By KIM BELLARD

Among the many things that infuriate me about the U.S. healthcare system, health systems sending their patients to collections – or even suing them – is pretty high on the list (especially when they are “non-profit” and./or faith-based organizations, which we should expect to behave better).

There’s no doubt medical debt in the U.S. is a huge problem. Studies have found that more than 100 million people have medical debt, many of whom don’t think they’ll ever be able to pay it off. Kaiser Family Foundation estimates Americans owe some $220b in medical debt, with 3 million people owing more than $10,000. It’s oft cited that medical debts are the leading cause of bankruptcy, although it’s quite not clear that is actually true.

So you’d think that helping pay off that debt would be a good thing. But it turns out, it’s not that simple.

A new study from the National Bureau of Economic Research (NBER) by Raymond Kluender, et. alia, found that, whoops, paying off people’s medical debt didn’t improve their credit score or financial distress, made them less likely to pay future medical bills, and didn’t improve their mental health.

“We were disappointed,” said Professor Kluender told Sarah Kliff in The New York Times. “We don’t want to sugarcoat it.”

The researchers worked with R.I.P. Medical Debt, a non-profit that buys up medical debt “at pennies on the dollar,” to identify people with such debt, and then compared people whom R.I.P. Medical Debt had helped versus those it had not. One set of people had hospital debts that were at the point of being sold to a collection agency, and another had debts that had already been sent to collection. And, perhaps to highlight how little we understand our healthcare system, they asked experts in medical debt what their expectations for the experiment were.

Much to everyone’s surprise, having debt paid off made no difference between control and debt-relief groups. I.e.,

• “We find no average effects of medical debt relief on the financial outcomes in credit bureau data in either of our experiments.
• We similarly estimate economically small and statistically insignificant effects on other measures of financial distress, credit access, and credit utilization.
• We find that debt relief causes a statistically significant and economically meaningful reduction in payment of existing medical bills.
• We estimate statistically insignificant average effects of medical debt relief on measures of mental and physical health, healthcare utilization, and financial wellness, with “opposite-signed” point estimates for the mental health outcomes relative to our prior.”

In short: 

Our findings contrast with evidence on the effects of non-medical debt relief and evidence on the benefits of upstream relief of medical bills through hospital financial assistance programs. Our results are similarly at odds with views of the experts we surveyed, pronouncements by policymakers funding medical debt relief, and self-reported assessments of recipients of medical debt relief. 

Amy Finkelstein, a health economist at the MIT and a co-director of J-PAL North America, a nonprofit group that provided some funding for the study, told Ms. Kliff: “The idea that maybe we could get rid of medical debt, and it wouldn’t cost that much money but it would make a big difference, was appealing. What we learned, unfortunately, is that it doesn’t look like it has much of an impact.”

If only it was that easy.

To be clear, there were three key statistically significant effects:

• “small improvements in credit access for the subset of persons whose medical debt would have otherwise been reported to the credit bureaus,
• modest reduction in payments of future medical bills, and
• worsened mental health outcomes, concentrated among those who had the largest amount of debt relieved and those who received phone calls to raise awareness and salience of the intervention.”

The authors admitted they had not expected the mental health results and had no good explanation, but their “preferred interpretation is that recipients of the cash payments viewed the transfers as insufficient to close the gap between their resources and needs, raising the salience of their financial distress and harming their mental health.”

As Neale Mahoney, an economist at Stanford and a co-author of the study, told Ms. Kliff: “Many of these people have lots of other financial issues. Removing one red flag just doesn’t make them suddenly turn into a good risk, from a lending perspective.”

The authors concluded:

Nonetheless, our results are sobering; they demonstrate no improvements in financial well-being or mental health from medical debt relief, reduced repayment of medical bills, and, if anything, a perverse worsening of mental health. Moreover, other than modest impacts on credit access for those whose medical debt is reported, we are unable to identify ways to target relief to subpopulations who stand to experience meaningful benefits.

On the other hand, Allison Sesso, R.I.P. Medical Debt’s executive director, told Ms. Kliff that study was at odds with what the group had regularly heard from those it had helped. “We’re hearing back from people who are thrilled,” she said.

As statisticians would say, anecdotes are not data.

————-

Removing medical debt seems like a can’t-lose idea. A number of states and local governments have passed programs to pay off medical debt (most working with R.I.P. Medical Debt) and a number of others are considering it.

Last fall the Consumer Financial Protection Bureau initiated rulemaking that would remove medical bills from credit reports. It has also, according to NPR, “penalized medical debt collectors, issued stern warnings to health care providers and lenders that target patients, and published reams of reports on how the health care system is undermining the financial security of Americans.”

Director Chopra admits: “Of course, there are broader things that we would probably want to fix about our health care system, but this is having a direct financial impact on so many Americans.”

If nothing else, the new study should remind us that our health system is best at putting band-aids on problems rather than solving them. The problems we should be addressing include: why are so many charges so high, why aren’t people better protected against them, and why don’t more Americans have enough resources to pay their bills, especially unpredictable ones like from health care services?

I’m glad R.I.P. Medical Debt is doing what it is doing, but let’s not kid ourselves that it is solving the problem.

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor

BY BEN WHEATLEY

We have heard it said before, and it is no longer shocking to say, that in 2021 the United States spent $4.3 trillion on health care. To put this gaudy number in some perspective, we measure it as a share of our economy and report that health care comprised 18.3% of our gross domestic product. CMS projects that health care will approach 20% of GDP in coming years—one-fifth of everything we buy and sell in this country. 

In a recent report, the Health Affairs Council on Health Care Spending and Value said that “it is unclear what percentage of GDP would represent the ideal level to devote to health care. Nevertheless, the council believes that the current expenditure and rate of growth are higher than they should be….” The council observed that the dollars devoted to health care seem “disproportionate to the health they produce” and noted that the spending places a “significant burden on families, employers, employees, and government.”

We spend approximately $12,900 per person per year on health care. By comparison, the average cost of health care per person in other wealthy countries is only about half as much.

These metrics seem to indicate that the United States is spending too much on health care, but nevertheless we struggle to identify the “right” amount. However, if someone were to ask me: “In an ideal world, how much would we spend on health care?” I would propose a very simple answer: zero. This is because, clearly, in an ideal world, no one would be sick.

You may argue that this is a bit of sophistry. Obviously, we don’t live in an ideal world, we live in the real world, and here on planet earth, sickness and dread diseases are rampant. According to this world view, sickness may be viewed as intrinsic—a fundamental feature of the imperfect world that we live in. But I am an optimist by nature. I believe that it’s possible to reduce the burden of illness, and that our explicit objective should be to reduce the burden of illness to zero. 

In 2001, the Institute of Medicine released Crossing the Quality Chasm: A New Health System for the 21st Century. Everyone remembers the six aims: care should be safe, timely, effective, efficient, equitable and patient-centered. But this was only the report’s second recommendation. The first recommendation said this: “All health care organizations, professional groups, and private and public purchasers should adopt as their explicit purpose to continually reduce the burden of illness, injury, and disability, and to improve the health and functioning of the people of the United States.”

Our explicit purpose should be to continually reduce the burden of illness. I would simply make one addendum: our explicit purpose should be to keep moving in this direction until the work is done. That is, until the burden of illness has been removed. Even if we believe, fundamentally, that this objective is unachievable, what would be the harm of adopting it as our goal? Making it the direction that we want to go. Even in the real world, I believe our explicit aim should be to reduce the burden of illness to zero—enabling spending to follow in that direction. 

Patenting the Sun

On March 26, 1953, American medical researcher Dr. Jonas Salk announced on a national radio show that he had successfully tested a vaccine against poliomyelitis, the virus that causes polio. In the two years before the vaccine was widely available, the average number of polio cases in the US was more than 45,000. By 1962 that number had dropped to 910. As the incidence of polio declined, spending on polio-related care also declined. 

Polio was once one of the most feared diseases in the U.S. The virus can spread from person to person and can invade an infected person’s spinal cord, causing paralysis. The virus paralyzes muscle groups in the chest, making it difficult to breathe. The medical apparatus most commonly associated with polio was the iron lung, which in the 1930s cost about $1,500—the average price of a home. 

An interviewer once asked Salk who owned the patent to the polio vaccine. Salk famously replied, “Well, the people, I would say. There is no patent. Could you patent the sun?”

Polio has been eliminated in the United States, but it has not been eradicated globally. It still exists in certain parts of the world.  At the World Health Summit in 2022, the Bill & Melinda Gates Foundation announced it would commit $1.2 billion to support efforts to end all forms of polio globally. Bill Gates has said: “We have what it takes to finally wipe polio off the face of the earth.” However, he does expect to be repaid. Gates told CNBC, “We feel there’s been over a 20-to-1 return.” 

Science is beginning to yield amazing cures for intractable diseases. Wired magazine announced in late 2022 that “The Era of One-Shot, Multimillion-Dollar Genetic Cures Is Here.” The article profiled a gene therapy called Hemgenix, which gained FDA approval in November 2022 for the treatment of patients with severe hemophilia. The therapy overrides a DNA mutation that causes spontaneous bleeding episodes, some of which are life-threatening. “Unlike most drugs, which relieve symptoms, gene therapy addresses the underlying cause of a disease.” The therapy appears to offer a complete cure, at least in some cases. However, it is not yet clear whether one shot will last for a lifetime. At $3.5 million for a one-time dose, Hemgenix is now the most expensive drug in the world. 

The company, CSL Behring, said the price was determined by considering the “clinical, societal, economic, and innovative value represented by this novel gene therapy.” And they received the backing of the Institute for Clinical and Economic Review, “the nation’s drug pricing watchdog.” ICER estimated that Hemgenix would be fairly priced at $2.9 million. ICER gathers testimony, reviews evidence, and seeks to ensure that Americans “stop paying far too much for the drugs that do far too little.” However, they assert that “pharmaceutical companies that develop highly effective drugs will still be handsomely rewarded.” Under this model, savings to the system are generated, but kept in private hands. 

Our Current Trajectory

Health care spending in the US is already exorbitant, even before the introduction of these novel new therapies. Nearly 1 in 10 adults currently owe significant medical debt. More and more, employers are indicating that health insurance is too expensive to provide to their employees. And the nonpartisan Congressional Budget Office warns that a fiscal crisis is looming if debt levels continue to rise as projected. Healthcare costs are a major driver of the national debt.

It is important to recognize that not all health innovations are expensive. Take, for example, the pasteurization of milk. Milk used to be a common source of the bacteria that cause tuberculosis, diphtheria, typhoid fever, and other foodborne illnesses. The incidence of disease outbreaks associated with milk has fallen dramatically since pasteurization became widespread.

Moreover, sometimes the profit motive slows innovation down. A Canadian start-up modified the psychedelic DMT to treat depression and a recent study revealed very promising results. However, the study “failed to excite investors.” The founding partner of a venture capital firm said, “these results are extremely promising, but they had no effect on the share price, zero.”

Sam Altman, the chief executive of OpenAI (which brought us ChatGPT) thinks psychedelic drugs will revolutionize mental health care and addiction treatment. However, the business model is not there yet. Amy Emerson, CEO of another company in the same space, noted that profitability depends on things like making sure insurers cover the drug, developing billing codes for the therapy, and training clinicians to administer it. “All of those things are a heavy lift,” she said. So, monetization is hindering innovation in some cases. 

A New Direction

In 2016, the Obama Administration launched an effort to “end cancer as we know it.” The Cancer Moonshot, initially funded at $1 billion, aimed to reduce cancer deaths by half within 25 years. “But in the costly world of biological research, such a sum may be better described as a cancer slingshot, researchers said.” “We’re not going to the moon on $1 billion.”

In 2022, President Biden relaunched the Moonshot and his most recent budget includes $2.8 billion for the effort. However, cancer research is one of the items targeted for cuts in the current debt ceiling fight. Regardless of your political persuasion, it seems fair to say that health care is bumping up against serious financial constraints. Consequently, we need to be open to “disruptive technologies and business models that may threaten the status quo.”

Bringing the burden of illness to zero is (admittedly) a highly aspirational goal. But it can also serve as a gauge on how we’re doing in the present. For GPS to work, you have to enter in the correct destination. Our aim should be to bring the burden of illness to zero, enabling spending to also decline.

Ben Wheatley has 25 years of experience working in health policy with organizations including AcademyHealth, the Institute of Medicine, and Kaiser Permanente.

BY KIM BELLARD

It’s a lot more fun to write about exciting new technologies, or companies in other industries that healthcare could learn from, than to pick on healthcare for its many, well-known shortcomings, but there was an article in JAMA Forum last week that I had to note and perhaps expand on: A New Category of “Never Events” – Ending Harmful Hospital Policies, by  Dave A. Chokshi, MD, MSc and Adam L. Beckman, BS (he is also an MD/MBA student).  

The concept of a “Never Event” is well known by this point.  Coined some twenty years ago by Ken Kizer, MD of the National Quality Form (NQF) and soon widely adopted and expanded, it recognizes that healthcare sometimes has egregious errors that shouldn’t happen:  the wrong foot is amputated, the wrong drug/dosage is given, surgical instruments are left inside a patient, and so on.  Organizations like The Leapfrog Group exist largely to try to measure and compare hospitals on such patient safety issues.

Never Events still happen, but hopefully less often.  However, Dr. Chokshi and Mr. Beckman argue that clinical events are not the only ones that should never happen, that there are several other categories that should be included as Never Events. “Hospitals should be places for healing,” the authors say, “not agents of harm—and there is precedent for addressing harm in hospitals. Now, another category of hospital behaviors should be rendered unacceptable—a different set of never events. Five are especially harmful.”

Their list:

1. “Hospitals should never pursue aggressive debt collection tactics against patients who cannot afford their medical bills;
2. A hospital should never spend less on community benefits (such as providing care to uninsured; patients or funding public health programs) than it earns in tax breaks from its nonprofit status
3. Hospitals should never flout federal requirements to be transparent with patients about the costs of their care;
4. Hospitals should never provide compensation worth less than a living for hospital workers;
5. A hospital should never deliver racially segregated medical care, whereby it systematically underserves its surrounding communities of color;”

The authors acknowledge that other healthcare organizations (they mention insurance companies and medical device makers, but could have easily included pharma, dialysis centers, certain physician practices, etc.) are similarly at fault, but felt hospitals deserved particular attention because “the fact that the majority of hospitals are engaged in 1 or more of these 5 behaviors…necessitates attention.”  

I’ve written before about shady hospital billing practices, those faux community benefits, issues with price transparency, inadequate wages for healthcare workers, and inequities in health care, so I feel pretty good about their list.  I hope the article gets the attention it deserves, and that “visionary hospital leaders” and thoughtful policymakers take appropriate action, as the authors call for.  I hope that it doesn’t take another twenty years for these five things to be seen as Never Events.  

But they’re not enough.

I don’t minimize the challenges of ending, or at least lessening those five practices, but I don’t want us to lose sight of other health-related events that we, as a society, should not tolerate.  The complete list is longer than I have room, time, or energy to fully enumerate, but here are some of the ones that should have highest priority:

Hunger: No one in America should go hungry.  Yes, we have SNAP, school lunch programs, and other efforts to make food more affordable/available, but an estimated 34 million people – including 9 million children, are still “food insecure” – never quite sure when or what their next meal might be.    

Housing: No one in America should go homeless, or live in housing that poses risks to their health.  Estimates for both are tricky, but there is thought to be at least a half million homeless at any point in time, and another 6 million homes (with 16 million living in them) considered severely or moderately substandard housing (some estimates put the number as high as 30 million homes).  

Clean air/water: No one in America should lack clean water/air. We like to think we live in a developed country, but some 2 million people are estimated to lack clean water (and sanitation); think Jackson (MS) or Flint (MI). Even more shocking, 135 million Americans are forced to breath polluted air.   

Hiding errors: No one in America should be subject to medical errors that could have been prevented. How many medical errors are there?  Who is committing them, and why (e.g., incompetence versus situational)?  We don’t know.  Due to concerns about medical malpractice, professional autonomy, and other factors, we don’t have solid mechanisms to report errors, analyze and act on them, or to ensure that problematic healthcare professionals either get better or get out the profession.

Ineffective/harmful care: No one in America should receive care that is unlikely to actually help them. We don’t like to admit it, but most of the care we receive is not based on solid research. We don’t like to admit it, but even when such research is available, it may take years, if ever, for practitioners to adopt it.  Too much care is based on “this is how I was trained” (whenever, wherever that was) or “this is how others around me practice” (whomever, wherever that is).  “How much will I make from this?” also plays too much of a factor.

Limiting care: No one in America should be prevented from receiving care they need. “Rationing” healthcare is universally denounced by politicians, but anyone working in healthcare or receiving healthcare knows it happens all the time. It happens when people can’t afford it, it happens when tests or procedures are denied, it happens when patients are forced to only use network providers.  Not all care is appropriate (as noted above), more care isn’t always (or even usually) better, and some healthcare professionals cause harm, but here’s the thing — the goal of everyone in healthcare should be: how do I help get this patient to the right person/place for the right kind of treatment?  

All of these should be Never Events in a civilized society and in a healthcare system that we’re proud of.  Sadly, they’re not, and I’ll bet that Dr. Chokshi and Mr. Beckman see their list accomplished before I see mine.  But that doesn’t mean we shouldn’t be working on both.  

Kudos to Dr. Chokshi and Mr. Beckman for broadening the issue, and it’s on all of us to make Never Events – of all kinds — never happen. 

Kim is a former emarketing exec at a major Blues plan, editor of the late & lamented Tincture.io, and now regular THCB contributor.

By BOB HERTZ

The only way to fully eliminate medical debt would be a comprehensive single payer plan, which allowed no fees at the point of service.

However, such a plan would require setting all prices for all doctors, hospitals, labs, and drug companies. All providers would have to be satisfied – in advance — with what the government is going to pay them on each procedure.

Countries like Germany accomplish this through collective bargaining. Japan, France, Taiwan, Israel and Scandinavia also have national fee schedules. However, I do not think you could get all the providers in Toledo to agree on one schedule, much less every provider group in America. 

Single payer would also require new income and payroll taxes of at least ten per cent more than we pay now, if we want first-dollar coverage.

Most single payer countries have a 10-20% sales tax as well. The Europeans are not shy about taxing the middle class for health care.

Based on consumer surveys, there are between seven and ten million households with over $10,000 in medical debt. However, there are about 20 million households who earn over $200,000 a year and would have to pay higher taxes to solve this problem.

It took a historic financial crisis, plus a fair amount of Democratic self-delusion, just to get Obamacare passed. One Congress after another has refused to impose relatively tiny cuts in Medicare reimbursements.

Therefore ………. the best we can do for now is to

a. cancel the unconscionable debts

b. provide more federal funding for emergency care

c. create supplemental insurance that will pay the deductibles

HERE IS A SUMMARY OF OUR ‘FULL-SCALE ASSAULT’:

APPENDIX

Here is what can happen when a state does nothing about medical debt….

Kansas is a living laboratory for far-right experimentation with extreme economic cruelty: a state where Medicare expansions has been thwarted, where xenophobia has penetrated the state bureaucracy, where a grifty, incompetent lawyer has apologized for slavery.

People are growing ever-sicker: poverty is strongly correlated with poor health outcomes—especially in America, where being poor means you can’t afford preventative care, and even more especially in Kansas, where limits on Medicaid expansion exclude even very poor people from access to subsidized care.

Enter hospital debt collectors.

Propublica’s Lizzie Presser reports from Coffeyville, Kansas, home to Coffeyville Regional Medical Center, the only hospital for 40 miles, now that its rivals have all shut down. In Coffeyville, magistrate judges are appointed, and need no special training to hold the office. Judge David Casement—a cattle rancher who never studied law—presides over medical debt cases, which he hears quarterly at ‘debtor’s exam’ days. At these proceedings, debt collectors—who do have law degrees, and whom the judge relies heavily on for legal advice—are allowed to quiz sick people, or the parents or spouses of critically ill or dying people, about their assets and income and to ask the judge to order them to divert what little they have to Coffeyville Regional Medical Center, minus the debt-collector’s healthy cut. But sick, poor people can’t always afford to travel to the courthouse. Ssometimes, it’s because they have to go see a specialist (or take their kid or spouse to see one); sometimes it’s because they had to sell their car to make a previous debt payment.

When this happens, debt collectors like Michael Hassenplug from Account Recovery Specialists Inc (ARSI) can ask the judge to issue a warrant for the debtor, who is taken to the local jail and hit with $500 in bail. Many can’t pay it, and stay in jail (Hassenplug insists that they’re not in jail for their debts, but rather for their failure to appear), while others who manage to borrow the $500 often find that it is then surrendered to the hospital and its arm-breakers. Meanwhile, the debts mount: in addition to punitive, usurious interest, the hospital and its debt-collectors reserve the right to lard on fees, fines and penalties.

Bob Hertz is a retired insurance broker. He learned about health care from Uwe Reinhardt, Joseph White, Dr. Robert Evans, and George Halvorson a fellow Minnesotan.

By BOB HERTZ

The first section of this article stated that many forms of medical debt can be reduced or cancelled by stronger enforcement of consumer protection laws. These debts are not inevitable and are not due to poverty. It would not require trillions of federal dollars to cancel them, either – just the willingness to go against lobbyists.

Therefore I advocate the following attacks on medical debt:

Phase One

We must cancel balance bills and surprise bills if there was no prior disclosure.

In most cases, providers will not have the right to collect anything more than what the  insurers pay them.

Phase Two

We must cancel the older, inactive “zombie debts” that are being purchased by collection agencies.

This line of business must terminate. Providers throughout the country are selling uncollected medical debt for pennies on the dollar to collection agencies, who aggressively attempt to force patients to pay the full amount due. These debt collectors harass patients at work and at home, deploying unscrupulous tactics even after the statute of limitations on the debt has expired. 

Debt collection lawyers can file hundreds of suits a day, often with little evidence that the alleged debt is actually owed. Once a lawsuit is filed, the process is stacked against defendants, the overwhelming majority of whom are not represented by an attorney. And collectors have a big advantage in small claims courts, which provide very limited due process protections to debtors. 

The Debt Buyer Industry has a bad reputation and for good reason. They are typically far more aggressive than the original creditors or their hired debt collectors. There is nothing redeemable about the junk debt buying business. 

Per Senator Sanders: “Forcing additional stress and hardship on someone for the ‘crime’ of getting sick is immoral, unconscionable, and un-American. We will eliminate past-due medical debt.”

Of course, all cancellations of unconscionable debt must be income-tax free. 

Phase Three

Debts can also be reduced by expanding the Affordable Care Act:

• Subsidies should be tied to low-deductible gold plans
• Subsidies should be available at all income levels – not just stopping at 400% of poverty
• We can let families join the ACA exchanges if their workplace plans do not cover spouses and children (i.e. solving the ‘family glitch’)

Phase Four

We must create a subsidized, guarantee-issue “Cost Sharing Reduction Insurance” that would be available to any American – not just those who have low incomes and  a Silver plan under the ACA.

This policy would cost about $125 a month and it would pay your deductibles – similar to the Medicare Supplement plans that seniors can purchase. Rates can be kept stable by government reinsurance – again, just like Medicare. The cost of reinsurance might be $50 billion a year… but we spend that much and more to lower the cost of Supplements and Drug Plans for seniors.

Low-deductible health plans have just become too expensive for many American businesses and consumers. Adding on a separate policy to pay deductibles is not a perfect solution, but it is a workable one.

Here are specific regulations to continue the assault on debt:

RULE #1: No  balance bills or out-of-network charges will be valid without arm’s length prior disclosure.

If a procedure can be scheduled, it can be quoted. Every other industry gives price quotes that are the basis of a valid contract – with fees and charges spelled out, and remedies if unavoidable extra costs appear.

A medical provider who does not offer a quote when requested will not be able to enforce payment. No prior disclosure means no patient liability, for scheduled procedures. Of course this solves the surprise bill problem: if extra fees are not disclosed in advance, then the patient may not be billed extra.

Also—If an insurance claim is denied, the patient is not liable. The provider and the insurer can fight it out.

For emergencies — when no contract is possible — providers can only charge an average of what they actually collect from all insurers. Networks are completely irrelevant.

I would call this “statutory protection.” You shouldn’t need to buy expensive insurance just to be protected from price gouging.

These laws must be national and they must be enforced. Some hospitals will continue to send balance bills even if they are illegal. Therefore, we must have a “Patient Financial Protection Bureau” with the power to nullify price-gouging. We need officials who are willing to assess fines, harassment, audits, bad publicity and even federal  takeovers if needed.

(Price gouging happens much less to persons over age 65, incidentally. Medicare Advantage (MA) patients are not responsible for out-of-network charges in emergency care settings. Federal law also limits how much providers can bill the patients in traditional Medicare, in most medical situations—although specialty drugs create their own bankruptcy issues )

RULE #2. Emergency care must not be subject to insurance deductibles.

Co-pays such as $250 for ER care would be acceptable, but nothing more.

In other words, even if you have a plan deductible of $4000 or more, any emergency will be covered at 100%.

Otherwise we get awful scenes such as occurred on the Boston subway.  A woman’s leg got stuck in the gap between the train and the platform. It was twisted and bloody. She was in agony and weeping, but she begged that no one call an ambulance. “It’s $3000,” she wailed. “I can’t afford that, I have terrible insurance.”

 RULE #3. The uninsured will be charged Medicare rates for hospital care.

All existing “chargemaster” bills must be cancelled, never to return.

The largest bills are almost never collected anyways. Wage garnishment generally doesn’t bring in very much for hospitals either. In a recent study of Virginia hospitals, the average total revenue from garnishment was 0.1% of the hospital’s annual cash flow.   The average “award” for hospitals that won lawsuits against patients was just $1,400.

Hospitals who serve the poor and uninsured do have a legitimate problem, however.  Hospital bad debts are running over $50 billion per year. Some hospitals do offer 70% discounts to the uninsured, and they still must deal with bad debt.

The solution is not meaner collections—it is more help from government. Medicare’s current aid to hospitals for patient bad debt are stingy and insufficient. (I would favor a small tax on the uninsured. The ACA mandate was not a bad idea, but the money that is raised should go toward hospital care. A person who has money but stays uninsured will still receive emergency care, and a tax to pay for this is not out of place.)

RULE #5  Limits must be placed on debt collectors:

Some non-profit and “public” hospitals­ aggressively sue low-income patients for medical bills. (At least until the media catches them doing it.) They sue people who would actually be exempt under their own charitable guidelines. Some have even filed lawsuits against their own employees to collect unpaid medical bills. 

Charity care guidelines should be national, universal, and generous, with harsh punishments given to hospitals that ignore them. 

The National Consumer Loan Center has made a good start in their proposed Model Medical Debt Protection Act, which would ban the following:

• Any action causing an individual’s arrest;

• Causing an individual to be subject to a writ of body attachment [or similar term such as “capias”];

• Setting a lien, or ever foreclosing on an individual’s real property;

• Garnishing the wages or state income tax refund(s) of a patient who is eligible for financial assistance.

Lawsuits for medical debt must disappear. No more attorney fees would be allowed, and no interest charged either. 

Under our new laws and regulations, here is a sample of what will happen to individual medical debtors 

#1  –  The debtor brought their child to the Emergency Room, and was billed  $25,000.

Hospitals use a complex, confusing chargemaster-based billing system to get more money from insurers. The list price is set unreasonably high; then the insurers negotiate a discount up to 80%. (Some insurers even bill for this ‘re-pricing’ – which is pure financial waste.)

In any event, when some hospitals see a chance to collect their invented “rack rates” from the uninsured, they go for it aggressively.

It is true that a stubborn patient can sometimes reduce their debt through negotiation… but no one has to negotiate with the fire department. Americans are used to posted prices, not haggling, and especially not haggling in medicine.  

This bill for $25,000 should be denied at the state health agency. The hospital can collect on the Medicare fee schedule.

#2  – The patient had to use an out-of-network hospital due to complications after surgery, and was billed $50,000 extra.

This event could not have been scheduled in advance. The patient had no choice in the matter.

Therefore no extra fees are due. The out of network provider must accept the standard insurance reimbursement as payment in full.

The  out-of-network providers — especially the ones owned by Wall Street — use a predatory price-gouging business model. The medical profession itself should have cracked down on them long ago.

#3 – The debtor is being harassed by debt collectors over a $40,000 hospital bill from six years ago

There will be a firm statute of limitations on medical debt. After a fixed period of perhaps five years the debt must be legally cancelled, so it can never be sold or re-sold to anyone. All interest and legal fees will also be cancelled. Lawyers who enforce medical debts can find honest work instead.

#4 – The debtor put $100,000 on high-interest credit cards to pay for cancer drugs, and now cannot cover the charge card payments.

They will probably have to declare bankruptcy. The pricing practices of Big Pharma unfortunately needs a more complex reform—and not a moment too soon. Very high drug costs are a major reason for the rising premiums (and resulting high deductibles ) in comprehensive health insurance.

However, bankruptcy only works well for one-time high medical expenses. If you have a chronic illness that will cost $1,000 a month for the rest of your life, bankruptcy is only a temporary reprieve.

#5  – The patient received a hospital bill for $50,000—after their insurance company already paid the hospital $100,000

The hospital cannot bill extra, if they did not allow the insured to approve the extra fee in an arm’s length quote and transaction. No extra payment need be made here.

#7 – The patient had a battery of tests of investigate his dizziness, and now faces a hospital bill of $15,000.

These tests could have been performed in a much cheaper location. The hospital should only be allowed to recover what an outside clinic would charge. We can go much further toward ‘site-neutral’ reimbursement, which hospitals violently resist.

#8 – The patient had a successful surgery, but the insurance claim was denied due to coverage issues. The hospital is now pursuing them for $35,000.

If a claim is denied, and the patient could not have known this was likely, the patient will not be liable. (This has been true in Medicare for decades.)

Right now, patients are often asked to pay disputed medical bills while insurers and providers attempt to resolve the dispute. If an individual does not pay the bill during this time, it can be turned over to collections. Before receiving medical care, most consumers sign consent forms agreeing that they are responsible for any medical bills their insurance company does not cover in full – this must end!

#8 – The patient needed  an ambulance after a stroke, and was billed $2800 for a 10 minute ride.

Ambulance service should be a government function, paid for by taxes, no different than fire or police. This applies to air-ambulances also.

The taxes required would be about $15 billion a year, which is a rounding error in federal health spending.

Ambulance fees must be capped at the standard Medicare amount of $450, perhaps with an increase of about 30%, all of which should be paid by government.

#9– The debtor did not pay a $600 medical bill while they were unemployed. They were sued for the debt but did not make a court appearance. Next time they got a traffic ticket, they were put in jail until they paid the medical bill.

No lawsuits should ever occur on small medical debt, and no arrests either. 

#10 – The patient owes their dentist $2,500 for past treatments, and needs addition dental care that they cannot pay for at this time (or ever).

This is a major area of medical debt – at least 12% of overdue bills — but unfortunately we do not have a quick solution. The patient must look to the following safety nets:

Dental schools – Most of these teaching facilities have clinics that allow dental students to gain experience treating patients, while providing care at a reduced cost. 

Dental hygiene schools may also offer supervised, low-cost preventive dental care as part of the training experience for dental hygienists.

Bob Hertz is a retired insurance broker. He learned about health care from Uwe Reinhardt, Joseph White, Dr. Robert Evans, and George Halvorson a fellow Minnesotan.

By BOB HERTZ

The recent proposal by Sen. Bernie Sanders to cancel $81 billion of medical debt is a very good start—but it is only a start.

The RIP Medical Debt group—which buys old medical debts, and then forgives them—is absolutely in the right spirit. Its founders Craig Antico and Jerry Ashton deserve great credit for keeping the issue of forgiveness alive.

Unfortunately, over $88 billion in new medical debt is created each year; most of it still held by providers, or sold to collectors, or embedded in credit card balances.

Tragically, none of this has to happen! In France, a visit to the doctor typically costs the equivalent of $1.12. A night in a German hospital costs a patient roughly $11. German co-pays for the year in total cannot exceed 2% of income. Even in Switzerland, the average deductible is $300.

U.S. patients face cost-sharing that would never be tolerated in Germany, says Dr. Markus Frick, a senior official. “If any German politician proposed high deductibles, he or she would be run out of town.”

In Australia, a recent proposal to establish the equivalent of a $5 co-pay for primary care visits fueled such an outcry that the federal government was forced to withdraw the idea.

Americans may be forced to take second jobs just to pay medical debt; meanwhile, the highly-taxed Europeans get free medical care and are counting their weeks of paid vacation. What is wrong with this picture?

These nations have shown that cost sharing is not necessary to keep health care spending at a level well below that of the United States. They rely on higher taxes and price controls…and yet, are those really worse than widespread patient debt?

U.S. Medical debt comes primarily from these sources:

• the uninsured
• high deductibles
• out-of-network bills
• claim denials
• specialty drugs
• emergency room care
• ‘zombie debts’ purchased by collectors

In this essay, I will show that a substantial number of these debts can be cancelled or greatly reduced.

Today, these groups run up the most medical debts:

Group No. 1. The poor and the uninsured, including those who still do not get Medicaid in red states.

 A Tennessee couple earning $13,000 annually gets no help whatsoever on medical bills. They can barely afford food or rent; so of course they incur medical debt every time they are sick.

Over 20% of these families do not have a checking or savings account. Over 30% are not working at all.If they do work, they cannot afford to join the employer’s plan.

Six full years after the ACA, there are still close to 30 million adults in the US who are uninsured. About seven million are undocumented immigrants. Another seven million are actually eligible for Medicaid, if they do get sick.

About four million could benefit from the ACA, but many are unaware of the exchanges. Up to five million are very poor, but are kept out of both Medicaid and the ACA in the red states described above. Another two to three million make too much for ACA subsidies.

This is a hard group to help. No states besides California want the undocumented to get insurance. No cities outside liberal enclaves like Seattle and New York care about health insurance for restaurant and service workers.

The poor rarely vote, so ignoring them does not trouble conservatives. Politics are often dominated by seniors—who will approve a conservative message about  ‘getting rid of socialized medicine’—while they themselves enjoy the federal socialism of Medicare.

(Not to mention Social Security, electricity, phone infrastructure, and the defense spending that comes to red state residents from the federal government,)

Group No. 2.  The under-insured, who have high deductible insurance but no savings.

Why are they walking around with deductibles they cannot afford?

At some employers, this is the only health insurance which is offered.

Even where there is a choice of plans, people with smaller incomes often select the cheaper high-deductible coverage.

If you are healthy, a high deductible plan to save money on insurance premiums may be a decent gamble at first.. But if you have a chronic illness, you will pay the entire deductible each year, and  will probably build up debt. Only a minority of employers offer  assistance to pay the deductibles.

Sometimes this group pays $500 a month or more for a porous health plan, which then leaves them with thousands in debt if they are hospitalized. 

Many families are living right on the edge financially, and they have trouble with all their debts, not just medical. Default rates are growing on their car loans and credit cards as well. They often face utility shutoffs and repossessions.

A recent study of insurance claims showed that 49% of patient out-of-pocket costs per healthcare incident were below $500; 39% were $501-$1,000; and 12% were more than $1,000. That generates an enormous amount of medical debt.

Group No. 3. The well-insured, who may still get huge out-of-network bills.

Some of their debts are out-and-out fraud. If a hospital says they are in-network, then all their contractors should be in-network – or else we have an illegal bait-and-switch. These surprise bills should be cancelled (details to follow).

• In 2011, (9 years ago) New York studied more than 2,000 complaints involving surprise medical bills, and found the average out-of-network emergency bill was $7,006. Insurers paid an average of $3,228 leaving consumers, on average, “to pay $3,778 for an emergency in which they had no choice.”

• Out-of-network assistant surgeons, who often were called in without the patient’s knowledge, on average billed $13,914, while insurers paid $1,794 on average.  Surprise bills by out-of-network radiologists averaged $5,406, of which insurers paid $2,497 on average.

Medical debt can be cruel and dispiriting—and it is also incredibly inefficient! The cost of creating a bill, sending a bill, following up, negotiating a settlement, paperwork for charity care, financial counseling, a possible lawsuit, and (rarely) getting repayments over years… The sheer administrative expense is staggering.

The average recovery on hospital bills sent to individuals is 15.3%. Non-hospital providers recover an average of 21.8% of each bill. No wonder some providers prefer Medicaid—it only pays about 50% or less of their normal charges, but that is far more than they will get in actual collections.

There are two overarching models for financing health care:

One is the Bernie Sanders model:

• Paternalistic – you get insurance whether you choose it or not
• Sympathy for the poor, minorities, and migrants (you never know when you might be among them)
• Collectively bargained – usually with large payroll taxes
• No pre-existing conditions clauses
• Hospitals are financed mainly by taxes, not user fees
• Patients are not in debt (though governments often are)
• Cost control through price controls and rationing

The Sanders model accepts the use of coercion to pay for health care. (For that matter, the Singapore health model that is praised by conservatives is filled with coercion, including public hospitals, forced savings for HSA’s and taxes for catastrophic insurance.) At some point we are all going to get sick, so letting us decide when to buy insurance is somewhat of a fool’s paradise. Millions will always make bad choices and be left to suffer; we need to be protected against our own stupidity. Coercion is —the only real issue is when and where. Even wealthy societies can benefit from forced savings. For example, a mandatory HSA deposit of 3% of income would eliminate most of the medical debts discussed in this essay.          

The other is the Paul Ryan-Newt Gingrich model:

• Based on Individual choice
• No mandates on employers to provide quality coverage
• No mandates on individuals to buy quality coverage; if they want to gamble going uninsured in order to save money, that is their call.
• Hospitals financed by user fees, insurance premiums and private savings
• No interference with anyone making money on health care – even those who prey on medical debtors
• Medical bankruptcy is OK, because the fear of it motivates the purchase of health insurance.
• Cost control (theoretically) through competition – faith in free markets
• Taxes on workers are lower – although the savings seem to be siphoned off in premiums, co-pays, and deductibles.

The Ryan model is frankly Darwinian when you get close to it. The uninsured, frankly, are usually people who make mistakes – like poor budgeting, failing in school, losing their jobs, or being born to non-rich parents. Persons with no money get much less care, and will die sooner. Those who do not buy insurance when they are healthy will suffer later on. Eventually it all starts to sounds like “culling the herd.”

The Ryan model therefore expects a lot from private charity. (Begging is preferable to new taxes.) Democratic legislators have also established Medicare, Medicaid, and SCHIP to smooth out the inevitable rough edges.

Medical debt is an obvious consequence of the libertarian model. It can only be reformed by importing controls and rules from the Sanders model.

The ideal image of high-deductible insurance features a judicious patient with at least $10,000 in HSA savings, getting bids on each procedure and therefore driving down costs. They might even have non-urgent care done abroad, which would force American hospitals to compete on price. They might decline an unnecessary treatment or diagnostic test, to save money.

Even if hospitalized, they can say to the provider, “I am paying cash, what is your best offer?” The Amish – who do not buy insurance, but save prodigiously – actually use this method.

This has some basis in fact. Cash for medical care is more efficient and will over time lead to lower prices.

However, millions of Americans have no cash, and no bargaining skills. Some diseases may not wait for patient ‘shopping.’ A desperate patient goes to the nearest hospital and then juggles utility bills and high-interest charge cards to pay down medical bills, and then begs for help from relatives or (even sadder) from GoFundMe.

The average holder of an HSA account is under age 45, healthy, and with an average income of $75,000. Whereas in low-wage America, a ‘consumer-driven’ health plan is a ‘consumer-indebted’ reality. 

Financial casualties among patients do not seem to lead to lower health care prices. Providers are just as likely to raise their prices, in order to cover the bad debt they are taking on. (Drug companies certainly do not lower their prices when their customers suffer.)

Doctors may want to forgive some patient debts, but there is a limit how often they can do this and still cover the expenses of their practice. In some cases, it is actually (and idiotically) illegal for physicians to waive the deductibles.           

Bob Hertz is a retired insurance broker. He learned about health care from Uwe Reinhardt, Joseph White, Dr. Robert Evans, and George Halvorson a fellow Minnesotan.