Medical Debt isn’t Treated Like Consumer Debt

 A dozen years ago my wife had a minor service performed at a hospital outpatient clinic. The hospital business office told her the service was covered by her health plan. Months later a man called claiming he worked for the hospital and requested payment of more than $700. This was news to my wife, who asked for an invoice. He wouldn’t provide one. My wife refused to pay without an invoice explaining what she was paying for. Another person called again weeks later, but he too would not provide an invoice. She was willing to pay but needed a list of denied charges to contact her health plan. She never got one and the hospital also never got paid. They stopped calling.

Indeed, others have also found that when they owed money to a hospital or clinic, they could not tell what they were being asked to pay for. This following is from The Atlantic article ‘Nobody Knows What These Bills Are For’:

Catherine… is a white-collar worker in Pennsylvania.

Yet when she started calling hospitals, doctor’s offices, and collection agencies, she realized that nobody could tell her what she was paying for and why she was being charged a certain amount. Some bills had been forgiven; some were miscoded. “I was like, I’m not going to just send you $500 for this random you-know-what,” she told me. “My takeaway was: Nobody knows what these bills are for.” So she did not pay them. She tossed new ones in the trash.

She wants to pay her bills, she told me; she’s not the type to walk out on the tab. But “it’s like no one even knows how much my procedures are going to cost,” she said. “The whole thing is so convoluted.”

The Atlantic reports that in years past unpaid medical debt could make it harder to rent an apartment, buy a car and sometimes even harder to get a job. Catherine could even have faced legal trouble and have assets seized or a lien placed on her house.  Increasingly, medical debt is not treated like other consumer debts. About 40% of Americans owe money to a health care provider, such as a hospital, clinic or physician. A small proportion of Americans have significant medical debt, with 3 million people owing more than $10,000.

Medical debt is difficult to collect. Hospitals are experts at navigating third party payers’ bureaucratic rules but are far less competent at getting their patients to pay outstanding bills. The debs are often sold to debt collectors for pennies on the dollar. Yet patients are never offered the same deal. Americans who are both poor and sick are more likely to carry medical debt that their wealthier counterparts. This is partly because you’re less able to work if your health is bad. Patients also have little control over the bills they rack up.

People often have no idea how much a medical procedure might cost, what their insurance might cover, or how much they might end up owing. Shopping around is rare and difficult to do, and sometimes—if you’re brought to a hospital after an accident, say—impossible. Billing offices fudge the numbers they send to insurers and patients, taking into account who’s paying, for what, where, how, and when. Half the time the bill is wrong.

The three big credit bureaus no longer include medical debts of less than $500 on credit reports. Perhaps patients they think the charges are ambiguous, almost fake to the point that nobody can explain the services being billed. Hospitals often send patients a statement rather than a bill, that lists dozens disaggregated line items with list prices. Even the band aids and OTC pain relievers are listed at outrageous prices.

States are acting to protect consumers from aggressive medical debt collectors:

Federal agencies are eliminating the consideration of medical debt when underwriting loans such as government-backed mortgages and small-business loans. Colorado, Rhode Island, and other states barred medical bills from credit reports. New York prohibited hospitals from putting liens on people’s homes and garnishing their wages; Delaware forbid companies from foreclosing because of medical debt; Florida and Virginia made it harder for providers or collectors to sue; Delaware and Maine banned creditors from charging interest on medical bills.

Not mentioned is Arizona, which recently capped the interest rates that could be charged.

The point of limiting aggressive collections on medical debt is an admission that much of the debt is ambiguous, overpriced, unfair and unlikely to every be paid. The Medical Industrial Complex is predicated on maximizing revenue against third party payers. Thus, insurers, health plans and government payers are their true customers, not patients. A deeper concern is the admission that medical debt is somehow different is more evidence that medical care has little in common with consumer markets.

For many years, our health care blog was the only free enterprise health policy blog on the internet. Then, when the NCPA closed its doors, the health blog stopped as well.

During this five-year hiatus no one else has come forward to claim the space. So, my colleagues and I have decided to restart the blog in connection with the Goodman Institute. We invite you and others to use this forum to share your views.

John C. Goodman,

https://www.goodmanhealthblog.org/medical-debt-isnt-treated-like-consumer-debt/