Medical debt is the mortal enemy of the patient, the physician, the hospital, the community, the state, and the nation. When we think of others’ debts, we tend to think such debts are their personal responsibility. If they’re unable to pay the debt, it’s their problem. (We make it a You problem, not a Me problem) Society tells us a problem with personal debt is a direct result of bad decisions, poor personal financial habits, profligate spending, living beyond one’s means. We blame those with medical debt for their bad choice of buying substandard health insurance, or else for not purchasing any health insurance at all. We say the consequences of debt are rightly visited on the debtor. Whatever the impact — canceled credit cards, low credit, wage garnishment — it’s on them. Personal responsibility.
Is this true? In the big picture, we individuals and society both bear the costs and burdens of personal “bad debt.” For individuals who fall into arrears in their payments, who cannot pay their financial obligations, unpaid debt means their ability to buy goods and services is curtailed or perhaps ended. If new credit is not extended, the person must live on cash. For any business, any debt that’s not paid by the customer creating it becomes a cost to the enterprise extending credit. The business recoups its loss by raising prices on products or services for all future customers. The business may stop its loss by not providing goods or services to a debtor, disciplining those not paying their bills. In such cases, the consequences of unpaid bills fall on the debtor and creditor, usually ending there.
This just does not apply to medical care services. Personal debt from being unable to pay for necessary health care services is the cause of medical debt. It’s not a voluntary debt. The range of consequences from unpayable medical debt extends far beyond individuals and service providers. Medical debt ripples outward, adversely affecting physicians, hospitals, communities, and potentially requiring intervention by a government, which impacts us taxpayers. COVID brought into full clarity the consequences of desperately needing medical care without an adequate ability to pay.
Medical providers during the pandemic, as expected, provided care regardless of patients’ ability to pay. When COVID-19 disproportionately impacted lower social-economic brackets, initially people of color and the elderly, more patients than usual who needed care lacked adequate health benefits coverage. COVID patients in Medicaid and Medicare have been covered by these government programs. COVID patients with commercial insurance, including plans bought through the ACA Marketplace, have been expected to rely on their private coverage, exposing them to their plans’ deficiencies, such as high deductibles. Other COVID patients have been caught in confusion over their eligibility for charity care, problems from sloppy billing, and even outright exploitation — resulting in patients being left financially exposed for their COVID-related care. Those most at risk include the“long haul” COVID patients having to pay out-of-pocket for care after their hospital discharge. COVID vaccinations can incur medical debt, too. The New York Times in December 2020 reported “surprise bills” can still happen. Care providers receiving basic federal coverage for the costs of vaccinations found ways to sweeten the pot. Some added a “facility fee” if the administering physician was a hospital employee. They added an “Emergency Room fee” if that’s where injections were given. These fees were not covered by the Federal guidelines, or by commercial insurance, so financial exposure landed on the patient. I believe this practice has not yet been curtailed.
The debt daisy chain
Medical debt is not like a debt incurred by buying a big screen TV one cannot afford. It should not be treated the same way. Medical debt largely results from unplanned, involuntary events, often an illness or accident. It is not a choice. Illness is never chosen.
Sure, certain lifestyle choices, personal habits, and emotional habits can lessen the chances of ill health. Smoking, drinking, illicit drugs, unhealthy foods, and all other risky behaviors are private choices. However, no one consciously volunteers to be ill. No one volunteers for a costly personal injury accident. Medical debt is not about living beyond one’s means. Medical debt is about staying alive. If people are unable to accept personal financial responsibility for the economic results of medical efforts to restore (or try to restore) them back to good health, medical debt is incurred. Having medical debt deters access to medical services. Owing medical debt, patients often wait until a condition becomes acute, when the care of last resort is the emergency room. The ER is the most costly, least appropriate for non-urgent care. More debt. Unlike private sellers of goods or services, medical providers do not cut off a debtor from all care. Medical debt may affect when and where a debtor receives care, but medical services are still available in some form. Physicians cannot ethically let folks suffer. Hospitals by law must treat all who enter the ER. Among all medical care providers, physicians and hospitals bear the heaviest economic burden from medical debt. Their patients’ unpaid bills then impact the rest of the health care system.
Unlike commercial ventures, hospitals and physicians do not routinely recover losses by increasing prices for the patients who can pay their bills. In today’s system of private and government health insurance, payments are set by contracts or regulations. Medicare and Medicaid reimbursements to medical providers use formulas tied to their costs for delivering care. Insurance plans pay the lowest rates possible, based on competitive financial factors. Care providers cannot simply raise their fees to cover accumulating losses from unpaid medical debts. For individuals, medical debt is a barrier to good health. Poor health means a loss of job productivity, maybe less (or no) income, reducing contributions to family wellbeing, reducing contributions to the economics of society through employment taxes. For hospitals, unpaid costs for care reduce their fiscal viability. Some seek taxpayer support through government programs to stay viable. Taxpayer support translates into higher taxes. Businesses avoid expanding or relocating in areas with high local taxes, which reduces desirability for economic development. A high proportion of medical indigents in a community reduces its allure to physicians. Less community health care cuts its desirability for workers and for business. Fewer jobs depress the local economy, further weakening the ability of residents to pay for insurance and medical care. Consider the interconnected social and economic daisy chain of medical debt in America. What impacts one impacts all.
Robert E. Goff is a health care consultant and co-author of End Medical Debt: Curing America’s $1 Trillion Unpayable Healthcare Debt.
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