Medical Debt Burden

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Debt trapTrying to get the most for your money on your medical care is much different than any other “shopping” experience out there. The doctor chooses the tests and treatment to eradicate what is bothering the patient. The patient does have a voice, but more often than not, the doctor is calling the shots and the customer is along for the ride.

If only getting medical care was like ordering food at the local hamburger shop, patients would be able to peruse the menu and see which item meets their needs, budget, quality, expectations and overall problem. Since there is no menu on the wall at the hospital, patients aren’t always sure how much those services they are ordering cost, and judging by a recent batch of surveys, this lack of transparency is part of an issue leading to many Americans spending far more than they ever thought they would on medical care.

Greater knowledge of medical billing practices can certainly help, but transparency from the industry is just as important to help prevent families from falling into unexpected debt due to medical costs.

 

Medical Debt is #1

Americans who have fallen into trouble with credit cards and other types of secured debt like mortgages and car payments understand the perils of being crushed under the weight of exorbitant and increasing interest rates. Financial literacy is a trending topic in the nation and, with loads of advertisements for debt consolidation companies and nonprofit organizations that try to help those in credit trouble, people are realizing that something must be done about this monster we call medical debt.

medical_billing_advocate-78Despite the amount of debt associated with credit cards, autos and homes, medical debt is a much more common source of third party debt collection than credit cards or any other types of debt. According to NerdWallet Health, 38 percent of debt collected from consumers in 2013 was related to healthcare costs, compared with 25 percent for student loans, 13 percent for credit cards and other financial services, 10 percent for government and then small percentages for debts like mortgages, telecom and retail. The study reported that in 2012, $21 billion in medical bills was paid to third-party debt collection agencies.

America’s largest state health survey, the California Health Interview Survey, placed the average medical debt total at less than $4,000 per person in the state. That debt has dire consequences for many families and individuals.

American Medical News cites a study by the University of Washington regarding bankruptcies that showed between the years of 1995-2009, those with cancer were 2.65 times more likely to file for bankruptcy. It simply confirms that Americans with major medical conditions are most likely to have to file for bankruptcy, further demonstrating just how devastating medical debt can be.

As the nation has attempted to pull out of its great recession, incomes have gone down while healthcare expenses have increased – a dangerous combination for many families. According to NerdWallet Health, between 2010 and 2013, American households lost $2,300 in median income, yet healthcare expenses increased $1,814.

It went on to state that out-of-pocket costs for healthcare are expected to move up to a 5.5 percent annual growth rate by 2023, which is double the growth of America’s real gross domestic product.

That certainly provides a harbinger that the estimated number of Americans contacted by a debt collection agency regarding medical debt is certain to increase from its estimated 2014 total of 51 million individuals.

 

Who Does this Affect the Most?

Medical debt is certainly an issue with all races, ages and financial situations, but a study by the Centers for Disease Control’s National Center for Health Statistics released in January, 2014 shows that families with children and poorer families in general were much more likely to experience financial burdens due to large medical bills.

medical_billing_advocate-12In 2012, it was reported that 26.8 percent of American families experienced some financial burden due to medical care, 16.5 percent had trouble paying medical bills in the past year and that 8.9 percent had bills that they were making no payments on.

More than one in five families (21.4 percent) were working on paying medical bills over time. Families that live at or below 250 percent of the poverty line are more likely to experience financial hardship due to medical bills, and families between 139 and 250 percent of the poverty line were the highest percentage that were making payments on medical expenses over time.

Some of those with insurance may feel that, because they are insured, they are immune to debilitating medical debt; however, Christina LaMontagne, Vice President of Health at NerdWallet, reported that some high-deductible plans have huge out-of-pocket costs like $5,000 to $10,000 per person per year, which for a family with a modest income could quickly lead to inescapable debt.

She went on to add that patients are then forced to determine which of their costs of living are most important, and leaving other (possibly vital) ones by the wayside, saying that insurance is not a “silver bullet”.

 

Practitioners

It doesn’t just affect those who need medical care – it can negatively affect those who provide care. The American Medical News article quoted Bruce Bagley, MD, who is CEO of TransforMED, and he mentioned that the fear of medical debt could cause people to avoid the healthcare system entirely. That means that diseases or conditions are less likely to be caught early, and some patients may not get the preventative procedures that can prevent tragedy in the future.

medical_billing_advocate-45They may also avoid purchasing prescriptions that had been prescribed for very important reasons, even if they did eventually see a doctor. Since this can put a dent in the practitioners’ profitability, there is a good chance that rates for those who are going to see a doctor will do nothing but increase.

Preventing people from getting sick in the first place is an obvious choice when it comes to finding ways to lessen the chance of medical debt, which can potentially cause individuals to file for bankruptcy. The Affordable Care Act’s emphasis on preventative care services hopes to make a long-term improvement in that area, and by making preventative care fully covered, it will likely show vast improvements in overall health over time.

According to Modern Healthcare, a study titled “Impact of Providing Fee Data on Laboratory Test Ordering: A Controlled Clinical Trial” found that healthcare providers can help their customers save money when lab costs are made easily available to doctors, nurses and patients when consulting about treatment plans. By focusing on the intervention early, doctors and patients can cut down on unnecessary or redundant tests, thus lessening the financial burden when seeing a medical professional.

The study did a round of tests where costs were not given up front, then another round in which patients and their doctors saw the costs of procedures and tests beforehand. It reported a “modest decrease” in the number of tests ordered, down from an average of 3.7 tests per patient per day to 3.4, which represented an 8.6 percent drop. The costs of tests also went down $3.79 per patient per day, a drop of 9.6 percent.

Healthcare will always be necessary, and still even after receiving preventative care, some people will continue falling ill. That is why the medical industry – or those who stand up for patients’ rights – are finding ways to transform how certain aspects of the business are conducted. Because of the extreme measures people are going to in attempts to avoid price gouging, it’s only a matter of time before this bubble also bursts and medical debt in America will decline.

Filed under: Resources, Small Business ACA, US Healthcare, Obamacare, Medical Debt, MBAA Education Center, Medical Billing Industry, Affordable Care Act

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