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.