July 20, 2013

The Medical Debt Market

Til Debt Do Us Part #1
By Melvin J. Howard

Over the next few entries I will be writing about the medical debt industry. I have a unique vantage point in commenting about this issue because of my background in health finance and a unique perspective of living with different healthcare systems. America is one if the only country that have such a market. Today, virtually every single American is one really bad day from financial ruin. Did you know that the vast majority of people that go bankrupt due to medical bills actually have health insurance?  Meanwhile, there are a significant number of people that are becoming fabulously wealthy off of this system.  Our “health care industry” has turned large numbers of individuals and company executives into multi-millionaires. The healthcare industry in the United States has been so corrupt and so greedy for so long that we don't even know what a legitimate medical system even looks like anymore something has got to change. People without insurance must privately finance health care. Less well understood, however, is that medical debt is not only a problem for those without coverage. One in five adults who are privately insured struggles to pay medical bills. Even more scandalous is the fact that Americans are paying more for weaker coverage (“Shorter Lives”). According to the Commonwealth Fund, the cost of insurance has outpaced wage increases for the last ten years. Employers are shifting these costs to employees and their families. Premiums increased 62% from 2003 to 2011. For at least ten million Americans, deductibles are so high that their insurance plans are little more than illusions, providing a false sense of security in hard times. The cost of health care has also risen faster than inflation. As a result, over the last few years, families have had little choice but to accept lower wages to hold on to benefits that, in the case of a serious illness or accident, may not protect them from financial disaster.

Almost every American is affected by medical debt. 

The healthcare industry is designed to benefit a few at the expense of the rest. Debtors and non-debtors alike are forced to pay out-of- pocket for everything from basic care to life-saving operations. The minute you walk into a doctor’s office or a hospital where you get ready to open your wallet to make an upfront payment called a co-pay, before seeing a doctor. The costs can start piling up from there, even if you have insurance. If you have a serious illness or accident, it’s unlikely that your insurance will cover all or even most of the care you need. What insurance doesn't pay, you’re responsible for remember that document you singed in the doctor’s office? Predictably, medical debt discriminates along familiar lines. According the Commonwealth Fund. Among the working-age population, 39% of women have medical bill problems, compared with just 25% of men. More than half of working-age African Americans (52%) report medical bill problems, in contrast with 34% of Hispanics and 28% of whites. 

Although medical debt affects some more than others, it cuts across lines of class, race, and gender. In fact, rates of medical indebtedness are comparable for people with and without insurance (“Consequences”). Insurance companies make a profit by denying claims. Private health insurance is akin to a life raft with holes in it. It simply sinks when you most need it. Americans spent $300 billion on out-of-pocket costs in 2010; a figure over and above the cost of health insurance premiums.Who is paying the price for our profit- based system? It may be obvious that low-income people pay a higher percentage of their income for health care. But the young are also at a high risk for incurring medical debt. This is because those from the ages of 19 to 29 are more likely to lack health insurance than older Americans. Many low-wage employers that hire young adults do not provide coverage, and since the 2008 financial crisis, new college graduates have disproportionately high rates of unemployment and underemployment. Through a toxic combination of college loans, medical debt, and a recession caused by banks, many people’s financial lives are ruined before they are even out of their twenties.

The link between medical debt and bankruptcy also shatters the myth of personal responsibility that makes many of us feel as if we are to blame if we can’t afford basic needs. According to a report in the American Journal of Medicine, most people who declare bankruptcy as a result of medical debt had insurance at the time they incurred the debt. Furthermore, the majority of medical debtors who declared bankruptcy attended college, owned their own home, and had middle-class jobs. They did everything “right,” yet they were still financially devastated when a member of their family got sick or had an accident.

If you have ever needed medical care but didn't have insurance, you most likely went to a public hospital or clinic. There are approximately 1,131 public hospitals in the US. These institutions, which serve 75% more uninsured patients than their private counterparts, are a vital resource for low-income and uninsured patients. Yet, public hospitals are disappearing. Like public schools, they have been swept up in a wave of privatization. The madness extends beyond the walls of the hospital. In 2012, the Minnesota Attorney General began an investigation of Accretive Health, one the largest medical debt collection firms in the country. Documents reveal that debt collectors were allowed into hospitals where they were indistinguishable from regular hospital staff. According to the New York Times, such collectors routinely demand [that patients] pay outstanding bills and may discourage them from seeking emergency care at all.” This is a violation of a federal law requiring hospitals to provide care to anyone who needs it.