Fwd: qotd: Medical bills and credit reports

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-------- Original Message --------
Subject: qotd: Medical bills and credit reports
Date: Mon, 10 Mar 2014 09:54:37 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



The New York Times
March 8, 2014
When Health Costs Harm Your Credit
By Elisabeth Rosenthal

Mounting evidence shows that chaos in medical billing is not just
affecting our health care but dinging the financial reputation of many
Americans: While the bills themselves frequently take months to sort
out, medical debts can be reported rapidly to credit agencies, and often
without notification. And even small unpaid bills can severely damage
credit ratings.

A mortgage initiator in Texas, Rodney Anderson of Supreme Lending,
recently looked at the credit records of 5,000 applicants and found that
40 percent had medical debt in collection, with the average around $400;
even worse, most applicants were unaware of their debt. Richard Cordray,
director of the federal Consumer Financial Protection Bureau, has noted
that half of all accounts reported by collection agencies now come from
medical bills, and the credit record of one in five Americans is affected.

The problem is accelerating for several reasons. Charges are rising.
Insurance policies are requiring more patient outlays in the form of
higher deductibles and co-payments. More important, perhaps, is that
while doctors' practices traditionally worked out deals for patients who
had trouble paying, today many doctors work for large professionally
managed groups and hospital systems whose bills are generated far away,
by computer.

http://www.nytimes.com/2014/03/09/sunday-review/when-health-costs-harm-your-credit.html

****


Comment by Don McCanne

Our fragmented, dysfunctional system of paying medical bills is having a
major impact on personal credit ratings. Half of all accounts reported
by collection agencies now come from medical bills. The credit record of
one-fifth of Americans is affected, and many of us are unaware of it.
Are people so broke that they can't pay their medical bills, or is
something else going on here?

There are two major factors at play here. One is that with flat wages
and increasing household costs, many people do have problems paying all
of their essential bills, and medical bills are moved to the bottom of
the stack. When payment of medical bills is postponed, or perhaps not
paid at all, they are commonly sent to collection agencies, eventually
appearing on the debtor's credit report. Now that high deductibles are
being used more to shift costs from payers (employers or government) to
patients, this phenomenon is much more common.

The other factor is how people with good incomes who are meticulous with
management of their personal finances end up with dinged credit reports
because of medical bills. It is often due to the administrative
complexity of the system we have of paying medical bills through private
insurers who make payments based on whether the providers are in or out
of network, on whether or not the products or services being billed are
even covered by the plans, and on how much the deductible and
coinsurance are and what charges can be credited against the deductible.

Typically the individual receives an explanation of benefits which is
difficult to decipher often because some of these questions still remain
unanswered. Billings may start to come in from various health care
providers but without adequate explanation. When the patient inquires as
to why the amount was not applied to the deductible, or why the amount
seems to be for out-of-network providers when this provider is
in-network, or for whatever reason, the patient is often given a
temporizing response. When more statements are received that failed to
address concerns such as the deductible, further efforts to correct the
problem are often met with reassurance. When nothing further is heard,
the patient assumes the matter was cleared up. Only later when a
collection agency begins to harass them or when they find their credit
report includes unpaid medical bills do they discover that the matter
never was resolved.

Add in further complexities such as when a person has primary coverage
perhaps through Medicare and secondary coverage through a Medigap plan,
or a person had a change in coverage coinciding with the medical
services provided, straightening out who is responsible for which
portions of the charges can be a monumental task.

These highly responsible individuals with previously excellent credit
records are understandably angry. They tend to look elsewhere for blame
- the physician's office or billing service, the hospital's billing
department, the insurer's claim processors, the credit agency's
disregard of registered protests, or perhaps the employer who provided
such a screwed up health plan.

Single payer advocates know where most of the blame really lies. It is
with our political leaders who insist on perpetuating this highly
inefficient, fragmented system of financing health care instead of
enacting a single payer national health program. This botched up system
of medical billing is only one manifestation of the profound
administrative excesses that permeate our system. Ironically, all of
this extra administrative detail in handling medical billings doesn't
even work well. You would think that if we are going to be paying much
more in administrative costs so that the insurers could do a "better"
job than a single government payer in handling our claims, we would be
demanding much better performance from them. But no, keep the government
out and blame everyone else.

In typical D.C. fashion, our legislators continue to look for solutions
that would increase regulatory oversight to prevent unfair damage to the
credit ratings of conscientious individuals, though the legislators are
receiving expected push back from the credit industry. What we do not
need is more administrative oversight piled on top of an administrative
boondoggle. Instead we need to replace it with an efficient improved
Medicare, with first dollar coverage, that covers everyone. Credit
scores dinged by medical bills then would become a quaint historical oddity.