On March 5th, 2003, Champaign County Health Care Consumers (CCHCC)
held a press conference in Champaign, Illinois, to release a report, "The
Consequences of Medical Debt: Evidence from Three Communities," and discuss its
implications. The local press conference was moderated by Claudia Lennhoff and
Brooke Anderson of CCHCC. About 20 people from the local media and the community
attended this press conference. The primary coordinator of this report, The
Access Project (TAP), which is affiliated with Brandeis University, also held a
press conference at the national level. Other organizations that were involved
in this investigation were the Human Services Coalition of Dade County in
Miami, Florida, and the Tenants' and Workers' Support Committee in Alexandria,
Virginia. All of these organizations cooperated to produce the report on
medical debtedness: Work on this project began in 1999.
To determine the consequences of medical debt, information was
gathered from several sources: individuals with medical debt, bankruptcy
attorneys, financial counseling agencies, health care providers (hospitals and
major clinics), and credit collection agencies. Some organizations in the
latter two groups were not always cooperative with investigators about their
business practices, or refused to participate in the project. Information was
gathered from 89 individuals with medical debt problems from the three
communities listed above. The majority of these respondents were middle-aged
women with one or two children who were without health insurance at some time
during the preceding year.
Above, are Claudia Lennhoff and Brooke Anderson, coordinators of the
press conference, attending to a comment from a member of the audience.
Coping with Medical
Debt
It was found that the size of medical debt among the respondents
varied considerably, from less than $1000 to $103,000. This debt was owed
primarily to hospitals and medical clinics. Less important sources of medical
debt include medical laboratories, pharmacies, and ambulance services. How do
people attempt to cope with this medical debt, and how successful are they? It
was found that respondents to the survey attempted to cope with medical debt in
a variety of ways, but they were often unsuccessful:
Arrangements were made with the health care provider for a
payment plan. An attempt to arrange a payment plan sometimes fails because the
provider has unrealistic expectations of what the client can afford. Even when
such arrangements are made, the client often fails to make the payments on a
timely basis because of a change in financial status. In either case, the
account is often turned over to a collections agency.
When payments are made on a medical debt, it is often
discovered that the interest on the outstanding debt (18% per year) is greater
than the payments. As a result, the medical debt often increases yearly in
spite of an individual's best efforts to pay it off. Providers often refuse to
waive interest charges unless ALL agreed upon payments are received on a timely
basis.
Individuals sometimes apply for government assistance, such
as Medicaid or SSI-disability, to help pay their medical bills. Such
applications are often denied because their income is too high or they have too
many assets. For similar reasons, they often fail to qualify for charity care
through the health care provider.
To pay medical bills, money is often borrowed from other
family members or friends. While this lowers the burden of debt for the person
incurring such bills, it imposes a burden on their acquaintances, who may have
to pay medical bills themselves. Thus, medical debt can lower the standard of
living of more people in the community than just the individuals owing bills to
health care providers.
In an attempt to pay off medical debts, some individuals
attempt to find jobs that pay them more money, or they move into cheaper
housing. The success of this approach is variable, depending on the job skills
of such individuals, their health, the state of the local economy, and the
availability of affordable housing.
Sometimes people apply for loans or credit cards in order to
pay off a medical debt. Their applications are often denied because of low
income and lack of assets, or because health care providers have wrecked their
credit rating.
As a last resort, individuals with medical and other kinds of
debt may file for bankruptcy. This may be the only effective remedy that is
available for managing a large medical debt. Depending on the community,
medical debt is involved in up to 58% of bankruptcy cases.
Unlike bills from other creditors, hospital and medical bills are
often large, unexpected, and incurred on an involuntary basis. Therefore,
people who are otherwise skilled in managing money may encounter considerable
difficulties in managing medical debt. Even people with health insurance often
have problems with medical debt.
Consequences of Medical Debt
Generally, it was found that medical debt has negative consequences
on individuals and their families in a variety of ways:
It becomes more difficult to gain access to health care
services because health care providers often demand cash payments up front, or
they may refuse to provide services altogether. Such practices vary
considerably across different communities.
Individuals may fail to seek health care for themselves and
other family members because of the fear that this will make their medical debt
even larger and less manageable.
Harassment from aggressive collection practices is
commonplace. Health care providers often turn accounts over to collection
agencies within 30 to 60 days of a missed payment, instead of waiting 150 to
210 days, as was more typical in the past.
Medical debt often makes it harder to pay other bills,
including rent, food, utilities, and clothing, which lowers the quality of
life. Some individuals have problems with other creditors because of the burden
of paying off a medical debt.
Health care providers often report unpaid medical debt to
credit bureaus. This wrecks the credit rating of individuals with medical debt,
which often undermines their ability to obtain credit cards, loans, mortages on
their homes, and other forms of credit.
Both for-profit and non-profit health care providers, or
their collection agencies, often take individuals owing medical debt into small
claims court. The average amount of medical debt in such cases is about $1000.
Sometimes medical debt interferes with financial
self-sufficiency. Individuals are sometimes denied jobs because of a poor
credit record, or they may fear garnishment of their wages if they go back to
work.
Medical debt can become a significant source of stress,
involving such emotions as anxiety, embarrassment, anger, or depression. People
often feel that they are being unfairly punished for a medical problem over
which they have little or no control.
Apparently, even people with very limited means can be subjected to
harassment over medical debt. Elderly persons with social security as their
sole source of income report being taken into small claims court as a result of
medical debt. Homeless persons living in shelters are sometimes hounded by
creditors attempting to collect medical debts. One woman in a shelter for
battered women reported that the cameras and security procedures where she was
staying made her feel safe not only from her boyfriend, but also from the
creditors attempting to collect a medical debt.
Above, are some of the participants of the press conference listening
to the findings of the medical debt report.
Policy
Recommendations
If anything, the problem of medical indebtedness is becoming more
severe. In the absence of universal health care coverage in the United States,
CCHCC has the following policy recommendations that providers should adhere to
while handling cases with medical indebtedness:
Providers should stop the practice of denying access to
health care because of outstanding debt: People need access to health care
in order to stay healthy, and are more likely to work and pay their bills if
they stay healthy. Therefore, denying access to health care will benefit no one
in the long run.
Providers should work with clients to make reasonable
payment agreements that are affordable and realistic: According to ACA
International (a trade association of collection agencies), the average
recovery rate for hospital collections is 6.5% and for medical clinics it is
7.6%. Therefore, little is gained when payment agreements are unrealistic and
contain excessive interest charges. Turning accounts over to collection
agencies produces little income.
Do not report unpaid medical debt to credit bureaus.
There is no evidence that this practice helps health care providers in any way,
and it may interfere with the capacity of clients to pay off their bills at a
lower rate of interest than what is being charged by their creditors.
Make financial and collections policies public. It is
important that clients and members of the community understand the policies
governing repayment of medical debt. This is likely to reduce the perception
that an individual has been subjected to collection practices that are unfair
and capricious. This will also make it more likely that health care providers
will abide by their own standards.
Treat people with dignity and respect. Clients are
more likely to develop a productive working relationship in the repayment of
their bills when they are so treated. Health care providers should also
understand that the contracted collection agencies must treat their clients
with dignity and respect. Failure to do this reflects poorly on the health care
provider.
Current and Future
Research
At the present time, the Medical Billing Task Force of CCHCC is
cooperating with the Access to Care Work Group of TAP to create a survey of
health care providers' financial policies. By responding to the survey, health
care providers will have an opportunity to make their financial policies known
to the public, as recommended above. In the future, these two groups will be
seeking input from health care consumers and other members of the community
regarding additional policy recommendations for the growing problem of medical
indebtedness. These policy recommendations might take the form of addressing
local health care provider practices, creating local ordinances, or advocating
legislation at the state or federal level.
