Health Reform, Medical Debt, and Hospitals – A Middle Class Issue

It’s an instructive trend.  Hospitals are becoming more aggressive and sophisticated about collecting on debts.  Many hospitals now are routinely checking credit scores of their patients and at least one credit bureau has developed a “medical debt score” that supposedly shows how likely a person is to pay their medical debts.  I wonder if that includes an assessment of a patient’s health too?  You can just imagine that computer analysis:  Patient A has brain cancer = minus 200 points because they probably won’t be able to keep much of a job pretty soon.

But why now?  Haven’t hospitals always faced trying to get some people to pay up?  The problem for hospitals is that major medical debt no longer means just dealing with people who don’t have insurance.  As employers scale back benefits and often involuntarily move employees to health plans with higher deductibles and coinsurance, once manageable medical problems become major financial hits – even for people with what is considered “good” coverage.

Under these sorts of plans, many middle class working people can’t afford to unexpectedly pay $5,000 cash for deductibles and coinsurance if an unforeseen health problem lands them in the hospital.  When it was just poorer people without insurance who were running up the bills, it wasn’t as fruitful for the hospitals to go after these patients.  They often have few assets and jobs where salaries are so low it could take centuries to pay off some hospital bills.  With someone slightly higher up the economic ladder it’s a different – and much older — story.  Get someone good and in debt and you can soak salaries and family assets for years. 

Combine rising levels of medical debt with a little more ability to pay and you might even have new business opportunity for banks and the loan industry.  That’s presumably what NC gubernatorial candidate Bill Graham had in mind with his nutty idea about new loan products for high-deductible health plans.  The one positive note is this.  Worry about medical debt is rising among the middle class.  And the middle class votes. 

I’ll close with an “only in America” moment from the recent Wall Street Journal story on this issue.  In no other wealthy Western democracy would people put up with this sort of thing and we need to eliminate it here:

After being treated for heart problems, and his wife received treatment for lung cancer, Ralph Carter says the New Hanover Regional Medical Center in Wilmington, N.C., suggested he fill out an "extended payment application" to stretch out the family's payments on what their insurance didn't cover. Mr. Carter declined, saying the application asked for information on wages, bank accounts and monthly bills. It also asked for permission to check his credit reports.