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Understanding Medical Debt

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Tiffany Henley
August 4, 2019

The cost of health care across the nation has been rising incrementally and health care spending accounts for 17.9 percent of our GDP.  Although the Affordable Care Act (ACA) was enacted in 2010 to increase access to health care services and achieve quality and affordability, the Trump administration passed legislation that was designed to dismantle the ACA.  Under the Trump administration, the individual mandate to buy health insurance has been eliminated, the enrollment period to sign up for health insurance through the federal exchange was shortened from 90 days to 45 days, work requirements were adopted for people on Medicaid by some states and the budget for advertisements and assistance with enrolling for health care insurance was slashed.  As a result of these changes, technological growth in the medical industry, administrative fees and the common practice of passing along the cost of health care services to consumers, Americans are facing a medical debt epidemic.

Medical debt can consist of any current bill or past due bill that a consumer is paying for medical care.  Additionally, medical debt includes bills for health care services that are in collections as well.  According to the Commonwealth fund, “…41 percent of working-age Americans –or 72 million people—have medical bill problems or are paying off medical debt, up from 34 percent in 2005.” This is an issue that warrants public attention because an important purpose of health insurance to is protect consumers from financial hardship. This problem can be alleviated by public administration professionals within the government sector by collaborating with administrators working in the health care sector.  What can the government do? The government can create and enforce laws to protect consumers from going into debt from expensive medical bills. 

To combat the medical debt epidemic at the federal level, the Consumer Financial Protection Bureau recently proposed regulations under the Fair Debt Collection Practices Act to protect consumers from harassment from debt collectors, provide consumers with disclosure information with itemized debts and an easy process to dispute claims and prohibit lawsuits or the threat of a lawsuit for expired debts. Under the proposed regulations, debt collectors would also need to provide communication to the consumer before reporting the debt to a credit reporting agency.  The proposed regulations will greatly impact the medical debt of Americans because many consumers are negatively affected by poor credit scores due to medical debt.  Additionally, hidden fees will be revealed in itemized debts and it is expected that a streamlined collection process will eliminate some of the confusion and complexity involved with medical billing and collection.

At the state level, states have passed legislation to protect consumers from medical debt.  Some states have restricted the billing practices of hospitals and instituted requirements for charity care through comprehensive legislation.  Other states have established formal agreements with hospitals to maintain fair prices and the collection of debts.  Some states also provide exemptions to individuals with high medical bills with the intention of protecting their personal assets such their home and income.  Additionally, states are starting to enact balance billing laws, which prohibits providers from charging consumers the balance of a bill that the insurance company does not pay.  These laws also prohibit surprise billing.  This can occur when a patient goes to an in-network facility and inadvertently sees an out-of- network provider and receives a surprise bill from the out-of network provider.

In 2018, the governor of New Jersey signed the, “New Jersey Out- of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act.”  This act applies to health care providers, facilities, and insurance companies.  Some of the requirements of the act include: disclosure of network status and medical fees in certain circumstances to patients, the prohibition of balanced billing which disallows the billing of health care costs that exceeds the patient’s co-pay, deductible, or coinsurance, assignment of mandatory benefits that delineates the costs of health care services to out-of-network providers for services inadvertently rendered and co-pays, deductibles and coinsurance that the patient is responsible for paying, as well as prohibiting cost-sharing waivers with out-of-network providers. 

Medical debt is a serious epidemic that has the potential to affect the health care industry, the economy and the face of politics. While the role of public administration is expansive, public administrators can formulate and implement programs and adopt regulations that are in the best interest of the public.  American citizens are spending their disposable income on medical bills, bills are being reported on their credit reports and some people are losing their personal assets such as their homes due to high medical debt.  Voting history shows that people make decisions based on social problems that affect them directly and 79 million Americans are struggling to pay their medical debt.  To make a significant impact on medical debt, action at the federal level should be examined.  The government should enact restrictions on billing and collections practices, prohibitions on surprise billing and balance billing by all types of providers, and disclosure notices on network status and fees.  These actions will reduce medical debt, and provide Americans with affordable health care and reduce the underinsured population.

Author: Tiffany Henley, PhD, MA, Assistant Professor, Department of Public Administration, Pace University, [email protected]


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