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According to the US Consumer Financial Protection Bureau, medical debts were filed on approximately 43 million credit reports last year, affecting 1 in 5 households and totaling $88 billion.
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Texas has some of the highest levels of medical debt in the country. According to the Medical Debt Policy Scorecard, the Lone Star State ranks 48th in the country when it comes to medical debt consumer protections.
Based on 2018 data, Texas also had the highest uninsured rate (17.7%), the 5th highest number of adults with unpaid medical bills (6.2 million), the 9th highest median medical debt in collections ($829 per person), and the 15th highest percentage of adults in fair or poor health (18.2%) in the country.
A recent white paper from Health Management Associates (HMA) and Leavitt Partners, an HMA company, outlines how policymakers, providers, and payers can help reduce medical debts for their patients, many of whom must pay directly for their medical care, despite being insured, due to the insurance’s cost-sharing requirements
The report says these “underinsured” individuals are often required to pay a greater share for their care than they can afford and higher amounts than the rate negotiated between their insurance and the provider. This is a major contributor to medical debt, according to the paper.
The report recommends the adoption of a payment model that charges only the negotiated pricing regardless of whether the insurer or the patient is paying the bill.
“… it does not cost a provider more to provide services simply because the patient is paying the bill,” reads the paper. “This best practice can be encouraged by requiring nonprofit hospitals to report related policies on their IRS 990 form or a schedule thereto.”
Bill Snyder, a Principal at Leavitt Partners who co-authored the guidance, said another potential solution for states interested in reducing medical debt is the adoption of auto-enrollment policies for residents already eligible for programs like Medicaid and the Children’s Health Insurance Program.
Another major policy recommendation outlined in the white paper is the adoption of a proposal by the Healthcare Financial Management Association’s Medical Debt Task Force concerning the recalculation of base charges for acute hospital services , which are a critical contributor to medical debt.
According to the task force, established Medicare charges for services hinder hospitals’ ability to rebase charges for their services and make them less costly for patients. In order to redetermine how much they charge for services, acute hospitals currently must also work with CMS to ensure Medicare payments align with any changes and ensure budget neutrality. The task force identifies the incorporation of Medicare charges into the redetermination of hospital charges as a significant obstacle to meaningful cost reform for services.
The task force recommends eliminating the use of these Medicare billed charges and adopting rebased charges derived from acute care hospitalization data.
“CMS’s adoption of [this] proposal that was developed by over 500 hospitals would make it feasible and rational for hospitals to voluntarily base the prices they charge self-pay patients on their costs rather than on sometimes arbitrary chargemaster rates,” Snyder said. “That’s a solution that’s already been put forward and would help alleviate medical debt in a lot of cases.”
The paper also recommends that stakeholders should afford patients and families more resources and time to deal with difficult medical issues so that they can focus on terminally ill loved ones before confronting medical bills.
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