Grant individuals access to capital for medical
procedures and preventative services
 Create a financial incentive to seek care
 Keep the bad debt off of the health provider's
balance sheet
 Reduce personal bankruptcies
 Help spare homeowners from foreclosure and
renters from eviction
 Criteria

4
Con




More funding options mean more federal government
spending
Increase in the already astronomical national debt
Current system for handling medical debt simply does
not work
Change must occur
Implementing a Borrower’s Security Act and enacting
the Medical Relief Act are ways medical debt policies
can be successful.
Do Nothing Option
Incremental
change
Option
Major Change
option
Likelihood of
eliminating medical
debt
-
+
+
Options for reducing
or eliminating
medical debt
-
+
++
Ability of current
policies to meet
current and future
medical debt relief to
consumers
-
-
-
Political Feasibility of
reducing or
eliminating medical
debt
-
-
-
Score:
0
2
3
criteria
Summary/Recommended Policy
 Healthcare Reform must happen, to decrease the
amount of medical debt.
 Do nothing option: provides no alteration in the
current system, sit and wait. Medical debt will
continue to accumulate at a rapid rate.
 Incremental change option: change in how
medical debt is looked at by creditors. The
change would allow medical debt to be listed as
medical debt and consumer debt as consumer
debt. A decrease in percentage rate for medical
debt. Once the debt is paid in full the incident is
wiped from credit report.

Major change policy: Policymakers must address
the twin problems of health care cost and
coverage in a comprehensive manner to protect
American families from financial insecurity and
the harmful health outcomes that result from the
current system. The ultimate solution is a system
that provides universal access to comprehensive
benefits.
 By ensuring health insurance coverage provides
policy holders access to care and protection from
financial ruin, medical debt can be avoided and
eliminated.
 Decrease interest rates by credit card companies.

Change has to occur and it is up to us to make
that change. Encourage your representatives to
seek health care reform.
 As health care providers we should voice our
thoughts and recommendations to legislation, we
deal with this issue on a daily basis and therefore
will have an increase in knowledge on how it
could improve.
 Compromise by all parties involved (Democratic,
Republican, Conservative) will need to occur to
do what is need to meet Americans needs for
insurance a decrease in medical debt.










Anonymous. (2008, August 21) Report: large number of U.S. adults face medical bill
 problems. Atlanta Business Chronicle, retrieved on April 17, 2010 from
 www.bizjournals.com/atlanta/stories/2008/08/18/daily68.html.
Britt, K. (2010, April 9). Inadequate insurance leading to many ills. Lawrence Journal World,
retrieved on April 17, 2010 from
http://wellcommons.com/groups/nosurance/news/2010/apr/9/kansas-health-institute-s/
Collins, S., Doty, M., Kriss, J., & Rustgi, S. (2008). Seeing red: The growing
Burden of medical bills and debt faced by U.S. families. The Commonwealth Fund. Retrieved on
April 23, 2010 from http://www.commonwealthfund.org/Content/Publications/IssueBriefs/2008/Aug/.
Colombo, J. (2007). Federal and state exemption policy, medical debt and healthcare for the
 poor. St. Louis University Law Journal, 51, 1-25.
Cramer, R. (2010). The medical relief act. New America Foundations. Retrieved on April 18,
 2010 from http://assets.newamerica.net/blogposts/2010/financial_burden_of_healthcare_costs.
Doty, M., Edwards, J., & Holmgren, A. (2005). Seeing red: Americans driven
 into debt by medical bills. The Commonwealth Fund. Retrieved on April 23, 2010 from
http://www.commonwealthfund.org/Content/Publications/Issue Briefs/2005/Aug/.
Gruber, J. & Levy, H. (2009). The evolution of medical spending risk. Journal of Economic
 Perspectives, 23, 25-48.

Levitt, J. (2004, July). Transfer of financial risk and alternative financing solutions. Journal of Health
Care Finance, (30)4, 21-32. Retrieved May 3, 2010, from ProQuest Nursing & Allied Health Source.

Pryor, C. and Prottas, J. (2006). Playing by the rules but losing: How medical debt threatens
Kansans’ healthcare access and financial security. Retrieved on May 2, 2010 from
http://www.accessproject.org/adobe/kansas_playing_by_the_rules.pdf

Seifert, R. W. & Rukavina, M. (2006). Bankruptcy is the tip of medical-debt iceberg. Health


Affairs, 25, W89-W92.
Tamkins, T. (2009, June 5). Medical bills prompt more than 60 percent of US bankruptcies.

CNN, retrieved on March 17, 2010 from

http://www.cnn.com/2009/HEALTH/06/05bankruptcy.medical.bills/

Unland, J. (2005, October). Two Years into the storm over pricing to and collecting from the

uninsured- A hospital valuation expert examines the risk/return dynamics and asks: Would fair pricing
and fair medical debt repayment plans increase yields to hospitals and simultaneously mitigate these
controversies? Journal of Health Care Finance, 32(1), 54-66. Retrieved May 3, 2010, from ProQuest
Nursing & Allied Health Source.

Zeldin,C. & Rukavina, M. (2007). Borrowing to stay healthy: how credit card debt is related to

medical expenses. Retrieved on April 17, 2010 from www.demos.org/pubs/healthy_web.pdf.