What To Do About Medical Debt?

What can be done about the medical debt crisis in the United States? In the United States, medical debt is a major financial burden for many families. In fact, one in five Americans has outstanding medical debt, and the average amount owed is nearly $6,000. Medical debt can have a devastating impact on a family's finances, leading to bankruptcy and negative credit histories. The problem is only getting worse, as the cost of healthcare continues to rise.

On this episode of the CareTalk podcast, John and David explain why medical debt is b.s. and what should be done about it.


TOPICS:

(1:38) What is medical debt?

(2:36) What makes medical debt different from other kinds of debt?

(4:59) What country has the most medical debt? 

(8:30) What percentage of bankruptcies are caused by medical bills?

(13:28) What are credit agencies doing to help medical debt?

(16:18) Is medical debt a good issue for politicians to run on? 

ABOUT CARETALK

CareTalk is a weekly podcast that provides an incisive, no B.S. view of the US healthcare system. Join co-hosts John Driscoll (CEO, CareCentrix) and David Williams (President, Health Business Group) as they debate the latest in US healthcare news, business and policy.

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Transcript

- Welcome to CareTalk, America's home for incisive debate about healthcare business and policy. I'm David Williams, president of Health Business Group

- And I'm John Driscoll, the CEO of CareCentrix.

- Well, John, you know, we wanna sort of dramatize a situation today about medical debt and just what a big deal it is. And, you know, a lot of people lose their home or get thrown outta their house 'cause of medical debt. It looks like you're sitting outside of your house right now, John, did you get tossed out 'cause of a medical debt?

- Well, not because of medical debt but there's nothing more to disclose.

- All right, John. Well, that's what they all say. You know, when it was, if you didn't pay for that ton selecting or whatever.

- Got the CareCentrix shirt for you. You're picking on me again.

- I think there's a requirement that they have to leave you with your shirt and one fresh pair of underpants. So, we won't ask about tomorrow, but in any case John, medical debt, very serious topic. By some accounts up to a hundred million American adults are in medical debt. I think it's high time we discussed it.

- It brings the country together at a time of division. One thing that all Americans appear to share is too much medical debt. What is medical debt, David?

- John, I thought you'd never ask because it is a strange concept. You know, basically medical debt is... Actually, you know what? I think it is bullshit. But medical debt is technically-

- Can we say that?

- We'll see whether our-

- It's true, but can we say it?

- We're gonna find out. In this topic, I think it's fine. So, it basically, it's a medical expense that isn't covered by insurance which then becomes a past due bill that you don't pay, and it gets written off, sent as a bad debt out for collection and then that becomes a medical debt. So, that's how your little visit to the office became a medical debt.

- Well, wait a second, David of course every provider tells me exactly how much I'm gonna owe when I go for some procedure whether it's to have a mole check for skin cancer or my leg is broken. I mean, how could there be any surprises? I mean, there's so much transparency and clarity around pricing. I mean, it's ludicrous.

- John, the thing is, you know, eventually just kind of sold off, or it's contracted that the provider holds it and tries to collect from it. And it does get reported to the credit bureau. So, you can say it's ridiculous, but when it appears on your credit report, that's it?

- Yeah. But what makes medical debt different than other kinds of debt?

- Well, so if you think about a classic example of debt that's sent out for collection, let's say you had a cell phone bill, you didn't pay your bill. Well, probably you signed up for the cell phone bill. Maybe you didn't read it too carefully. Exactly which plan you got and how much it would be, or you didn't wanna have to pay it but you knew it was something you wanted to buy at some time. Now, a medical debt is usually for a product or service that not only didn't you sign up for, you didn't actually want it in the first place. You'd rather not be sick. And it also tends to happen, John, like if you go out and get a new cell phone to give that contrast, hey, you're feeling good. Maybe you got a little raise, a little boost feeling good at the office, but when you go and have a medical bill, it's probably a time when your earnings may be under pressure, someone's sick. You might not be able to work. And the other thing, John, that makes it even more the case is that your cell phone bill, okay, maybe it's $200 a month which is a lot or whatever you pay for it. It's not 200,000 or 20,000, or some number you have no idea of whereas a medical debt could be, that's why I say it's BS John, I'll use that term. It's a nicer term. Because it could be just a totally nonsense number. And also it could be something the insurance company was supposed to pay.

- Well, one of the really hard things about medical debt and it's true of healthcare pricing in general is that it's not actually a fixed thing or a predictable thing. And so it's very different than your laundry bill, your grocery bill or your cell phone bill, where, to your point you're picking what you're buying. The price is clear. And once the price is established, it doesn't change. In healthcare, you don't pick a price or a service rather typically, you rarely know what that price is. And it's rarely... Is it one that you couldn't negotiate if you weren't an insurance company versus an individual. It's really confusing. And to your point about being, you know, potentially inflated or just wrong. And that's why there's this weird thing where a lot of people don't pay their medical bills because they just don't even understand it. And, so David, obviously this medical debt thing is a problem for America, but America's leading in one big category. I mean, after all, what country has the most medical debt per capita in the world?

- John, you could have left it right at the story of what country has the most medical debt or what country has medical debt, because the concept of medical debt, it's just like Vegemite. You know, it only exists in one place. And so it's sort of like, if you-

- And it's gross.

- Well, it's an acquired taste. You know, you grew up and get used to Vegemite, I like it. I grew up with medical debt. I enjoy it, John. I like getting the mail and getting 50 bills from Eurofins which I got the other day, that said that I hadn't paid for some COVID test from two years ago or that they paid my insurance company. I was best to pay them back. John, it's only in America, John, American exceptionalism. So, it's the highest here in the U.S.

- Well, and just to put a round number, about 41% of all American adults have medical debt, near around a hundred million people. And 12% of all Americans have medical debt that's greater than $10,000 in a country where a thousand dollars bills surprise bill can turn a lot of Americans household budgets upside down. $10,000 of medical debt for 12% of America according to the Kaiser Family Foundation in 2019 is insanely high. So, in addition to being it unpredictable and difficult to understand, I mean what I get a kick out of is the providers explanation of benefits and bills don't always conform to the language that you can even understand. And then health insurers send these incredibly detailed also confusing letters often that then describe how big a discount they've provided but you still owe money. It's complicated for even those of us in healthcare. And there has to be a better way.

- Well, John, let's take it from the other side and that sort of the provider, and the care, and the insurers side. One of the things that I do enjoy about getting that letter from the insurance company is at least it says, "This is not a bill." I can say, "Thank God." At least it says what I may owe but it doesn't actually ask me for anything. Now, we said as a patient, you don't want to be there, you're dragged in et cetera. But from the provider, they may also say who the heck is this guy? You know, some guy with no insurance landed on my doorstep and I had to poke at him and he did something stupid to get here in the first place, didn't take care of himself or whatever it may be. And now I gotta try to collect for my services, my valuable services. So, what do you want?

- Okay, Dr. Williams, you overcharging monster. Let's start with the notion like why do we have a system where there's a standard price for services and that the price that you pay out of pocket, the cash price, the price that you pay, if you don't have coverage isn't just the average of all the negotiated prices that the insurance companies have negotiated that you have some predictability here. It's sort of insane that we have no regulatory support because the people who are really gonna get in trouble here are people on fixed budgets or with limited income, or who just are not educated enough or aggressive enough not to negotiate with the carriers and the providers because often it's the out of pocket price that's much higher than the insurance companies. And it's one that you can't even understand. I mean, David, the Kaiser Family Foundation estimates that the medical debt alone drives about a million people a year into bankruptcy. The 2/3 of those people who were declare personal bankruptcy, start with a pretty large... Go into it with pretty large medical debt. That one out of three or one out of two people think about because they've got debt, worry about even going to get service, which means they're gonna get sicker. And those bills will eventually come due to all of us. I mean, this is a system that I mean, again, it's a toxic system that we've all become much more comfortable with. And it's really hard to believe that we couldn't create a system where the out of pocket cost or the net cost to the consumer wouldn't be simpler and fairer. But until that happens, we're still kind of, again it's better post Obamacare because with more coverage, more of the incremental bills are being paid by insurance but it's still a pretty material problem. And it just feels unfair.

- So, John, I think we're in a similar spot on the policy side of things. Let's talk a little bit about how these crazy things happen. 'Cause you know, the typical, I won't speak for hospitals but the typical physician, nice people, and they're not trying to necessarily rip you off but they're couple of things that happened that lead to this phenomenon of someone like you or I getting a crazy bill, and one of them is that the provider will say, "Well, I'll send this bill out to somebody that came in here without proper insurance or whatever." And only one out of five of 'em is gonna pay me. Therefore, I gotta charge more to the one that does pay to make up for all the ones that don't-

- That's unfair. That's unfair. Look. Dr. Kevorkian meet Dr. Williams. I mean, that is unfair and-

- Well, Dr. Kevorkian... To be fair, John, Dr. Kevorkian does not get a lot of repeat business. He doesn't have a lot of chronic illness patients which are your better patients

- But it's totally unfair. There has to be, I mean, there's this new Biden bill around kind of treating medical differently. It's ironic that the transparency bill and regulation got passed, but not this medical debt which is really crippling for low income people. And the reality is this debt can be retired for pennies on the dollar. The whole system's a bunch of baloney.

- But John-

- Do you hear that, David? Baloney. That for every hundred... Go on the internet. That whole Google machine of yours. And look up RIP Medical Debt. For every hundred dollars that people give, they can retire $10,000 of medical debt because the way this works is there's this decreasing amount of yield to your point about the bill as it sits out there for longer, it's sold from one person to another for collections and there's no, historically, no limits on what the collectors can say and do are very few. And then it can hit people's credit ratings. There's a modest amount of voluntary movement which is positive on the credit agencies to stop tagging people's credit ratings with medical debt. But this is a real problem that you are trivializing by misconstruing the position of the physician.

- John hurt me, hurt me more, but you didn't even let me give the second reason.

- What's that?

- The one reason they give, as I said is because, not many people will pay, so they have to overcharge the one that does. But the other reason is that they'll say, well this is my overall, my rack rate. And then if I give you a discount, then that means I gotta give some insurance company a discount and I don't need you to pay it, but I need the insurance company to pay this big amount. Or maybe there's some of these, there's some of these so-called secondary provider networks where I've agreed to give a 20-

- You're getting lost here.

- I am not.

- The average American doesn't know what they're being charged.

- Joe sixpack.

- They can't understand. In many cases the out-of-pocket cost is much higher than the negotiated average. They then get bills, particularly at a point of vulnerability that they can't understand or unpack unless they hire some expert. When the reality is these bills are weighing down on people's credit histories, they're driving people into bankruptcy. And they're trading on the private market for 10 cents on the dollar. This system needs to be fixed. And I think posturing for the providers who genuinely to your point need to get paid for their services. We have a $4 trillion healthcare market. We shouldn't put a dollars paid for healthcare in America. We shouldn't be putting a million people a year into bankruptcy. That system's nuts.

- So, John, as you said, there's been some modest progress potentially, 'cause there's definitely pressure.

- Itsy-bitsy.

- Everyone cares about this, but what is it that the credit agencies are actually doing? And is it meaningful at all? They made some announcements out earlier this year.

- You're right. The credit agencies, the Equifax's and the Experian and all the other-

- Great names, TransUnion.

- The companies that sound like technology companies but they're just credit agencies are actually extending the time before your credit rating deteriorates that would allow you to actually negotiate and pay. They're increasing the amounts that would count towards a negative credit score. But David, that is, you're talking about negotiating over the dessert when the main course is the problem. It's great that they're making progress. I don't want to ignore that but my Lord, $4 trillion, and we can't find a way to pay people's medical bills that are sending people into bankruptcy, that are stressing them out. Your trutherism will likely to be suffering from anxiety and depression if you've got medical debt. Well, guess why? 'Cause you've got medical debt you can't pay. This is a problem we could solve, Dave, just by forcing the... From a regulatory perspective, requiring that providers don't overcharge those who are paying cash, requiring that there be a standard simple way of describing the bills and providing some access to credit counseling and support on the part of the providers for those patients that really can't pay. 'Cause I'm sure there are scofflaws out there who don't wanna pay their bills. And obviously those folks ought to be chase. But a lot of this is burdening people who have a very hard, either don't understand it, can't pay it and need more time but also more support particularly when the provider, the person who's actually gonna get paid is only gonna get 10 to 15 cents on the dollar of the amount of the bill that's weighing so many Americans down.

- John, I read an interesting statistic the other day and it said you're more likely to be hit by lightning than to receive an accurate medical bill. So I think that is... It was some of these things you don't believe, but that one sounded right to me. I wanna ask you a final question, John, on this topic which is this a good topic for politics? Is this like the third rail of politics? Or is this a good one for politicians to run on?

- Everybody should be... Every family in America has gotten a goofy medical bill and most people have had a hard time figuring out what they really should pay. And so I think this is a great issue. Let's make healthcare work for all Americans. Let's make sure people understand their bills and that when they can't pay it, they get the support to pay it. That's an all American issue that could bring this country together, David.

- So, you're not gonna take a stab at whether it's better for Republicans or Democrats.

- I think it's good for everybody, everybody suffers in this system. Everybody's got a family member that probably... Most people probably have a family member who's got a medical bill that they're having a hard time paying. And look up that website, RIP Medical.com. It's really insightful. Maybe we'll both make some contributions to help bring down that medical debt. David, go America, let's solve this problem on a bipartisan basis.

- That sounds good, John. I'm gonna say it's better for the Democrats because when they get to talk about these issues, it points out some of the problems in the so-called, free market economy in healthcare. So, that's who I think it's better for. And anyway, I'll make a donation to RIP Medical Debt.org just so I can hear you stop talking about it. And that's it. For yet another addition of CareTalk, we've been talking about medical debt, we're in your debt to our listeners and streamers because we love you, and we love talking about healthcare. I'm David Williams, president of Health Business Group.

- And I'm John Driscoll, the CEO of CareCentrix. Thanks for listening. And please subscribe on your favorite service.