Published this week in the New York Times, this article describes the decaying state of Greenwood Leflore Hospital, a 117 year-old facility in the Mississippi Delta that may be within months of closure. While rural hospitals across the country are struggling, Mississippi’s firm opposition to Medicaid expansion has exacerbated the problem in that state, by depriving providers of an additional $1.4B per year in federal funds. Instead, only a few of the state’s 100-plus hospitals actually turn an annual profit, and uncompensated care costs are almost 10 percent of the average hospital’s operating costs.
Despite a dozen or more hospitals at imminent risk of closure, Mississippi officials would rather use the state’s $3.9B budget surplus to lower or eliminate the state income tax.
The Gist:Expanding Medicaid doesn’t just reduce rates of uncompensated care provided by hospitals, it changes the volume and type of care they provide.
Further, Medicaid expansion has been found to result in significant reductions in all-cause mortality.
Ensuring that low-income residents in Mississippi and other non-expansion states have access to Medicaid would allow providers to administer more preventive care and manage chronic diseases more effectively, before costly exacerbations require hospitalization.
A report from the Center for Healthcare Quality and Payment Reform (CHQPR) found that over 600 rural hospitals are at risk of closing in 2023, citing persistent financial challenges related to patient services or depleted financial resources.
More than 600 rural hospitals are at risk of closing in 2023
In the report, which was released in January, CHQPR identified 631 rural hospitals — over 29% nationwide — at risk of closing in 2023. However, compared to pre-pandemic levels, fewer rural hospitals are at immediate risk of closing because of the federal relief they received during the pandemic.
Among rural hospitals at risk of closing, CHQPR found two common contributing factors. First, these hospitals reported persistent financial losses of patient services over a multi-year period, excluding the first year of the COVID-19 pandemic. Second, these hospitals reported low financial reserves, with insufficient net assets to counter losses on patient services over a period of more than six years.
In most states, at least 25% of the rural hospitals are at risk of closing, and in 12 states, 40% or more are at risk.
Meanwhile, more than 200 of these rural hospitals are facing an immediate risk of closing. According to CHQPR, these hospitals have inadequate revenues to cover expenses and very low financial reserves.
“Costs have been increasing significantly and payments, particularly from commercial insurance plans, have not increased correspondingly with that,” said Harold Miller, president and CEO of CHQPR. “And the small hospitals don’t have the kinds of financial reserves to be able to cover the losses.”
How rural hospital closures impact communities
In many cases, the closure of a rural hospital leads to a loss of access to comprehensive medical care in a community. Most of the at-risk hospitals are in areas where closure would result in community residents being forced to travel a long distance for emergency or inpatient care.
“In many of the smallest rural communities, the only thing there is the hospital,” Miller said. “The hospital is the only source. Not only is it the only emergency department and the only source of inpatient care, it’s the only source of laboratory services, the only place to get an X-ray or radiology. It may even be the only place where there is primary care.”
Many small hospitals also run health clinics. “There literally wouldn’t be any physicians in the community at all if it wasn’t for the rural hospital running that rural health clinic,” Miller said. “So if the hospital closes, you’re literally eliminating all health care services in the community.”
According to Miller, there has to be a fundamental change in the way hospitals are paid. “The problem that hospitals have faced though, is that they do two fundamentally different things — but they are only paid for one of them,” Miller said.
“Hospitals deliver services to patients when they are sick, and they are paid for that. But the other thing that hospitals do, which is essential for a community, is that they are available when somebody needs them — that standby capacity is critical for a community. But hospitals aren’t paid for that,” he added. (Higgs, Cleveland.com, 3/16; CHQPR report, accessed 3/20)
Advisory Board’s take
Why it is ‘not enough’ to simply stave off hospital closures
Hospital closures are a big deal — for all the reasons outlined above (and more) — but we cannot understate the importance of monitoring hospitals that are in or moving into the “at risk” category.
When hospitals fall into the “at risk” category, they are more likely to cut services to reduce costs. While this may help preserve hospital survival, it can have a devastating effect on patient access. For instance, a 2019 Health Affairsstudy found that rural hospital closures are associated with an 8% annual decrease in the supply of general surgeons in the years preceding closure.
While dangerous trends persist in maternal mortality, especially among Black women, obstetrics (OB) care is often placed on the chopping block for hospitals looking to rationalize services and stave off closure. According to the American Hospital Association (AHA), nearly 90 rural community hospitals closed OB units between 2015-2019. As of 2020, only 53% of rural community hospitals offered OB services, AHA reports.
Ultimately, these service closures carry massive implications for patient access and outcomes. As care delays result in higher-acuity downstream presentation, they can also increase the strain on the rest of the healthcare system.
So, yes, we need to stave off hospital closures. But to say “that’s not enough” is a massive understatement. In fact, many of the strategies hospitals deploy to stave off closure can create gaps that stakeholders must work together to fill.
This is especially true as we near the end of the COVID-19 public health emergency. As Medicaid redeterminations start ramping up, rural hospitals may see an increase in bad debt, especially among states that have not expanded Medicaid.
For example, the Alabama Rural Health Association reported that 55 of 67 counties in Alabama are considered rural, and CHQPR reported that 48% of rural hospitals in the state are at risk of closing. Meanwhile, the Wyoming Department of Health reported that 17 of 23 counties in the state are considered “Frontier,” which means there are fewer than six residents per square mile, and CHQPR reported that 29% of the state’s rural hospitals are at risk of closure.
When rural hospitals close their doors, the surrounding communities are left without access to timely, quality health care.
There is no silver bullet here — but Advisory Board researchers have created several resources to help stakeholders understand how to support rural hospitals:
Rural providers aren’t providing “rural healthcare” — they’re providing healthcare in a rural setting. While niche policies can help in pockets, rural providers need federal policymakers to consider rural needs in overall health policy to meet the magnitude of the crisis.
Budget retailer Dollar General announced this week that it’s partnering with mobile medical service provider DocGo to deliver routine primary care in mobile clinics outside three stores near its Goodlettsville, TN headquarters.
The mobile clinics will accept public and select commercial insurance plans, as well as offer services for a flat fee. It’s the latest step in Dollar General’s tentative exploration of healthcare, which includes a partnership with Babylon Health to offer telehealth visits in several Missouri stores, and the DG Wellbeing initiative, which has placed basic health and wellness products in roughly 3,200 of its 19,000 stores nationwide.
The Gist: With an unmatched footprint in rural areas (an estimated 75 percent of the US population lives within five miles of one of its stores) Dollar General has the capacity to transform rural healthcare access.
Rather going head-to-head with other national retailers who are quickly expanding into healthcare delivery, Dollar General has so far taken a measured approach, aiming to develop workable services that improve rural healthcare access at the margins.
Since it hired a chief medical officer in 2021, it has dabbled in small care delivery pilots like this one, but one of these pilots will need to succeed at scale for Dollar General to enter the ranks of serious retail disruptors.
Hospitals experienced a slight boost to operating margins in November, but not enough to restore the median negative margins that persisted for 2022 to date.
Kaufman Hall’s December “National Flash Hospital Report“ — based on data from more than 900 hospitals — found hospitals’ median operating margin was -0.2 percent through November, a slight improvement from the median of -0.3 percent recorded a month prior.
A 1 percent decline in expenses from October to November drove the eleventh-hour improvement to margins and tipped the scales on hospitals’ relatively flat revenue. Additionally, hospitals saw labor expenses decrease 2 percent in November, potentially driven by less reliance on contract labor.
The median -0.2 percent margin recorded in November 2022 marks a 44 percent decline for margins in 22 year-to-date compared to 2021 year-to-date. Kaufman Hall’s index shows hospitals’ median monthly margins have been in the red throughout 2022, starting with the -3.4 percent recorded in January, driven by the omicron surge. November is tied with September as hospitals’ best month of the year, with both sharing a median margin of -0.2 percent.
Outpatient care marks one of the brighter spots for hospitals’ finances, with outpatient revenue up 10 percent year-over-year while inpatient revenue was flat over the same time period.
“The November data, while mildly improved compared to October, solidifies what has been a difficult year for hospitals amidst labor shortages, supply chain issues and rising interest rates,” Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said. “Hospital leaders should continue to develop their outpatient care capabilities amid ongoing industry uncertainty and transformation.”
Healthcare leaders now need to strike a delicate balance that requires managing financial and growth metrics, increasing the speed of transformation, and building the health systems of tomorrow. So how do we redefine compensation models to reward all these behaviors?
Executive compensation might not spring to mind as a key driver of healthcare transformation, nor does it seem naturally connected to critical issues such as health equity, patient safety, or quality of care – just a few of the areas where significant changes can be made to transform healthcare. But, in fact, executives leading not-for-profit health systems today are tasked with delivering measurable results that improve the health status of their patients and their communities. And to ensure that these new performance metrics are met, we must change how we think about —and deliver—compensation.
Defining a new model
While executive compensation has always been tied to specific objectives, they have historically leaned heavily toward financial performance, volume and margins, with a modest portion of compensation aligned to quality of care and patient outcomes. But transformative approaches such as population health, value-based care, patient wellness and health outcomes are shifting the mark.
Healthcare leaders now need to strike a delicate balance that requires managing financial and growth metrics, increasing the speed of transformation, and building the health systems of tomorrow. So how do we redefine compensation models to reward all these behaviors?
Some might say that the answer lies in adjusting incentive plans. While incentive plans across health care have not changed significantly in the past decade, the sophistication of the plans has changed, reflecting greater attention to delivering a better patient experience. But delivering better experiences does not imply that health systems have transformed from the top down. In my mind, adjusting incentive plans only solves part of the problem.
If we want true health care transformation—and we should, in order to best serve patients and communities—health systems need to re-evaluate the outcomes for each stakeholder and create incentives to evolve leadership as a whole. We need to rethink executive compensation models to align with value-based care, patient experience, and the resulting outcomes, along with traditional performance measurements.
Leading through lingering disruption
But rethinking executive compensation models won’t be an easy task, especially given the external challenges and changes thrust upon the health care system over the last few years.
As with nearly every other aspect of health care, pay for performance was disrupted during the pandemic. Demand for health services changed dramatically, labor and attrition issues intensified, and supply chain problems and operational costs increased. These new pressures required executives to manage through long periods of uncertainty where meeting operational pay-for-performance goals was nearly impossible. Fast-forward to today, the executive talent market remains extraordinarily competitive. Demand outpaces supply due to higher-than-typical retirements, effects of the great resignation, the need for new skill sets and overall burnout.
As a result, there has been upward pressure on compensation to address and fulfill unexpected but immediate needs such as rewarding executives for managing in a unique and challenging performance environment, increasing efforts to recruit and retain, and recognizing leaders for their hard-won accomplishments.
Considerations and changes
When considering adjusting models for 2023 and beyond, CEOs and compensation committees need to take these pressures and disruptions into account. They should look closely at their own compensation data from the past two years – not as a lighthouse for future compensation, but as data that may need to be set aside due to the volume of performance goals and achievements that were up-ended by the pandemic. When relying on external industry data, the same rules apply; smaller data sets or those that don’t account for the past two years may be misleading, so review carefully before using limited data sets to inform adjusted models.
Just as important, CEOs and compensation committees should consider new performance measurements tied to both financial and quality or value-based transformation metrics. We don’t need to eliminate traditional financial and operational goals because viability is still a business mandate. But how can we articulate compensation-driven KPIs for stewardship of patient and community health, improved outcomes and reduced cost of care? Too many measures are akin to having no measures at all.
The compensation mix should take into account a more focused approach to long-term measures. The old paradigm of 12-month incentive cycles is not enough to address the time required to truly transform health care. Another consideration should be performance-based funding of deferred compensation based on achieving transformation goals, and greater use of retention programs to support the maintenance of a stable executive team during the transformation period. Covid-19 proved how crisis can be an accelerator for change. True transformation should blend the skills gained from crisis management with planful, thoughtful and intentional change.
In addition, some metrics may need to incorporate a discretionary component, considering ongoing disruption within the workforce, supply chain limitations, and energy, equipment and labor cost increases. More organizations are also including health equity, DE&I, and ESG goals in incentive programs to tighten alignment with mission-critical board-mandated goals.
Transformative change
There are four elements that are vital in the journey to transform health care from “heads in beds” to the public-service-oriented organizations that they were meant to be—and can be again. With mounting pressure from patients, communities, and payers to boards and employees, CEOs and compensation committees must become key drivers of change, setting the right goals and incentives from the top down.
Affordability: can patients afford the care they need?
Quality: is the care being delivered of the utmost quality?
Usability: how can we reduce hurdles to undertaking the care plan?
Access: are all community members able to access needed care?
Solving for each of these elements is one of the biggest challenges we face, and as we begin to emerge from the disruption of the pandemic, leaders will be watched closely to ensure that they deliver—and can clearly show the path to delivery.
Ideally, end achievements would include patients spending less to achieve better health; payers controlling costs and reducing risk; providers realizing efficiencies and greater patient satisfaction; and alignment of medical supplier pricing to patient outcomes. And when you zoom out to reveal the bigger picture, all of these pieces come together to achieve healthier populations and lower overall health care costs, while still meeting the financial goals of the organization.
We’re asking a lot of already-overburdened health care executives. Stakeholders must prove that we value leaders with the right mindset and skillset in order to attract executives who can shepherd organizations through the transformation journey. This requires a setting where there is supportive leadership, a compelling mission and opportunity for personal growth and development. It will not be easy, but without rethinking how we design compensation models from the top down, it will be unnecessarily challenging.
Elizabeth Woodruff drained her retirement account and took on three jobs after she and her husband were sued for nearly $10,000 by the New York hospital where his infected leg was amputated.
Ariane Buck, a young father in Arizona who sells health insurance, couldn’t make an appointment with his doctor for a dangerous intestinal infection because the office said he had outstanding bills.
Allyson Ward and her husband loaded up credit cards, borrowed from relatives, and delayed repaying student loans after the premature birth of their twins left them with $80,000 in debt. Ward, a nurse practitioner, took on extra nursing shifts, working days and nights.
“I wanted to be a mom,” she said. “But we had to have the money.”
The three are among more than 100 million people in America ― including 41% of adults ― beset by a health care system that is systematically pushing patients into debt on a mass scale, an investigation by KHN and NPR shows.
The investigation reveals a problem that, despite new attention from the White House and Congress, is far more pervasive than previously reported. That is because much of the debt that patients accrue is hidden as credit card balances, loans from family, or payment plans to hospitals and other medical providers.
To calculate the true extent and burden of this debt, the KHN-NPR investigation draws on a nationwide poll conducted by KFF (Kaiser Family Foundation) for this project. The poll was designed to capture not just bills patients couldn’t afford, but other borrowing used to pay for health care as well. New analyses of credit bureau, hospital billing, and credit card data by the Urban Institute and other research partners also inform the project. And KHN and NPR reporters conducted hundreds of interviews with patients, physicians, health industry leaders, consumer advocates, and researchers.
The picture is bleak.
Where medical debt hits the hardest in the U.S.
The share of people with medical or dental bills in collections varies widely from one county to another
In the past five years, more than half of U.S. adults report they’ve gone into debt because of medical or dental bills, the KFF poll found.
A quarter of adults with health care debt owe more than $5,000. And about 1 in 5 with any amount of debt said they don’t expect to ever pay it off.
“Debt is no longer just a bug in our system. It is one of the main products,” said Dr. Rishi Manchanda, who has worked with low-income patients in California for more than a decade and served on the board of the nonprofit RIP Medical Debt. “We have a health care system almost perfectly designed to create debt.”
The burden is forcing families to cut spending on food and other essentials. Millions are being driven from their homes or into bankruptcy, the poll found.
Medical debt is piling additional hardships on people with cancer and other chronic illnesses. Debt levels in U.S. counties with the highest rates of disease can be three or four times what they are in the healthiest counties, according to an Urban Institute analysis.
The debt is also deepening racial disparities.
And it is preventing Americans from saving for retirement, investing in their children’s educations, or laying the traditional building blocks for a secure future, such as borrowing for college or buying a home. Debt from health care is nearly twice as common for adults under 30 as for those 65 and older, the KFF poll found.
Perhaps most perversely, medical debt is blocking patients from care.
About 1 in 7 people with debt said they’ve been denied access to a hospital, doctor, or other provider because of unpaid bills, according to the poll. An even greater share ― about two-thirds ― have put off care they or a family member need because of cost.
“It’s barbaric,” said Dr. Miriam Atkins, a Georgia oncologist who, like many physicians, said she’s had patients give up treatment for fear of debt.
Patient debt is piling up despite the landmark 2010 Affordable Care Act.
The law expanded insurance coverage to tens of millions of Americans. Yet it also ushered in years of robust profits for the medical industry, which has steadily raised prices over the past decade.
Hospitals recorded their most profitable year on record in 2019, notching an aggregate profit margin of 7.6%, according to the federal Medicare Payment Advisory Committee. Many hospitals thrived even through the pandemic.
But for many Americans, the law failed to live up to its promise of more affordable care. Instead, they’ve faced thousands of dollars in bills as health insurers shifted costs onto patients through higher deductibles.
Now, a highly lucrative industry is capitalizing on patients’ inability to pay. Hospitals and other medical providers are pushing millions into credit cards and other loans. These stick patients with high interest rates while generating profits for the lenders that top 29%, according to research firm IBISWorld.
Patient debt is also sustaining a shadowy collections business fed by hospitals ― including public university systems and nonprofits granted tax breaks to serve their communities ― that sell debt in private deals to collections companies that, in turn, pursue patients.
“People are getting harassed at all hours of the day. Many come to us with no idea where the debt came from,” said Eric Zell, a supervising attorney at the Legal Aid Society of Cleveland. “It seems to be an epidemic.”
In debt to hospitals, credit cards, and relatives
America’s debt crisis is driven by a simple reality: Half of U.S. adults don’t have the cash to cover an unexpected $500 health care bill, according to the KFF poll.
As a result, many simply don’t pay. The flood of unpaid bills has made medical debt the most common form of debt on consumer credit records.
As of last year, 58% of debts recorded in collections were for a medical bill,according to the Consumer Financial Protection Bureau. That’s nearly four times as many debts attributable to telecom bills, the next most common form of debt on credit records.
But the medical debt on credit reports represents only a fraction of the money that Americans owe for health care, the KHN-NPR investigation shows.
About 50 million adults ― roughly 1 in 5 ― are paying off bills for their own care or a family member’s through an installment plan with a hospital or other provider, the KFF poll found. Such debt arrangements don’t appear on credit reports unless a patient stops paying.
One in 10 owe money to a friend or family member who covered their medical or dental bills, another form of borrowing not customarily measured.
Still more debt ends up on credit cards, as patients charge their bills and run up balances, piling high interest rates on top of what they owe for care. About 1 in 6 adults are paying off a medical or dental bill they put on a card.
How much medical debt Americans have in total is hard to know because so much isn’t recorded. But an earlier KFF analysis of federal data estimated that collective medical debt totaled at least $195 billion in 2019, larger than the economy of Greece.
The credit card balances, which also aren’t recorded as medical debt, can be substantial, according to an analysis of credit card records by the JPMorgan Chase Institute. The financial research group found that the typical cardholder’s monthly balance jumped 34% after a major medical expense.
Monthly balances then declined as people paid down their bills. But for a year, they remained about 10% above where they had been before the medical expense. Balances for a comparable group of cardholders without a major medical expense stayed relatively flat.
It’s unclear how much of the higher balances ended up as debt, as the institute’s data doesn’t distinguish between cardholders who pay off their balance every month from those who don’t. But about half of cardholders nationwide carry a balance on their cards, which usually adds interest and fees.
Bearing the burden of debts large and small
For many Americans, debt from medical or dental care may be relatively low. About a third owe less than $1,000, the KFF poll found.
Even small debts can take a toll.
Edy Adams, a 31-year-old medical student in Texas, was pursued by debt collectors for years for a medical exam she received after she was sexually assaulted.
Adams had recently graduated from college and was living in Chicago.
Police never found the perpetrator. But two years after the attack, Adams started getting calls from collectors saying she owed $130.58.
Illinois law prohibits billing victims for such tests. But no matter how many times Adams explained the error, the calls kept coming, each forcing her, she said, to relive the worst day of her life.
Sometimes when the collectors called, Adams would break down in tears on the phone. “I was frantic,” she recalled. “I was being haunted by this zombie bill. I couldn’t make it stop.”
Health care debt can also be catastrophic.
Sherrie Foy, 63, and her husband, Michael, saw their carefully planned retirement upended when Foy’s colon had to be removed.
After Michael retired from Consolidated Edison in New York, the couple moved to rural southwestern Virginia. Sherrie had the space to care for rescued horses.
The couple had diligently saved. And they had retiree health insurance through Con Edison. But Sherrie’s surgery led to numerous complications, months in the hospital, and medical bills that passed the $1 million cap on the couple’s health plan.
When Foy couldn’t pay more than $775,000 she owed the University of Virginia Health System, the medical center sued, a once common practice that the university said it has reined in. The couple declared bankruptcy.
Illinois law prohibits billing victims for such tests. But no matter how many times Adams explained the error, the calls kept coming, each forcing her, she said, to relive the worst day of her life.
Sometimes when the collectors called, Adams would break down in tears on the phone. “I was frantic,” she recalled. “I was being haunted by this zombie bill. I couldn’t make it stop.”
Nearly half of Americans in households making more than $90,000 a year have incurred health care debt in the past five years, the KFF poll found.
Women are more likely than men to be in debt. And parents more commonly have health care debt than people without children.
But the crisis has landed hardest on the poorest and uninsured.
Debt is most widespread in the South, an analysis of credit records by the Urban Institute shows. Insurance protections there are weaker, many of the states haven’t expanded Medicaid, and chronic illness is more widespread.
Nationwide, according to the poll, Black adults are 50% more likely and Hispanic adults 35% more likely than whites to owe money for care. (Hispanics can be of any race or combination of races.)
In some places, such as the nation’s capital, disparities are even larger, Urban Institute data shows: Medical debt in Washington, D.C.’s predominantly minority neighborhoods is nearly four times as common as in white neighborhoods.
In minority communities already struggling with fewer educational and economic opportunities, the debt can be crippling, said Joseph Leitmann-Santa Cruz, chief executive of Capital Area Asset Builders, a nonprofit that provides financial counseling to low-income Washington residents. “It’s like having another arm tied behind their backs,” he said.
Medical debt can also keep young people from building savings, finishing their education, or getting a job. One analysis of credit data found that debt from health care peaks for typical Americans in their late 20s and early 30s, then declines as they get older.
Cheyenne Dantona’s medical debt derailed her career before it began.
Dantona, 31, was diagnosed with blood cancer while in college. The cancer went into remission, but when Dantona changed health plans, she was hit with thousands of dollars of medical bills because one of her primary providers was out of network.
She enrolled in a medical credit card, only to get stuck paying even more in interest. Other bills went to collections, dragging down her credit score. Dantona still dreams of working with injured and orphaned wild animals, but she’s been forced to move back in with her mother outside Minneapolis.
“She’s been trapped,” said Dantona’s sister, Desiree. “Her life is on pause.”
The strongest predictor of medical debt
Desiree Dantona said the debt has also made her sister hesitant to seek care to ensure her cancer remains in remission.
Medical providers say this is one of the most pernicious effects of America’s debt crisis, keeping the sick away from care and piling toxic stress on patients when they are most vulnerable.
The financial strain can slow patients’ recovery and even increase their chances of death, cancer researchers have found.
Yet the link between sickness and debt is a defining feature of American health care, according to the Urban Institute, which analyzed credit records and other demographic data on poverty, race, and health status.
U.S. counties with the highest share of residents with multiple chronic conditions, such as diabetes and heart disease, also tend to have the most medical debt. That makes illness a stronger predictor of medical debt than either poverty or insurance.
In the 100 U.S. counties with the highest levels of chronic disease, nearly a quarter of adults have medical debt on their credit records, compared with fewer than 1 in 10 in the healthiest counties.
The problem is so pervasive that even many physicians and business leaders concede debt has become a black mark on American health care.
“There is no reason in this country that people should have medical debt that destroys them,” said George Halvorson, former chief executive of Kaiser Permanente, the nation’s largest integrated medical system and health plan. KP has a relatively generous financial assistance policy but does sometimes sue patients. (The health system is not affiliated with KHN.)
Halvorson cited the growth of high-deductible health insurance as a key driver of the debt crisis. “People are getting bankrupted when they get care,” he said, “even if they have insurance.”
What the federal government can do
The Affordable Care Act bolstered financial protections for millions of Americans, not only increasing health coverage but also setting insurance standards that were supposed to limit how much patients must pay out of their own pockets.
By some measures, the law worked, research shows. In California, there was an 11% decline in the monthly use of payday loans after the state expanded coverage through the law.
But the law’s caps on out-of-pocket costs have proven too high for most Americans. Federal regulations allow out-of-pocket maximums on individual plans up to $8,700.
Additionally, the law did not stop the growth of high-deductible plans, which have become standard over the past decade. That has forced growing numbers of Americans to pay thousands of dollars out of their own pockets before their coverage kicks in.
Last year the average annual deductible for a single worker with job-based coverage topped $1,400, almost four times what it was in 2006, according to an annual employer survey by KFF. Family deductibles can top $10,000.
While health plans are requiring patients to pay more, hospitals, drugmakers, and other medical providers are raising prices.
From 2012 to 2016, prices for medical care surged 16%, almost four times the rate of overall inflation, a report by the nonprofit Health Care Cost Institute found.
For many Americans, the combination of high prices and high out-of-pocket costs almost inevitably means debt. The KFF poll found that 6 in 10 working-age adults with coverage have gone into debt getting care in the past five years, a rate only slightly lower than the uninsured.
Even Medicare coverage can leave patients on the hook for thousands of dollars in charges for drugs and treatment, studies show.
About a third of seniors have owed money for care, the poll found. And 37% of these said they or someone in their household have been forced to cut spending on food, clothing, or other essentials because of what they owe; 12% said they’ve taken on extra work.
The growing toll of the debt has sparked new interest from elected officials, regulators, and industry leaders.
In March, following warnings from the Consumer Financial Protection Bureau, the major credit reporting companies said they would remove medical debts under $500 and those that had been repaid from consumer credit reports.
In April, the Biden administration announced a new CFPB crackdown on debt collectors and an initiative by the Department of Health and Human Services to gather more information on how hospitals provide financial aid.
The actions were applauded by patient advocates. However, the changes likely won’t address the root causes of this national crisis.
“The No. 1 reason, and the No. 2, 3, and 4 reasons, that people go into medical debt is they don’t have the money,” said Alan Cohen, a co-founder of insurer Centivo who has worked in health benefits for more than 30 years. “It’s not complicated.”
Buck, the father in Arizona who was denied care, has seen this firsthand while selling Medicare plans to seniors. “I’ve had old people crying on the phone with me,” he said. “It’s horrifying.”
Now 30, Buck faces his own struggles. He recovered from the intestinal infection, but after being forced to go to a hospital emergency room, he was hit with thousands of dollars in medical bills.
More piled on when Buck’s wife landed in an emergency room for ovarian cysts.
Today the Bucks, who have three children, estimate they owe more than $50,000, including medical bills they put on credit cards that they can’t pay off.
“We’ve all had to cut back on everything,” Buck said. The kids wear hand-me-downs. They scrimp on school supplies and rely on family for Christmas gifts. A dinner out for chili is an extravagance.
“It pains me when my kids ask to go somewhere, and I can’t,” Buck said. “I feel as if I’ve failed as a parent.”
The couple is preparing to file for bankruptcy.
About This Project
Diagnosis: Debt is a reporting partnership between KHN and NPR exploring the scale, impact, and causes of medical debt in America.
The series draws on the “KFF Health Care Debt Survey,” a poll designed and analyzed by public opinion researchers at KFF in collaboration with KHN journalists and editors. The survey was conducted Feb. 25 through March 20, 2022, online and via telephone, in English and Spanish, among a nationally representative sample of 2,375 U.S. adults, including 1,292 adults with current health care debt and 382 adults who had health care debt in the past five years. The margin of sampling error is plus or minus 3 percentage points for the full sample and 3 percentage points for those with current debt. For results based on subgroups, the margin of sampling error may be higher.
Additional research was conducted by the Urban Institute, which analyzed credit bureau and other demographic data on poverty, race, and health status to explore where medical debt is concentrated in the U.S. and what factors are associated with high debt levels.
The JPMorgan Chase Institute analyzed records from a sampling of Chase credit card holders to look at how customers’ balances may be affected by major medical expenses.
Reporters from KHN and NPR also conducted hundreds of interviews with patients across the country; spoke with physicians, health industry leaders, consumer advocates, debt lawyers, and researchers; and reviewed scores of studies and surveys about medical debt.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. Together with Policy Analysis and Polling, KHN is one of the three major operating programs at KFF (Kaiser Family Foundation). KFF is an endowed nonprofit organization providing information on health issues to the nation.
What role should the federal government play in addressing major healthcare issues? And does the way you vote affect your prospects for a long and healthy life? We talked about it on today’s episode of the 4sight Friday Roundup podcast.
David Johnson is CEO of 4sight Health.
Julie Vaughan Murchinson is Partner of Transformation Capital and former CEO of Health Evolution.
David Burda is News Editor and Columnist of 4sight Health.
This week’s contributor is Paula Chatterjee, a physician and assistant professor at the Perelman School of Medicine at the University of Pennsylvania. Her research focuses on improving the health of low-income patients and evaluating policies related to safety-net health care delivery and financing.
Low-income patients face many barriers to care, one of which is the high cost of prescription medications. The 340B program lets certain hospitals and clinics (like federally qualified health centers) receive discounts on outpatient medications. They can then use those savings to provide medication and additional care for little to no charge to low-income patients. However, policymakers and other stakeholders have raised concerns that the 340B program might not be reaching the patients it was designed to support.
A recent paper in the American Journal of Managed Care by Sayeh Nikpay*, Gabriela Garcia, Hannah Geressu and Rena Conti sheds light on one of the latest examples of 340B mistargeting: so-called contract pharmacies. These are retail pharmacies that fill 340B prescriptions and split the savings with the hospital or clinic. These relationships have been on the rise, with hospitals and clinics arguing they make it more convenient for patients to get their prescriptions. Given their growth, the authors looked at whether contract pharmacies were more likely to open up in areas where low-income and uninsured people live.
They found the pattern was different for pharmacies contracting with 340B clinics vs. 340B hospitals:
The number of counties with a pharmacy contracted with a 340B clinic grew from 20.8% to 64.8% over the past decade. Counties with higher poverty rates were more likely to gain a clinic-contracted pharmacy.
The number of counties with hospital-contracted pharmacies grew much more (from 3.2% to 76.3%), but those counties had fewer uninsured residents and were less likely to be medically underserved.
The researchers acknowledge that counties may be an imperfect geographical area to represent a pharmacy’s market and that they were unable to collect information on how many (if any) 340B prescriptions a pharmacy actually filled.
Nonetheless, their results reveal a mismatch between where the 340B program is growing and where low-income patients live, especially for pharmacies contracting with 340B hospitals. The authors argue that any 340B policy changes should take these differences between hospitals and clinics into account.
Despite decades of policies designed to bolster the safety-net, it remains perennially reliant on a patchwork of subsidies that are often mistargeted.
This study adds to a growing body of work highlighting the opportunity to improve the 340B program so that it achieves its intended goal of improving access for low-income patients.
A certain segment of the health policy world spends a lot of time trying to get more states to expand Medicaid and reduce underinsurance.
But are we doing enough to make sure care is accessible once people enroll? One issue is access to physicians, who are less likely to treat patients on Medicaid than Medicare or private insurance because Medicaid payment rates are lower.
A new paper in Health Affairs by Avital Ludomirsky and colleagues looked at how well the networks of physicians supposedly participating in Medicaid reflect access to care. The researchers used claims data and provider directories from Medicaid managed care plans (the private insurers that most states contract with to run their Medicaid programs) in Kansas, Louisiana, Michigan and Tennessee from 2015 and 2017 to assess how the delivery of care to Medicaid patients was distributed among participating doctors. Their results were striking:
One-quarter of primary care physicians provided 86% of the care; one-quarter of specialists provided 75%.
One-third of both types of physicians saw fewer than 10 Medicaid patients per year, hardly contributing any “access” at all.
There was only one psychiatrist for every 8,834 Medicaid enrollees after excluding those seeing fewer than 10 Medicaid patients per year. This is especially concerning given that the COVID-19 pandemic has worsened mental health in the U.S., particularly among children.
The authors note that their study only covers primary care and mental health providers in four states, so it is not necessarily generalizable to other states or specialties. But these results are still concerning.
States have so-called network adequacy standards for their Medicaid managed care plans that are supposed to make sure there are enough providers. These standards typically rely on either a radius (a certain number of providers for a geographic area) or ratio (number of providers per enrollee), but the authors’ findings show these methods fall short if they are based on directories alone.
The authors specifically recommend states use claims-based assessments like the ones in the study and “secret shopper” programs — like this recently published one from Maryland by Abigail Burman and Simon Haeder — to better evaluate whether plans are offering adequate access to physicians. We absolutely need people to have coverage, but it needs to be more than just a card in their wallet.
HENRY KOTULA 