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MEDICAL DEBT
NU 508 – Healthcare Policy, Finance & Organization
May 6, 2010
Tracy Hill
Tricia Neis
Miriam Slaugh
Allison Veeder
PROBLEM IDENTIFICATION
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.
HISTORY1960’s Medicare & MedicaidConsolidated Omnibus Budget Reconciliation
Act of 1986Health 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.
SOCIAL FACTORS 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).
ECONOMIC ISSUES 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
ETHICAL ISSUES 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)
LEGAL 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)
POLITICALHR 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
ISSUE STATEMENTWhat 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?
STAKEHOLDERSPatients 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.
STAKEHOLDERS 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.
STAKEHOLDERS 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.
STAKEHOLDERS Additional Stakeholders
Financial institutionsCommunitiesGlobal economy
POLICY OBJECTIVES Goal is to help citizens recover from their current medical debt and prevent the incurrence of future debt by making changes to healthcare system.
MEDICAL DEBT Policy Objectives
Universal HealthcareImprove pricing policies and debt collection by hospitals.
Medical Debt Relief Act
POLICY OPTIONS/ALTERNATIVES
Do Nothing Option Incremental Change Option
Major Change Option
DO NOTHING OPTIONContinue 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.
INCREMENTAL CHANGE OPTION
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
MAJOR CHANGE OPTION
In addition to the incremental change option:
Enact 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.
EVALUATION CRITERIA
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.
ANALYSIS OF DO NOTHING OPTION
Criteria 1:Pro- 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.
ANALYSIS OF DO NOTHING OPTION
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 elderlyComplications r/t smoking/obesityMedical malpractice lawsuits and
cumbersome gov’t regulationsUnnecessary use of ED’s continues to
rise, leading to more “bad debt”.
ANALYSIS OF DO NOTHING OPTION
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).
ANALYSIS OF DO NOTHING OPTION
Criteria 2 – Con:High cost of healthcare
alarming social and economic problemsGreater 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.
ANALYSIS OF DO NOTHING OPTION
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.
ANALYSIS OF DO NOTHING OPTION
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.
ANALYSIS OF DO NOTHING OPTION
Criteria 4 – Pro:
Those that feel system works just fine :strong political voicesactively lobby politicians to
support their viewsPressure policy makers to
preserve the status quo
ANALYSIS OF DO NOTHING OPTION
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.
ANALYSIS OF INCREMENTAL CHANGE OPTION
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.
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 1-Pro- (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
ANALYSIS OF INCREMENTAL CHANGE OPTION
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.
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 2Pro-
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)
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 2 – Con-Discourage medical providers from
entering the financial services area Transforms the patient/provider
relationship into a debtor/creditor relationship
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 3Pro-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.
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 3 Con-Downward spiral of economyRise in healthcare costsPremiums up 131% in last decadeBusinesses struggling = decreased
profits = cost to employee/consumerResponsibility of the individual to budget
for out of pocket expenses.
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 4 – Pro- Individual 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
ANALYSIS OF INCREMENTAL CHANGE OPTION
Criteria 4-Con
Credit card companies are reluctant to separate medical debt from consumer debt time and labor issueseparating the two would be very
tedious and potentially confusingLumping all the debt together
potentially benefits the credit card companies
ANALYSIS OF MAJOR CHANGE OPTION Criteria 1
ProTwin problems of health care cost and
coverage must be addressedProtect American families from financial
insecurity and harmful health outcomes that sometimes result from current system
Ultimate solution will provide universal access to comprehensive benefits
ANALYSIS OF MAJOR CHANGE OPTION
Criteria 1Con-Difficult to fully analyze:
Impact of the medical debt relief act Impact of universal healthcare
Patients with access to care will increaseQuestion 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
ANALYSIS OF MAJOR CHANGE OPTION
Criteria 2Pro
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 reductionsaffordable payment plansmore equitable treatment
ANALYSIS OF MAJOR CHANGE OPTION Criteria 2-
Con-New health benefits + increased healthcare
needs = higher health care costsRate 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.
ANALYSIS OF MAJOR CHANGE OPTION Criteria 3
Pro-Borrower’s Security Act restores the
current practices and balance of power in lending institutions
Limitations on credit card companiesRaise the minimum payment
requirement to five percent of a cardholder’s balance to curtail excessive debt loads.
ANALYSIS OF MAJOR CHANGE OPTION
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
ANALYSIS OF MAJOR CHANGE OPTION
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 servicesCreate a financial incentive to seek careKeep the bad debt off of the health provider's balance
sheetReduce personal bankruptciesHelp spare homeowners from foreclosure and renters
from eviction
ANALYSIS OF MAJOR CHANGE OPTION 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.
COMPARISON OF POLICY ALTERNATIVES
Do Nothing Option Incremental change Option
Major Change option
criteriaLikelihood 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
SUMMARY 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.
SUMMARY 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.
SUMMARY 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.
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