People with health insurance may now account for the majority of debtors that U.S. hospitals are struggling to collect, according to medical billing analysts.
This represents a dramatic change from just a few years ago, when people with health insurance accounted for only one in 10 bills that hospitals considered “bad debt,” analysts said.
“We’ve always used to look at bad debt, especially bad debt write-offs, from a hospital’s perspective, and those (patients) who have the ability to pay but don’t,” said Colleen Hall, senior vice president of Kodiak Solutions, a billing company. “. , an accounting and consulting firm that works closely with hospitals and performs analysis.
“Now, it’s not as if these patients across the board are able to pay, because (the out-of-pocket costs) are an astronomical amount relative to what their overall income might be.”
Although “bad debt” can be a controversial metric on its own, those who work in the hospital billing industry say it shows the prevalence of complex health insurance products with large out-of-pocket costs.
“What we noticed was the breaking point in the 2018-2019 time frame,” he said. Matt Szaflarski, Director of Revenue Cycle Intelligence at Kodiak Solutions. This trend has since stabilized, but remains at more than half of the total “bad debts.”
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. By 2022, those who couldn’t (or wouldn’t) pay their bills had risen to 57.6% of all hospital bad debts.
Kodiak receives every billing transaction for more than 1,800 hospitals across the United States, just under a third of all hospitals in the country. She was able to do the analysis by looking at this internal database.
The cost of health care in the United States is a constant political concern, eating up more than 18% of GDP, which is much more, and often results in worse health outcomes, than in other peer democracies. As much as 31% of the cost of health care in the United States may be driven by the complex bill administration that the public now struggles with.
Now, medical debt and its impact on Americans’ lives is an issue of increasing political concern. A recent investigation by KFF Health News and NPR found that more than 100 million Americans have medical debt of some kind, debt that often forces families to make heart-wrenching sacrifices.
In part, these sacrifices are driven by hospitals’ unusual collection practices. Hospitals refer patients to aggressive debt collectors, use state courts to seize wages, place liens on people’s homes and report debts to credit agencies, which can significantly worsen future employment and housing prospects. Although there have been some attempts to rein in these practices, billing analysts like Szaflarski say they don’t address the underlying issue — health plans designed by insurance companies that force hospitals to become debt collectors.
“These stories really grind me down,” Szaflarski said. “The idea of patient responsibility” — those deductibles and coinsurance requirements — “was not an idea created by health care providers. They were vehicles created by payers,” she said, referring to insurance companies.
Ariel Levine, director of coverage policy at the American Hospital Association, says the organization is discussing multiple solutions — such as removing hospitals from the billing equation entirely — to challenges they say arise from insurers’ decisions.
“Another thing we’re exploring recently is how to remove providers from cost-sharing altogether and require health insurance companies to pick it up,” Levine said.
Even seasoned professionals like Levine found it difficult to decipher hospital bills, such as when her child needed surgery.
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“It was really hard to look at my plan, even though I should be able to read the fine print and understand it,” Levine said.
Deductibles have come under particular scrutiny as the percentage of workers subject to high deductibles has risen in the past decade. There’s no single definition of a high-deductible health plan, but such plans typically require a copayment of $1,000 or more before insurance kicks in for one person – although costs can skyrocket. Because deductibles reset every year, they can be especially punitive for chronically ill patients — and can be much more expensive than $1,000 a year.
ObamaCare—insurance plans that people buy as individuals on state exchanges—is known for such high deductibles. Federal regulations allow insurers on state exchanges to charge an individual up to $9,450 out of pocket in 2024 – Does not include Monthly payments are called annuities. This limit is expected to rise to $14,100 by 2030. Because health care costs are rising faster than wages, these expenses are expected to eat up an increasing share of Americans’ paychecks.
Notably, it’s unclear whether rising costs to patients alone explain the breaking point seen in Kodiak’s analysis in 2018. George W. Bush signed a law in 2003 allowing insurers to sell such plans, and they quickly grew to represent about 30%. From employers in the private sector. The insurance market by 2012. This ratio remains about the same today, and “cost sharing” has continued to increase across all types of health plans.
“We’ve now seen that much of the debt we buy in and dispose of is also owed by insured patients,” said Ruth Landy, vice president of hospital relations at RIP Medical Debt, and former leader of the hospital billing team. RIP Medical Debt buys hospital debt portfolios and forgives them – part of an effort to ease a burden that many Americans see as implicitly unfair.
Furthermore, patient advocates criticize bad debt as a metric in and of itself. Hospitals view bad debts as billing patients could Pay but choose not to. But hospitals rarely screen patients for their ability to pay, and a large body of evidence shows that patients with medical debt are often low-income and may qualify for discounted or free care if they go through hospitals’ lengthy application process.
When RIP takes debt portfolios and matches accounts with third-party income data, it often shows that the vast majority of patients with delinquent debt would probably qualify for free or discounted care if their finances were evaluated, Landy said. The RIP program provides debt relief to people with incomes at or below four times the federal poverty level.
“It’s clear (to hospitals) that if someone comes to them and isn’t insured, there’s going to be a need for them,” Landy said. But if they are insured, and can’t afford insurance, their processes and systems are not designed to detect that need.
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This article was amended on January 11, 2024, because Ariel Levin of the American Hospital Association did not say that all hospitals would prefer to remove themselves from the billing equation; Levin even discussed it as a potential solution to some of the challenges created by insurance companies’ decisions.