Medical Debt And Your Credit Score

Medical Credit Score

Til Debt Do Us Part #3

By Melvin J. Howard

Do ever wonder why you have a low credit score or why you never seem to qualify for the lowest interest rates on home, car, or other loans, the problem may be medical debt. This is true even if you paid an overdue medical bill. The Federal Reserve has shown that more than half of all collection accounts that negatively impact credit reports are medical debt. This is a result of the fact that health care costs are on the rise and tens of millions are uninsured. But it is also because medical debt is treated differently from other kinds of debt. Private health insurance reimbursement is incredibly cumbersome. Different benefits are often covered by different companies and at different rates, leading to a lengthy, circuitous billing process that often leaves patients holding the bag. If you have ever received a medical bill that you didn’t understand or that you thought your insurance was supposed to cover, you have been caught up in this system. If you have ever received a letter from a health care provider stamped with the notice “This Is Not A Bill,” or if you have signed a form at a doctor’s office promising to pay anything your insurance fails to cover, you have been an unwitting victim in the tangled web of medical billing, an industry that thrives on patient and health care provider confusion.

One study found that nearly one-third of respondents let a medical bill go to a collection agency because they did not understand the bill or explanation of benefits statement. Another study estimated 14 million American adults said that a medical bill was sent to a collection agency because of a billing mistake.

Confusion keeps the medical collections industry turning. It’s hard not to think that billing “mistakes” may not be mistakes at all but part of an intentional strategy to keep patients in the dark and in the red. In addition to patient confusion, medical debt is more likely to end up in collection because hospitals routinely sell medical debt to debt collectors after 60-90 days of nonpayment, far less than the customary 180 days for other kinds of debt. Health care providers rarely report paid medical bills to the credit reporting agencies. So, even if you are billed in error, your health care provider may send your bill to a collection agency before you can dispute the charge. Once in default, a medical debt stays on a credit report for up to 7 years, even if you pay the bill. Research by the Commonwealth Fund shows that, in 2010, 9.2 million people wound up in default on a medical bill because of a billing mistake.

These mistakes have serious consequences. A single paid medical bill can lower a consumer credit score by as many as 80 points. That means you will pay a higher interest rate for almost anything else you want to buy on credit, including a home or a car. The fact that a relatively small medical bill can end up costing thousands in interest charges down the line demonstrates the obscene power of the credit rating agencies. No other companies have more power over the American consumer than the top three credit reporting agencies, Equifax, TransUnion, and Experian.

If patients are powerless, so are many health care providers. It’s important to note that your doctor may be just as confused as you are. Talk to any health care worker around the country, and they tell you that they are as frustrated as patients when it comes to medical billing. Why do insurance companies and ratings agencies have so much power over our lives? Why do we live in such perpetual confusion?

The Medical Debt Relief Act attempts to prohibit credit reporting agencies from listing medical debts on credit scores. Yet, even this minor reform has little chance of passing because the credit rating agencies and insurance companies are a powerful lobby in Washington. And even if the MDRA were to make it through the Senate, it only applies to paid medical bills. Indeed, the evidence actually indicates that if we don't act things will get worse for patients and debtors before they get better. FICO has begun developing a special ratings system to rank potential patients on how likely they are to pay their medical bills. Like having a barcode tattooed on your forehead, we could be looking at a brave new world in which your credit rating determines not only whether you can obtain a credit card but whether you receive medical care when you get sick.

Nonprofits are losing out to Privatizers that has got to stop forthwith

After years of welfare reform there is evidence that privatization has been successful, not for the people who were supposed to be moved out of poverty, but for corporate profiteers.

By Melvin J. Howard

An unintended consequence of welfare “reform” has been the transformation of the nonprofit sector particularly the better-funded national organizations from community assets to market-based competitors. The traditional distinction between nonprofits investing in people and communities, and for-profit entities that make money for their owners, is becoming blurred. In some areas, for-profits and nonprofits are now in direct competition; in others, they are creating partnerships to secure government contracts. In the Harvard Business Review, William P. Ryan, a Cambridge, Massachusetts-based consultant to foundations and nonprofit organizations, looks at the changing landscape for nonprofits forged by government willingness to contract with for-profit corporations to administer government services. Ryan points out: “By playing in the new marketplace, nonprofits will be forced to reconfigure their operations and organizations in ways that could compromise their missions. The danger,” writes Ryan, “is that in their struggle to become more viable competitors in the short term, nonprofit organizations will be forced to compromise the very assets that made them so vital to society in the first place.”

One of the most insidious consequences of the San Francisco County’s welfare-to-work program is that local nonprofits and private businesses are able to “steal jobs from low-wage workers, for whom these jobs no longer exist.” This short sighted pitting of low-wage workers against welfare workers threatens to create a new group of unemployed workers, who may find themselves applying for welfare benefits.

To compete in the marketplace, nonprofits are adapting to its new realities in a myriad of ways, “from subcontracting to partnership to outright conversion to for-profit status,” writes Ryan. He points to the YWCA of Greater Milwaukee, which although “large and sophisticated by any nonprofit standard…could not go it alone.” In order to deal with the “demand of a comprehensive, $40 million welfare-to-work contract, it created a for-profit limited liability corporation [called YW Works], with two for-profit partners.”

In addition to unleashing predatory corporate forces, and the ongoing transformation of nonprofit organizations into high stakes competitors for government contracts, the Personal Responsibility and Work Reconciliation Act of 1996 contains the first enactment of a concept known as “charitable choice.” Far from expanding anyone’s choices, “charitable choice” mandates that state and local governments include religious organizations in their pool of bidders for service-delivery contracts.

On the face of it, this is nothing new. As Cathlin Siobhan Baker, Co-Director of the Employment Project, explains, for years religious organizations have received government funding for emergency food programs, child care, youth programs, and the like. However, they were expressly prohibited from religious proselytizing. Now, Baker writes: “Gone are the prohibitions regarding government funding of pervasively sectarian organizations. Churches and other religious congregations that provide welfare services on behalf of the government can display religious symbols, use religious language, and use religious criteria in hiring and firing employees.”

President George W. Bush has been a big-time supporter of charitable choice and faith-based initiatives. If his faith-based initiative, announced to great fanfare in late January, ever gets back on track, it will allow for a bunch of social services to come under the control of faith-based organizations. During the presidential campaign, Bush repeatedly called for “armies of compassion” fielded by “faith-based organizations, charities and community groups” to help aid America’s poor and needy. In a USA Today opinion piece he laid out his plan for taking “the next bold step in welfare reform,” proposing $80 billion over 10 years in tax incentives to “help our nation’s most heroic armies of compassion.” He also proposed a federal initiative to “support community and faith-based groups that fortify marriage and champion the role of fathers.”

Welfare is no longer a question of poverty or the economic inequities in our society. Charitable choice frames the debate within such time-honored moral hodgepodge as the proverbial “epidemic of out-of-wedlock births,” or the “lack of personal responsibility”—behaviors that conservatives claim, contribute to the general moral breakdown of our society.

Since 1996, responsibility for welfare services has shifted from the federal government to the states and the states have contracted many services out to for-profit corporations and non-profit organizations. Under President Bush’s faith-based initiative, religious organizations have become a major player in the service provider mix. However, in addition to the bevy of objections raised by liberals and conservatives that have stalled the implementation of Bush’s faith-based plan, many people of faith do not believe that they can shoulder such a burden.

In Religion-Sponsored Social Service Providers: The Not-So-Independent Sector, independent researchers Jim Castelli and John McCarthy of Pennsylvania State University, conclude that it is mistaken to believe that faith communities can take on the burden of expanding their provision of social services as a substitute for government efforts. “Not only is there no infrastructure at the national, state, or local levels to administer programs and large amounts of funding, but such expansion would require faith communities to wholly change their funding priorities in order to build their capacity.”

Privatization as the engine powering welfare reform was supposed to replace federal and state bureaucracies with streamlined, cost-effective corporate service providers. Privatizers believed that private companies would administer welfare regulations more stringently and accurately, deliver services more efficiently, and focus on only those who really deserved benefits. Saving the taxpayers money was another appealing promise. Companies competing for contracts assured states that they would dramatically reduce the welfare rolls.

Has the privatization of welfare delivered on its promises? Have private companies and enterprising nonprofits transformed the old welfare system with the outcome of long-term employment with decent pay for former welfare recipients? Max Sawicky, economist at the Washington, DC-based Economic Policy Institute, is troubled by the fact that the so-called “success [of welfare privatization] was announced before the results are in.”

In a 1997 speech, Lawrence W. Reed, President of the conservative Midland, Michigan-based Mackinac Center for Public Policy, touted privatization as the wave of the future: “The superiority of [privatization]…is now approaching the status of undisputed, conventional wisdom: the private sector exacts a toll from the inefficient for their poor performance, compels the service provider or asset owner to concern himself with the wishes of customers, and spurs a dynamic, never-ending pursuit of excellence - all without any of the political baggage that haunts the public sector as elements of its very nature.”

·         While welfare privatization has delivered drastic reductions in caseloads and welfare rolls, it has not moved recipients from the “underclass” to the working class. Privatization is not efficiently delivering job training and support services to those who need them.

·         The financial bonuses privatizers receive for reducing caseloads create an incentive to terminate clients’ benefits, not to assist them in climbing out of poverty.

·         As in the case of Curtis and Associates, staff working for private companies often have neither the credentials nor the training to handle their caseloads. Consequently, clients do not receive services they need, and to which they are entitled, such as childcare, transportation subsidies and medical care.

·         As Wisconsin, New York, and Texas have learned to their chagrin, companies like Maximus and Lockheed Martin blithely spend public money from other jurisdictions to wine, dine, and pay off decision-makers in the pursuit of new contracts.

·         The states and local governments that contract with corporations for welfare services have not instituted any form of systematic oversight. Because information about large private contractors is not centralized, it is not unusual for a company in hot water one place to pick up new contracts at the same time in another state—or in another county in the same state. Ultimately, for-profit corporations are accountable to their shareholders, not to the communities they are hired to serve.

Spurred by revelations of Maximus’s questionable activities, Milwaukee-area Democratic Congress- people Jerry Kleczka and Tom Barrett, are hoping the federal General Accounting Office will fully investigate the practices of private companies hired to manage welfare services. As we move closer to welfare reauthorization, the GAO needs to vigorously take on the Congresspeople’s request. In the meantime, corporations will continue prospecting for gold among the poor.                                      

MAXIMUS INC CONTRACT UNDER THE MICROSCOPE