By Chuck Bell
A liberatory or emancipatory approach to eliminating medical debt begins with truly hearing the voices of one hundred million Americans who are struggling with bills they can’t afford to pay. As a nation, the United States needs to fully recognize the scope and extent of medical debt as a systemic problem and take responsibility for its harsh ongoing impacts—including the income and racial disparities it exacerbates and reinforces. Only then can we begin to realize the depth of policy reforms that will be needed to extend full protections against unfair billing and collection practices.
To fully protect people across the nation from bills they can’t afford to pay, policymakers and advocates will also have to take on the elephant in the room: The United States has the most expensive healthcare system in the world, yet for all we pay, it is failing to deliver safe, affordable, and efficient care—across multiple dimensions. Many of the worrisome practices are highlighted in Dr. Elisabeth Rosenthal’s excellent book An American Sickness, based on her “Paying Till It Hurts” series in the New York Times. One of the key problems is that Americans pay higher “unit prices” for almost all of the healthcare we buy relative to costs in other countries. “While the United States medical system is famous for drugs costing hundreds of thousands of dollars and heroic care at the end of life, it turns out that a more significant factor in the nation’s $2.7 trillion annual health care bill may not be the use of extraordinary services, but the high price tag of ordinary ones,” writes Dr. Rosenthal.
And there’s also plenty of routine outrageous price gouging and profiteering. Hospitals and providers charge markups that greatly exceed the actual costs of providing care. For example, a 2021 study found that seven of the largest 100 US hospitals were charging patients more than five times the amount their care cost the hospital. Nine hospitals marked up their prices more than 10 times the cost of actual care. Similarly, “it is estimated that hospitals mark up the prices of drugs for patients with private insurance by anaverage of 140 to 280 percent,” according to one recent study.
And the medical billing and collections system is itself fraught with financial and administrative waste. “For every office-based physician in the United States, there are 2.2 administrative workers. That exceeds the number of nurses, clinical assistants, and technical staff put together. One large physician group in the United States estimates that it spends 12 percent of revenue collected just collecting revenue…. Canada, by contrast, has only half as many administrative workers per office-based physician.”
While low-income patients are in the greatest, most urgent need of protection from medical debt, we should create firm rules to prevent patients from ever receiving medical bills they can’t pay across the entire healthcare system. Otherwise, the system will continue to shift costs to other individuals, families, and employers, and postpone the day of reckoning for stamping out overcharges and creating a fairer, more rational system of pricing.
A key process reform would be to cap and strictly limit the amount of financial cost sharing for healthcare experienced by patients across the entire marketplace, so that almost all expenses are covered by insurance as a matter of course for all patients. The proliferation of high-deductible health plans has created a system whereby many patients are afraid to seek care because they are routinely charged more money at the point of service for copays and deductibles. We can and should get rid of high-deductible health plans; but in doing so, it is imperative to implement sweeping reforms in the pricing and efficiency of care delivery so as to limit the markups charged by providers and prevent price gouging for services that can and should be more reasonably priced.
Savings from innovations and improvements in care delivery and reduction in the complexity of billing and administration could then be clawed back to reduce the cost of care for patients. There is no doubt that savings of the annual national cost of $195 billion for medical debt could be rapidly found in a $3 trillion healthcare system if social movements demand these savings and if the United States finds the political will to look for them. The Institute of Medicine estimated in 2012 that $750 billion is wasted every year in our healthcare system—literally 30 percent of every dollar we were spending at the time.
Unless bolder steps are taken to limit the health system’s relentless drive to raise prices and shift costs onto patients, medical providers and insurers will continue to export additional costs to them, despite whatever reforms are achieved in the processes for billing and debt collection.
Finally, a stopgap approach to medical debt would also include forgiveness and elimination of medical debts above a certain threshold. As advocates point out, no one takes on medical debt voluntarily. Refusing medical care because of financial factors is fraught with risk and danger to patients and their families. The nonprofit organization RIP Medical Debt has already purchased $6.7 billion in medical debts from creditors for pennies on the dollar and released 3.7 million patients from the burden of paying it back. The cost of buying debt from creditors is often less than the actual debt, because creditors don’t expect to collect the full amount. “Every $100 donation relieves $10,000 in medical debt,” the organization’s website says.
Three examples of states that have begun to realistically tackle the debt problem are:
• In Maryland, advocates succeeded in “a ban on all lawsuits for medical bills under $1,000 … prohibiting arrests for medical debt and liens on homes for all patients, prohibiting wage garnishments for low-income patients, and requiring hospitals to offer income-based repayment plans … [The 2021 law also] require[s] hospitals to submit an annual report on debt collection activity” that includes impact by race and ethnicity, to bring more public attention to racial disparities in collection practices. The bill was supported by End Medical Debt Maryland, a broad-based coalition of “unions, churches, and state and local community advocacy organizations representing approximately 400,000 Marylanders.”
• In Colorado, patient advocates helped pass a new law that requires hospitals to screen patients for participation in public insurance programs and hospital financial assistance programs. The bill also requires steep discounts on hospital bills for low-income patients who do not qualify for discounted care under the state indigent care program.
• In New York, the statewide End Medical Debt Campaign initiated by Health Care for All New York succeeded in enacting reforms to cut the amount of time a hospital can sue patients from six years to three years; reduce the interest rate charged for medical debts from 9 percent to 2 percent; and close a loophole in the state surprise billing law that exempted hospital emergency rooms. In 2022, the End Medical Debt coalition continued its advocacy and passed a bill to ban liens on primary homes and wage garnishments for nonprofit hospital debts that is now under consideration by the governor. The coalition’s hard-hitting reports about medical debt lawsuits in different parts of the state resulted in several large hospital systems voluntarily announcing that they will no longer sue patients for medical debt.
“The millions under the weight of medical debt deserve help, both because medical debt is a uniquely unfair form of predatory lending and because of its devastating effects on American families,” Dr. Rosenthal wrote in a recent op-ed. “Government could take action in the short term to relieve this uniquely American form of suffering by buying the debts for a modest price. And then, it needs to tackle the underlying cause: a healthcare system that denies millions of people adequate care while still being the most expensive in the world.”
Chuck Bell is the programs director for Consumer Reports. He also serves as an advisor to We the Patients New York, which is involved in the statewide End Medical Debt campaign, and is on NPQ’s board of directors.
Source: nonprofitquarterly.org, January 24, 2023. This is an excerpt from a much more comprehensive article appearing in NPQ’s winter 2022 issue, “New Narratives for Health.”