Medical debt mires millions in a flood of red ink

kffmarch22medicaldebt-300x149Medical debt, one of the most shameful aspects of the U.S. health care system, has only become more so in recent times, drowning patients in an ever-rising flood of red ink now climbing past $195 billion.

The money owed by millions of Americans to doctors, hospitals, labs, Big Pharma and others in healthcare and big systemic problems have raised alarms for experts at the Kaiser Family Foundation, the Commonwealth Fund, and the Consumer Financial Protection Bureau.

The independent, health-focused nonprofits and the federal consumer agency say that soaring indebtedness — increased by the cost of coronavirus pandemic care — keeps patients from getting medical treatments and prescription drugs they badly need and that could maintain or improve their health.

The burdens of excessive medical bills for the insured, underinsured, and uninsured alike destroy consumers’ finances, not only pushing too many into bankruptcy but also damaging their credit and their capacity to get jobs, as well as vital personal, vehicle, home, and business loans.

How grim has the situation become with medical debt?

  • The Kaiser foundation estimates that more than 3 million people in the U.S. owe more than $10,000, with the total medical debt nationally exceeding $195 billion.
  • The consumer agency estimates that 1 in 5 U.S. households has medical debts and says that more than half of the sums owed not only appear on consumer credit reports but apparently has gone into collection.
  • The Commonwealth Fund finds that health coverage, especially insurance provided via an employer as most Americans get it, may not offer the financial haven that too many consumers might want from medical debt. That’s because employers have offloaded increasing burdens of the costs of health coverage on their workers via increasing premiums and deductibles — too often heavy expenses that patients must pay out of pocket and up front before their coverage kicks in. As the Fund describes this challenge:

“Premium contributions and deductibles in employer health plans accounted for 11.6% of median household income in 2020, up from 9.1% a decade earlier. In 37 states, premium contributions and deductibles amounted to 10% or more of median income in 2020, up from 10 states in 2010.”

Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, told Yahoo Finance that medical care’s high costs often leave consumers confronting tough choices — seek the care they need and risk falling into debt or skip care to save money:

“What we’ve found that it does for people with lower and moderate incomes is that it’s a disincentive for people to get care. People with high deductibles are less likely to get health care when they need it because they want to avoid the costs associated with it. We also know that when people do get health care when they have high deductibles, they’re more likely to report they carry medical debt or are having difficulty paying their medical bills.”

Rohit Chopra, who heads the federal consumer agency, described consumers’ plight with medical debt in a statement, saying:

 “When it comes to medical bills, Americans are often caught in a doom loop between their medical provider and insurance company. Our credit reporting system is too often used as a tool to coerce and extort patients into paying medical bills they may not even owe.”

Medical debt, of course, disproportionately plagues the poor, those with lower incomes, and blacks and Latinos. It poses greater problems for residents of a dozen or so states, most in the South, that declined under the Affordable Care Act, aka Obamacare, to expand Medicaid, a coverage program for the working poor, poor, the aged, and the chronically ill and mentally ill.

Due to obdurate political partisans — Republicans, chiefly, but also some hold-out Democrats (Sens. Joe Manchin of West Virginia and Kyrsten Sinema of Arizona) — Congress has failed, thus far, to provide funding for key federal actions that help people with medical debt. These include expanding Medicaid to holdout states, as well as maintaining increased Obamacare support that has allowed record numbers of the working poor and middle class to get affordable health coverage on public insurance exchanges.

While health insurance is not a perfect shield against significant financial problems with medical care, it is one of the new ways that society spreads risk out and keeps consumers from getting crushed in the health care system.

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent health care. This has become an ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which turn out to be dangerous drugs.

Chopra said the CFPB will take steps as it can to deal with financial issues surrounding medical debt, the New York Times reported:

“[T]he agency will be ‘scrutinizing’ the three major credit reporting bureaus — Equifax, Experian, and TransUnion — and their handling of medical debt to make sure it is accurately reported in consumer files, Mr. Chopra said. Medical debt, unlike a mortgage or car loan, is often incurred involuntarily. People get sick or are injured in accidents and may end up with a bill they can’t afford … Now, the bureau is being more assertive in tackling medical debt under Mr. Chopra, who was confirmed in October as the agency’s director. Doctors and hospitals typically don’t report late payments directly to credit bureaus, but they may eventually send past-due accounts to outside collection agencies. If patients can’t pay the bill, the bill collectors may report the debt to the credit bureaus. The debt can then tarnish patients’ credit files and potentially their credit score, which is calculated based on information in the report. Credit reports and scores are used by lenders to determine if you qualify for a loan, and what interest rate you pay. Employers and landlords use them to screen applicants for jobs and apartments.

“Of particular concern, the report said, is that collection agencies may be reporting inaccurate data to the credit bureaus. If bad data is ‘polluting’ consumer credit reports, Mr. Chopra said, the credit bureaus should cut off the agencies furnishing the faulty information. The bureau’s determination on whether credit bureaus should include medical debt on consumer credit reports will be based, Mr. Chopra said, on “additional research on medical billing, collections and reporting.”

These seem to be reasonable steps — to start. As patient advocates and organizations like the nonprofit RIP Medical Debt have found in their efforts to erase consumers’ challenges with this issue, medical debt is particularly cruel and nonsensical. Doctors, hospitals, and others in health care often stick the poor and uninsured with the highest possible charges for services. They don’t always tell them what they are supposed to about charitable care and financial alternatives that might ease their burdens.

They also know that medical debts are among the toughest to collect. That’s because poor patients put a priority with their few available dollars to paying for essentials like food, rent, and utilities — not medical bills. So, providers end up turning to collection outfits that aggregate and sell medical debt, with these companies aware that they eventually will snag just pennies on the dollar. Health care providers, including some in Virginia, have taken withering criticism for their Draconian piling on and attempting to collect medical debt. They then have made it vanish with relatively effect. So, what gives?

We have much work to do to ensure that parties in U.S. health care get a fair return, while also getting rid of the shameful excesses of medical debt.

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