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Most Medical Debt Now from the Insured

Over the past 5 years, the proportion of US medical debt represented by insured individuals grew from 11% to 58%. Modern health insurance is failing to serve its purpose of assuring financial access to care.

January 18, 2024

Majority of debtors to US hospitals now people with health insurance
The Guardian
January 11, 2024
By Jessica Glenza

People with health insurance may now represent the majority of debtors American hospitals struggle to collect from, according to medical billing analysts.

This marks a sea change from just a few years ago, when people with health insurance represented only about one in 10 bills hospitals considered “bad debt”, analysts said.

In 2018, just 11.1% of hospitals’ bad debt came from insured “self-pay” accounts, or from patients whose insurance required out-of-pocket payments, according to Kodiak Solutions. By 2022, the proportion who did (or could) not pay their bills soared to 57.6% of all hospitals’ bad debt. Kodiak receives every billing transaction for a little less than one-third of all hospitals in the country.

A recent investigation by KFF Health News and NPR found more than 100 million Americans have medical debt of some kind, debt which often forces families to make heart-wrenching sacrifices. Hospitals refer patients to aggressive debt collectors, use state courts to garnish wages, place liens on people’s homes and report debt to credit agencies, which can drastically worsen future job and housing prospects.

“Obamacare” plans are notorious for high deductibles. Federal regulations allow insurers on state exchanges to charge an individual as much as $9,450 out of pocket in 2024 – not including monthly premiums.

Comment by: Don McCanne

Health insurance is designed to assure that a person can access health care when they need it by removing financial barriers to care. But private insurers want to keep their premiums for their insurance products competitive in the marketplace, and, even more important to them, they want to guarantee generous profits for their investors and executives.

With premiums that must be kept competitive, how do they increase profits? Obviously, they attempt to reduce spending on patient care. There are several mechanisms they use, but one of the most important is to have the patient pay a share of the costs of the care through copayments and especially through high deductibles (many thousands of dollars). That way, theoretically according to insurers, patients will obtain only the care that they need. Actually, health care experts find that patients can’t reliably prioritize care based on medical need.

Well, it’s not working out as insurers promise. Americans need and seek a lot of care and the large deductibles are pushing ever more of them into intolerable levels of debt, defeating the very purpose of health insurance.

Since the marketplace has not worked, this is where the government needs to step in, and they did, with the Affordable Care Act, aka Obamacare. But wait a minute. The ACA provided us with insurance exchanges that are selling us, guess what, high deductible plans! The ACA encouraged higher deductibles with job-based insurance. Maybe the ACA helps with coverage rates and subsidies for premiums, but it fosters flawed high deductible plans in the hands of the private insurance industry.

Though it is imperative that we make a fundamental change, fortunately we don’t have to go back to the drawing board to create it. We’ve already designed a single payer system – an improved and expanded version of our traditional Medicare program. We need to enact and implement that.

But that will only be the first step. We will need to follow through with addressing the ownership issue of the delivery system so that our patient care dollars will be going to patient care rather than to wealth building for billionaire investors. For instance, instead of hospital funds going to private equity and other investors, they will go to fund hospital operating budgets. Single payer will obviate the need for designated patient payments.

The ultimate responsibility is going to lie with us, the people. We select our legislators and the heads of the administrations (governors and the president) to carry out our wishes. If we want a health care system that is universal, comprehensive, affordable and equitable for all, then we need to educate our legislators as to the clear benefits of such a system that would serve all of society well. We could try by beginning with the difficult task of convincing the conservatives and neoliberals of how great it would be to pass legislation that would serve the US population so well, or we could simply go ahead and elect all progressives to run the government. Of course, I’m not crazy. Either way, it won’t be easy. But we have to do it!

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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