Medical Debt Is Crushing Many Americans. Is The Health Care System On The Verge Of Collapse?

Authored by Daisy Luther via The Organic Prepper blog,

Health care expenses are a massive burden for many Americans, and for some, they can be financially devastating.

A new report from Kaiser Health News revealed some shocking examples of just how bad things can get for some people.

‘UVA Has Ruined Us’: Health System Sues Thousands Of Patients, Seizing Paychecks And Claiming Homes covers the cases of individuals who are dealing with serious financial hardship due to the University of Virginia Health System’s aggressive collection practices.

The article begins with the story of Heather Waldron, who required emergency surgery in 2017. She believed she had insurance at the time – it wasn’t until after her hospitalization that she learned a computer error involving the HealthCare.gov website caused a lapse in her coverage.

The UVA health system slapped Waldron with a lawsuit and a lien on her home to recoup the $164,000 in charges, leading to serious financial hardship for her family:

She is now on food stamps and talking to bankruptcy lawyers. A bank began foreclosure proceedings in August on the Blacksburg house she shared with her family. The home will be sold to pay off the mortgage.

She expects UVA to take whatever is left.

The $164,000 billed to Heather Waldron for intestinal surgery was more than twice what a commercial insurer would have paid for her care, according to benefits firm WellRithms, which analyzed bills for Kaiser Health News using cost reports UVA files with the government. Charges on her bill included $2,000 for a $20 feeding tube. (source)

Waldron is not alone. There are many stories similar to hers – and some are much worse.

The UVA Health System aggressively pursued patients for medical bills for years.

The Kaiser Health News (KHN) analysis found that during a six-year period ending in June 2018, “the UVA health system and its doctors filed 36,000 lawsuits against patients seeking a total of more than $106 million, seizing wages and bank accounts, putting liens on property and homes and forcing families into bankruptcy.”

People who have received treatment in the UVA system are facing a particularly formidable opponent. “UVA stands out for the scope of its collection efforts and how persistently it seeks payment, pursuing poor as well as middle-class patients for almost all they’re worth,” the KHN report explains. Court records, documents, and interviews with hospital officials and dozens of patients revealed that UVA has sued people for as much as $1 million and as little as $13.91.

The system has garnished thousands of paychecks, seized $22 million over six years in state tax refunds owed to people with outstanding bills, sued about 100 patients every year who were their own system’s employees, filed thousands of property liens, and hit some patients with legal fees and interest that added up to more than the original bill. UVA has the most restrictive eligibility guidelines for financial assistance of any hospital system in Virginia. “Savings of only $4,000 in a retirement account can disqualify a family from aid, even if its income is barely above the poverty level,” KHN reports.

UVA Health System spokesman Eric Swensen told KHN that UVA gave $322 million in financial assistance and charity care in fiscal 2018. But legal and finance experts said that’s not a reliable estimate:

The $322 million “merely indicates the amount they would have charged arbitrarily” before negotiated insurer discounts, said Ge Bai, an accounting and health policy associate professor at the Johns Hopkins Carey Business School.

The figure is “based on customary reporting standards used by hospitals across the U.S.,” Swensen said.

Insurers would have paid UVA only $88 million for that care, according to an accounting of unpaid bills presented in September 2018 to the UVA Health board. Even that unpaid figure did not come out of UVA’s purse since federal and state governments provided “funding earmarked to cover indigent care” for almost all of it — $83.7 million, according to Bai.

The real, “unfunded” cost of UVA indigent care: $4.3 million, or 1.3% of what it claims, according to the document.

“That’s nothing,” given how much money UVA makes, Bai said. “Nonprofit hospitals advance their charitable mission primarily through providing indigent care.” (source)

Perhaps the most surprising detail about the UVA Health System is that it is not a for-profit system and does not have shareholders making demands. It is funded with taxpayer and state money (also taxpayer money, of course):

Like other nonprofit hospitals, it pays no federal, state or local taxes on the presumption it offers charity care and other community benefits worth at least as much as those breaks. Democratic Gov. Ralph Northam, a pediatric neurologist, oversees its board.

UVA Medical Center, the flagship of UVA Health System, earned $554 million in profit over the six years ending in June 2018 and holds stocks, bonds and other investments worth $1 billion, according to financial statements. CEO Sutton-Wallace earns a salary of $750,000, with bonus incentives that could push her annual pay close to $1 million, according to a copy of her employment contract, obtained under public information law. (source)

Other hospitals in the US are suing patients too.

Recently, journalists and academics have exposed hospital collections practices in BaltimoreMemphisNew Mexico, North CarolinaNebraska, and Ohio. In 2014, NPR and ProPublica published stories about a hospital in Missouri that sued 6,000 patients over a four-year period.

NPR recently reported on collection practices at Mary Washington, another Virginia hospital. According to their report, Mary Washington sues so many patients that the court reserves a morning every month for its cases.

Since KHN and NPR exposed the collection practices at the two Virginia hospitals, both have stated they are going to change their ways.

“Gov. Ralph Northam and the president of the University of Virginia committed to changing UVA Health System’s collections practices a day after Kaiser Health News detailed its aggressive and widespread pursuit of former patients for unpaid medical bills,” KHN reported.

NPR added an Editor’s note to its June 25 article about Mary Washington that states:

The day after this story published, Mary Washington Healthcare announced it will suspend its practice of suing patients for unpaid bills, stating: “We are committed to a complete re-evaluation of our entire payment process to ensure that all patients know they have access to care.” When asked what they will do about any patient whose wages are currently being garnished, Eric Fletcher, Mary Washington’s senior vice president, said in a statement to NPR: “We are happy to try to work with that patient and the courts and their employer to try to eliminate the garnishment.” (source)

According to a study published in the American Medical Association’s journal, JAMA in June, an estimated 20% of US consumers had medical debt in collections in 2014. Medical debt has been increasing with direct patient billing, rising insurance deductibles, and more out-of-network care being delivered, even at in-network facilities.

For the JAMA study, researchers looked at Virginia court records from 2017 and found that in the state, 36% of hospitals sued patients and garnished their wages in 2017. They identified 20,054 warrant-in-debt lawsuits and 9232 garnishment cases. Garnishments were MORE common in non-profit hospitals (71%).

“If you’re a nonprofit hospital and you have this mission to serve your community, [lawsuits] should really be an absolute last resort,” says Jenifer Bosco, staff attorney at the National Consumer Law Center, told NPR:

Bosco explains that IRS rules require nonprofit hospitals to have financial assistance programs and prohibit them from taking “extraordinary collection actions” on unpaid medical bills without first attempting to determine patients’ eligibility for financial assistance.

Nonprofit hospitals, Bosco says, “have to provide some sort of financial help for lower-income people, but the federal rules don’t say how much help, and they don’t say how poor you have to be to qualify [or] if you have to be insured or uninsured.” (source)

“Hospitals were built — mostly by churches — to be a safe haven for people regardless of one’s race, creed or ability to pay. Hospitals have a nonprofit status — most of them — for a reason. They’re supposed to be community institutions,” Dr. Martin Makary, one of the JAMA study’s authors and a surgeon and researcher at Johns Hopkins Medicine, told NPR.

Unpaid hospital bills are a leading cause of personal debt and bankruptcy in the US.

According to a study published in the American Journal of Public Health earlier this year, 66.5 percent of all bankruptcies in the US are tied to medical issues, either because of high costs for care or time out of work. An estimated 530,000 families turn to bankruptcy each year because of medical issues and bills, the researchers found.

The study, titled Medical Bankruptcy: Still Common Despite the Affordable Care Act, states, “Despite gains in coverage and access to care from the ACA, our findings suggest that it did not change the proportion of bankruptcies with medical causes.”

Prior to the ACA’s implementation in 2014, 65.5 percent of debtors reported medical reasons for filing bankruptcy. After the Act was implemented, 67.5 percent cited medical expenses as their reason. In 2007, an estimated 62.1 percent cited medical bills as contributors to their bankruptcy, and 40.3% cited income loss due to illness.

Other studies have found that at least 25 percent and as many as 50 percent of bankruptcies include significant medical debt, according to a recent report from The Balance.

One study found that the insured were a bit more likely to declare bankruptcy (3 percent) than the uninsured (1 percent), The Balance reports:

Most probably thought their insurance protected them from medical costs. They weren’t prepared to pay for unexpected deductible and coinsurance costs. Almost a third weren’t aware that a particular hospital or service wasn’t part of their plan. One-in-four found that the insurance denied their claims.

How did those with insurance wind up with so many bills? After high deductibles, co-insurance payments, and annual/lifetime limits, the insurance ran out. Other companies denied claims or just canceled the insurance. (source)

According to GoFundMe CEO Rob Solomon, one-third of the donations made through the site help people pay for medical care. Roughly 250,000 campaigns for assistance with medical bills and healthcare costs are set up on the crowdfunding site annually, raising total contributions of $650 million per year.

Millions of Americans are struggling to pay healthcare-related costs.

Even Americans who have insurance coverage are struggling to afford medical bills. As the research shows, health insurance won’t completely protect you. Many people have been bankrupted by high deductibles and other out-of-pocket expenses. This is why you should try to have at least the amount of your deductible in savings.

Rising healthcare costs have serious implications for many Americans. According to a recent report from The Balance, many people cannot afford groceries, rent, and clothing due to medical costs. Many have burned through their savings, and others have taken on extra work to pay medical bills. Some cut back on or skip prescription medications and follow-up care, and many rack up credit card debt and use loans to pay for healthcare expenses.

Here are some more troubling facts from The Balance report:

In 2015, the Kaiser Family Foundation found that there were 1 million adults who declared medical bankruptcy. That is more than those going bankrupt for unpaid credit card debt or mortgage defaults. A 2013 Nerdwallet study found that almost 30 percent maxed out their credit cards, while 8 percent were forced into bankruptcy because the illness cost them their jobs.

Even more disturbing was that 78 percent of them had health insurance that failed to cover all their bills. Sixty percent were let down by private insurance, not Medicare or Medicaid. Ten million of them will incur medical costs they can’t pay off each year, thanks to high-deductible plans.

How did those with insurance wind up with so many bills? Before the ACA, many were sunk by annual and lifetime limits. Others were stuck when insurance companies denied claims or just canceled the policy once they got sick.

But even after Obamacare, many weren’t prepared for high deductibles and co-insurance payments. In 2017, 31 percent of the insured found it difficult to afford copays. That’s up from 24 percent in 2015, according to a Kaiser Family Foundation study. Similarly, 43 percent found deductibles too high, compared to 34 percent in 2015. (source)

What are the causes of rising health care costs?

A recent report from The Balance answered this question. Here are some shocking statistics from that report:

In 2017, U.S. health care costs were $3.5 trillion. That makes health care one of the country’s largest industries. It equals 17.9 percent of gross domestic product. In comparison, health care cost $27.2 billion in 1960, just 5 percent of GDP. That translates to an annual health care cost of $10,739 per person in 2017 versus just $146 per person in 1960. Health care costs have risen faster than the average annual income. (source)

There are two causes of this massive increase – government policy and lifestyle changes, the report goes on to explain:

First, the United States relies on company-sponsored private health insurance. The government created programs like Medicare and Medicaid to help those without insurance. These programs spurred demand for health care services. That gave providers the ability to raise prices. A Princeton University study found that Americans use the same amount of health care as residents of other nations. They just pay more for them. For example, U.S. hospital prices are 60 percent higher than those in Europe. Government efforts to reform health care and cut costs raised them instead.

Second, chronic illnesses, such as diabetes and heart disease, have increased. They are responsible for 85 percent of health care costs. Almost half of all Americans have at least one of them. They are expensive and difficult to treat. As a result, the sickest 5 percent of the population consume 50 percent of total health care costs. The healthiest 50 percent only consume 3 percent of the nation’s health care costs. Most of these patients are Medicare patients. The U.S. medical profession does a heroic job of saving lives. But it comes at a cost. Medicare spending for patients in the last year of life is six times greater than the average. Care for these patients costs one-fourth of the Medicare budget. In their last six months of life, these patients go to the doctor’s office 29 times on average. In their last month of life, half go to the emergency room. One-third wind up in the intensive care unit. One fifth undergo surgery. (source)

The best way to avoid medical debt is by taking care of yourself.

Accidents are often not preventable, and neither are some health conditions.

But many of the health issues that lead to massive medical debt are preventable, including obesity, Type 2 diabetes, and heart disease.

A 2014 study published in The Lancet revealed that

…chronic diseases are the main causes of poor health, disability, and death, and account for most of health-care expenditures. The chronic disease burden in the USA largely results from a short list of risk factors—including tobacco use, poor diet and physical inactivity (both strongly associated with obesity), excessive alcohol consumption, uncontrolled high blood pressure, and hyperlipidaemia—that can be effectively addressed for individuals and populations. (source)

If you’d like to improve your health (and hopefully reduce your risk of accruing medical debt), here are some resources that may help.

45 Ways To Add More Physical Activity to Your Day

Quit Smoking program

Bug Out Boot Camp

99 Healthy No-Cook Meals and Snacks