Patients' ability to pay medical bills is declining as their out-of-pocket costs rise under high-deductible health plans, according to a report released Tuesday by the credit rating firm TransUnion.
In the first quarter of 2016, consumers had $1,720 in revolving credit to cover every $100 in medical costs, down from $2,250 in revolving credit to cover those costs in the first quarter of 2015, according to TransUnion Healthcare, the company's healthcare revenue cycle management arm. Patients in the subprime risk tier, the highest-risk consumers, were in even dicier shape in the first quarter of this year, with just $420 in revolving credit for every $100 in medical costs.
Nearly eight in 10 patients owed more than $500, while 51% owed more than $1,000.
Meanwhile, patients experienced a 13% increase in both deductible and out-of-pocket maximum costs between 2014 and 2015, with the average annual deductible totaling $1,278 and the average annual out-of-pocket costs totaling $3,470, TransUnion found.
“This amplifies the under-insured and uncompensated care issues,” said Jonathan Wiik, principal for revenue cycle management at TransUnion Healthcare, which says it provides services to 1,200 hospitals. “It's not sustainable, and hospitals have to be proactive in figuring out who can pay and having discussions with those patients early on.”
With the increase in consumers' out-of-pocket costs under high-deductible plans, a growing number of hospitals are working aggressively with patients before procedures or before they leave the hospital to work out payment. Many first determine patients' ability and willingness to pay, and check to see if the patients qualify for charity care or publicly subsidized coverage. TransUnion Healthcare and other revenue cycle firms are helping hospitals implement such policies.
One large health system, Ascension Health, has gone further, waiving deductibles for all patients enrolled in health plans through the Affordable Care Act exchanges who have incomes below 250% of the federal poverty level. It did so because it found that many Ascension patients were drowning in debt related to their high plan deductibles, which was hurting their credit scores. An Ascension spokesman said it cannot also waive copayments or coinsurance amounts due to its contracts with insurers.
But some providers have taken a more hard-nosed collection approach, filing numerous debt collection lawsuits against patients. A St. Louis Post-Dispatch investigation in April found more than 1,000 lawsuits between Dec. 2, 2014 and March 10, 2016 in the St. Louis area stemming from emergency department treatment provided by the Schumacher Clinical Partners medical group at hospitals owned by SSM Health, a Catholic system.
An investigation by ProPublica and NPR found that not-for-profit Deaconess Hospital in Evansville, Ind. filed more than 20,000 collection lawsuits against patients from 2010 through 2015, according to ProPublica's analysis of state court data. After questioning by ProPublica, Deaconess said last month it was reconsidering its financial assistance policies and would be making changes.
Healthcare affordability under high-deductible plans has become a political issue in the presidential election. Presumptive Democratic nominee Hillary Clinton has proposed requiring health plans to cover three sick visits to a doctor a year without applying the deductible; giving insured people a $5,000 per family refundable tax credit for out-of-pocket costs exceeding 5% of income; and barring providers and insurers from charging patients out-of-network bills for services received in an in-network hospital.
Donald Trump, the presumptive Republican nominee, has released a seven-point health policy agenda emphasizing market mechanisms to reduce overall healthcare costs, though it doesn't directly address out-of-pocket costs.
Gerry McCarthy, president of TransUnion Healthcare, said burgeoning out-of-pocket costs put consumers with precarious finances at growing risk of bankruptcy if they experience medical problems. A 2013 report from the price transparency firm Nerdwallet Health estimated that 1.7 million Americans live in households that will declare bankruptcy due to their inability to pay their medical bills.
At the same time, however, consumers have received some protection from having medical debts count against their credit scores. Last year, TransUnion and the two other major credit-reporting companies, Equifax and Experian, signed a settlement agreement with New York Attorney General Eric Schneiderman requiring that medical debt not be reported until after a 180-day waiting period. That allows time for any insurance payments to be applied and for consumers to have enough time to work through any disputes and pay up.
The federal Consumer Financial Protection Bureau reported in 2014 that 43 million Americans have blemishes on their credit reports because of overdue medical bills, and that medical debts comprise more than half of collection items on credit reports.
