qotd: ACA reform has not eliminated bad debt for hospitals

Bloomberg Business
February 23, 2016
Bad Debt Is the Pain Hospitals Can't Heal as Patients Don't Pay
By John Lauerman

A type of pain that hospitals thought they had relieved has come back
with a vengeance: it's called bad debt.

Hospitals have long struggled to collect bills when patients aren't
covered by insurance -- creating delinquent accounts. The Affordable
Care Act was supposed to relieve some of that strain by helping pay for
coverage for millions of Americans and expanding Medicaid in some states
to cover the poor.

Yet while millions of people have gained coverage since Obamacare became
law in 2010, there's also been an increase in insurance that comes with
high deductibles and cost-sharing. Under those plans, the first few
thousand dollars of annual medical expenses come out of patients'
wallets. That's money that hospitals like Childress Regional Medical
Center in the Texas Panhandle region are unlikely to collect.

"It feels like a sucker punch," said John Henderson, the nonprofit
hospital's chief executive. "When someone has a really high deductible,
effectively they're still uninsured, and most people in Childress don't
have $5,000 lying around to pay their bills."

The rate of uninsurance in the U.S. has fallen to 9.1 percent from 15.7
percent in 2009. Yet in the first nine months of 2015, about 36 percent
of the U.S. insured were covered by high-deductible or consumer-directed
health plans that can require considerable out-of-pocket payments,
compared with about 25 percent in 2010, according to a CDC survey.

Hospitals are feeling the pressure from those patients. Community Health
Systems Inc. operates 195 hospitals in 29 states and is the U.S.'s
second-biggest for-profit U.S. hospital chain. This month, it revised
its fourth-quarter 2015 provision for bad debt up by $169 million -- and
said that 40 percent, or about $68 million of that amount, was from
patients being unable to pay deductibles and co-payments. Patient
bankruptcies also contributed, the company said.

While higher out-of-pocket charges can lower what insurance costs up
front, it means more costs for patients on the back end. Under
individual Obamacare mid-level "silver" plans, the annual deductible was
$2,556, and under less expensive, low-level "bronze" plans it was $5,328
in 2015, according to the Kaiser Family Foundation.

Outside of Obamacare, deductibles are becoming more common, as well.
Last year, 81 percent of coverage people got through work came with a
deductible, up from 70 percent in 2010, according to Kaiser. The average
deductible in a high-deductible, individual plan gained through work was
$2,099 last year.

Rural hospitals have been hit particularly hard. Minnesota has long had
high rates of care coverage, and many employers have switched to high
deductible offerings, according to Joe Schindler, vice president of
finance for the Minnesota Hospital Association. Last year, bad debt rose
by 20 percent to $425 million at the association's 140 member hospitals.

http://www.bloomberg.com/news/articles/2016-02-23/bad-debt-is-the-pain-hospitals-can-t-heal-as-patients-don-t-pay

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Comment by Don McCanne

The Affordable Care Act (ACA) was supposed to make health care
affordable, yet many hospitals are finding that patients are generating
more bad debt. A large portion of that is due to the inability of
patients to pay the high deductibles and other cost sharing required by
their insurance plans. Patient bankruptcies also compound the problem.

Deductibles are used by insurers to shift some of the spending to
patients so that the insurers can keep the premiums for their plans
competitive. But much has been written about how these deductibles
create financial burdens for patients. And when the patients cannot pay
the deductibles, physicians and hospitals are faced with bad debt. With
greater use of higher deductibles, the problems with debt will surely
increase.

This is a problem inherent in the model of reform perpetuated by ACA.
Various policies such as the deductibles are developed to comply with
the private insurance model. How would the incrementalists fix this
problem? There are too many moving levers.

What we should have instead is a system in which the policies are
developed to comply with the needs of patients. Deductibles can be
eliminated if we do away with premiums as a means of financing health care.

The financing of a single payer system is not through individual
premiums but rather is through a single universal risk pool that is
funded equitably through progressive taxes, making health care
affordable for everyone. Medical debt simply goes away.