Today’s high deductibles are tomorrow’s bad debt

I’m not sure if you’ve heard the parable of the tall man and the cat.

Maybe not, since I had to make it up in light of health care’s unending cost increase.

In this allegorical village, there was a group of citizens who were very upset with a man who lived there. This man was very, very tall, and he made all the villagers feel uneasy (they were insecure about the crowns of their heads, who knows why).

One night, a mob caravanned to the tall man’s house with tall, burning torches.

“Get out,” the mob cried.

The tall man peered at them from high up in a window, worried.

The scene was tense, until a woman ran up to the mob.

“My cat’s stuck in a tree,” she said. “The thing’s stubborn.”

“But we’re sick of this tall man,” said the mob.

“Yes, but he’s the only one who can save my cat.”

Moral of the story: Don’t run people out of town because they make you feel insecure; you might need their help one day.

I bring this up because of something I read lately. Hospitals are literally arranging loans for patients swamped by significant medical debt — debt that is increasingly attributed to high insurance deductibles and co-payments.

Since February 2013, Mount Carmel Health System has set up loans for as long as five years at an annual interest rate of 4% for patients with a minimum balance of $300.

Ohio State University’s Wexner Medical Center, whose bad debt swelled 31% to $118.6 million in the last fiscal year, also is considering a loan program, said Debra Lowe, the hospital’s administrative director of revenue cycle.

A recent report issued by Moody’s Investors Service warned that bad debt is becoming a hot spot for hospitals, partly because of the proliferation of high-deductible health plans that make consumers foot a greater portion of their health care bills.

In fiscal year 2013, local hospital systems reported $357 million in bad debt, a 14% increase from the previous year.

The Affordable Care Act is benefiting hospitals by expanding the number of people with health insurance; an estimated 5.4 million U.S. adults who had not been insured as of September now have health insurance, according to Urban Institute research released on Thursday.

But that windfall might be tempered by the fact that about 80% of people signing up for private health coverage through government-run marketplaces are choosing plans with high deductibles, Moody’s said.

“Today’s high deductibles are tomorrow’s bad debt,” the report states.

Yes, they definitely are when we waste money in the ER.

The reality is that 80% of what I see in the ER is “family medicine after hours.” I could just as safely see these patients in my own direct care practice, saving them time and money.

Ohio State is working to educate patients, many of whom previously have not had health insurance and might be experiencing sticker shock, Lowe said.

In other cases, patients aren’t fully aware of the particulars of their health plans, including the fact that they are responsible for a significant portion of the costs.

“Because of Medicaid expansion, we’re seeing fewer uninsured patients,” she said. But, she added, “We’re seeing people with $10,000 deductibles.”

Whoa, whoa, whoa. Ten thousand dollar deductibles?

Yes, Merry Christmas. You didn’t meet your deductible after an entire year of paying premiums.

Sure, for hospitals, there’s an incentive to work with patients upfront to resolve big bills. Lowe said less than 5% of Ohio State’s bad debt is recouped through the collection process. (Again, an example of cash’s negotiation power in paying for medical services.)

High-deductible plans have become far more common for those who have health coverage through their jobs, too. Overall, the number of people with health savings account/high-deductible health plans has grown at about 15% a year, reaching 15.5 million in 2013, according to America’s Health Insurance Plans.

Let me paint a rather controversial portrait of American health care. If I offend you, let’s talk about it. My goal is to heal you, not emotionally devastate you. However, we have one story told daily and that is that the ACA is insuring millions of people. That’s well and good.

Then we have another voice telling us that a substantial amount of these insured people are actually buying high-deductible insurance plans. In certain cases, patients aren’t aware of it.

And then we have people claiming that high-deductible plans are the reason patients are going broke.

I’ll let you stretch your legs after walking in that logical circle.

Then I hear a minority voice, strong, though, opposing my work as a cash-only clinic for exacerbating a two-tier health care system.

The thing about direct care is the math: For $600 per year, I promise you, I can handle about 80% of what you would ever need treatment for.

I can get you almost all of your medications, for dollars per year. Yes, dollars per year. And I’m here for you when you cut your finger in the middle of the night, when your child has a stomach flu.

And I will openly admit that I can’t treat every problem. I’m not an oncologist. I’m not a cardiologist.

However, if you’re seeing a specialist like that, you are in a rare and extremely serious circumstance.

However, when a direct care doc can reduce monthly costs for our patients, families especially, and keep them from incurring major debt, that’s a victory.

No, we’re not a one-size-fits all solution.

Insurance is important for the things we can’t predict.

However, if our government is going to swindle people into unwittingly buying high-deductible insurance, don’t mob the tall man who could at least save your cat.

Josh Umbehr is founder, Atlas.md.

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