New healthcare gorilla in America: Patient medical debt

Discovery and diagnosis of a serious illness can throw even the most stable, well-planned life into financial chaos. Unlike a mortgage, a car payment or credit card bill, it’s impossible to fully plan for sickness or the costs associated with often expensive treatments. The result is mounting medical debt that can exacerbate medical conditions and overwhelm families that see no end in sight to thousands upon thousands of dollars owed in medical bills. 

Medical debt remains an unfortunate and catastrophic problem for millions of Americans, despite expanded health coverage options. For years, the Patient Advocate Foundation (PAF), a leading national nonprofit that today manages more than 100,000 patients cases annually, has worked to eliminate barriers that prevent patients from receiving access to necessary health care.  Fortunately, millions of Americans who have previously gone without healthcare coverage will now, thanks to the Affordable Care Act, have access to routine examinations and preventive care. But the issue of medical debt – which depletes savings, shatters credit scores, and can lead to home foreclosures – remains all too familiar.

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Medical expenses are contributing factors in over 62 percent of individual (as opposed to business) bankruptcy filings, and the number of bankruptcy filings identifying medical debt as a significant factor is increasing. A recent study surveyed patients to determine their cause of bankruptcy and found that when asked about problems that contributed “very much” or “somewhat” to their bankruptcy, 41.8 percent specifically identified a health problem, 54.9 percent cited medical or drug costs and 37.8 percent blamed income loss due to illness. Overall, 68.8 percent cited at least one of these medical causes. An additional 6.8 percent of respondents had recently borrowed money to pay medical bills.

The major drivers of medical debt are the cost of healthcare and the system in which it functions.  The cost of health care in the United States is disproportionately high and unpredictable as evidenced by the comparison of charges for a procedure at one hospital that can vary greatly from a hospital competitor two blocks away, or in a hospital in-patient setting versus a free-standing outpatient setting.  For example, the charge for a sprain in one National Institutes of Health study of Emergency Room costs, ranged from $4 to $24,110. These prices, which combine both the patient and insurer’s costs, showcase the extreme fluctuation and unpredictability that is symptomatic of the American health care system as a whole.

And patients, even the insured, continue to bear a significant amount of out-of-pocket expenses for their care. According to the Congressional Budget Office, national health expenditures in 2011 were about $2.7 trillion, of which private insurance financed about one-third. In 2012, combined federal spending on Medicare, Medicaid and CHIP totaled $811 billion, leaving about one trillion in out-of-pocket costs to the American public.

Medical debt is inherent in our health care system and we need a serious, thoughtful national debate on how to protect families from financial hardship due to illness. Patients struggling to survive an illness should not also have to worry that their illness will mean financial ruin for themselves or their families.

The Patient Advocate Foundation, along with our sister patient advocacy organization in Washington, DC – The National Patient Advocacy Organization (NPAF) --  is committed to pursuing myriad protections for patients who declare bankruptcy or experience debt. Most importantly, we feel it’s necessary to allow homeowner protections and provide sufficient time for patients to either contest or reconcile their debts with providers or payers.

As lawmakers consider the issue this year, we hope they will introduce protections for those who declare bankruptcy or experience debt for medical reasons; in particular, provide homeowner protections, such as those provided in the Medical Bankruptcy Fairness Act. It’s also crucial that patients have sufficient time to either contest or reconcile their debts with providers or payers since, according to numerous credit evaluators and other private organizations, medical bills have a disproportionate error rate and consumers’ bills are often reported to credit reporting agencies in error.

A substantial first step in this important effort would be passage of legislation like the Medical Debt Responsibility Act of 2013, which would prohibit a consumer reporting agency from making any report containing information related to a fully paid or settled medical debt for which the date of payment or settlement precedes the report by more than 45 days.

Chronic disease should not be synonymous with financial ruin. PAF and NPAF commends our lawmakers who are pursuing smart, compassionate public policy that helps patients survive both physically and financially after a diagnosis.  We hope they will urge their colleagues to join them in this effort to assure that much-needed improvements will be made. 

Davenport-Ennis is chairman of the Board of the National Patient Advocate Foundation, the leading national non-profit organization providing the patient voice in improving access to, and reimbursement for, high-quality healthcare through regulatory and legislative reform at the state and federal levels.