Drawing on a report published by the North Carolina State Health Plan for Teachers and State Employees, a recent Kaiser Health News article shines a light on the lack of transparency in financial reporting of not-for-profit hospitals’ community benefit obligations.
The report claims many North Carolina hospitals—including the state’s largest system, Atrium Health—show profits on Medicare patients in their cost report filings, while at the same time claiming sizable unrecouped losses on Medicare patients as a part of their overall community benefit analyses.
The Gist: These kind of reporting discrepancies draw attention to the controversial issue of whether not-for-profit hospitals provide sufficient community benefit to compensate for their tax-exempt status, which was worth nearly $2 billion in 2020 for North Carolina hospitals alone.
Greater transparency around charity care, community benefit, and losses sustained from public payerscould go a long way toward shoring up stakeholder support for not-for-profit institutions at a time when their political goodwill has deteriorated. Hospitals should be proactive on this front, as political leaders increasingly train their sites on high hospital spending in the current tight economic environment.
Revenue cycle challenges “seem to have intensified over the past year,” according to Kaufman Hall’s “2022 State of Healthcare Performance Improvement” report, released Oct. 18.
The consulting firm said that in 2021, 25 percent of survey respondents said they had not seen any pandemic-related effects on their respective revenue cycles. This year, only 7 percent said they saw no effects.
The findings in Kaufman Hall’s report are based on survey responses from 86 hospital and health system leaders across the U.S.
Here are the top five ways leaders said the pandemic affected the revenue cycle in 2022:
1. Increased rate claim denials — 67 percent
2. Change in payer mix: Lower percentage of commercially insured patients — 51 percent
3. Increase in bad debt/uncompensated care — 41 percent
4. Change in payer mix: Higher percentage of Medicaid patients — 35 percent
5. Change in payer mix: Higher percentage of self-pay or uninsured patients — 31 percent
Earlier this month, the Biden administration officially extended the federal public health emergency (PHE) declaration it had set in place for COVID-19. That means the PHE provisions will stay in effect for another 90 days — until mid-January at least.
When the PHE does end, a number of rules developed in response to the pandemic will sunset. One of those is a provision that temporarily requires states to let all Medicaid beneficiaries remain enrolled in the program — even if they have become ineligible during the pandemic.
Estimates suggest that millions could lose Medicaid coverage when this emergency provision ends. Among those who would lose coverage because they are no longer eligible for the program, about one-third are expected to qualify for subsidized coverage on the Affordable Care Act (ACA) marketplaces. Most others are expected to get coverage through an employer. It remains an open question, though, how many people will successfully transition to these other plans.
A recent paper by health economics researcher Laura Dague and colleagues in the Journal of Health Politics, Policy, and Law sheds light on these dynamics. The authors used a prior change in eligibility in Wisconsin’s Medicaid program to estimate how many people successfully transitioned to a private plan when their Medicaid eligibility ended.
Wisconsin’s Medicaid program is unique. Back in 2008 — before the ACA passed — Wisconsin broadly expanded Medicaid eligibility for non-elderly adults. After the ACA came into effect, Wisconsin reworked its Medicaid program in a way that made about 44,000 adults (mostly parents) with incomes above the federal poverty line ineligible for the program. To remain insured, they would have to switch to private coverage (via Obamacare or an employer).
Only about one-third of those 44,000 people had definitely enrolled in private coverage within two months of exiting the Medicaid program.
The remaining two-thirds of people were uninsured or their insurance status couldn’t be determined.
Even using the most optimistic assumptions to fill in that missing insurance status data, the authors estimated only up to 42% of people might have had private coverage within three months.
Nearly 1 in 10 enrollees had re-entered Medicaid coverage within six months, possibly due to fluctuations in household income.
This paper has several limitations. Health insurers are not required to participate in Wisconsin’s APCD, so the authors may not be capturing all successful transitions from Medicaid to private insurance. The paper also does not distinguish between different types of private insurance: Some coverage gains may have resulted from employer-based insurance rather than the ACA marketplace.
Still, the findings suggest that when a large number of Wisconsin residents lost Medicaid eligibility in 2014, many were not able to transition from Medicaid to private coverage. Wisconsin’s experience can help us understand what might happen when the national public health emergency ends and Medicaid programs resume removing people from their rolls.
A spokesperson for RWJBarnabas Health said the case is “yet another in a series of baseless complaints filed by … an organization whose leadership apparently prefers to assign blame to others rather than accept responsibility for the unsatisfactory results of their own poor business decisions and actions over the years.”
A lawsuit filed last week accuses RWJBarnabas Health of “a years-long systemic effort” to hamper competition and monopolize acute care hospital services in northern New Jersey.
The case brought by CarePoint Health to a U.S. District Court accuses the state’s largest integrated healthcare delivery system of “aiming to destroy the three hospitals operated by CarePoint as independent competitors” with the support of healthcare real estate investors and Horizon Blue Cross Blue Shield, the state’s largest health insurer.
CarePoint Health includes the 349-bed Christ Hospital, 224-bed Bayonne Medical and 348-bed Hoboken University Medical Center (HUMC).
The group said RWJBarnabas intended to force the first two hospitals to shut down but acquire the third due to its more profitable payer mix.
“RWJBarnabas Health’s] goal explicitly disregarded the needs of the poor, underinsured and charity care patients which CarePoint serves in its role as the safety net hospital system in Jersey City and surrounding areas,” CarePoint wrote in the lawsuit.
The slew of alleged tactics listed in the lawsuit largely surround RWJBarnabas Health’s “serial acquisitions” of hospitals, providers and real estate that “has gone unchecked by the state and [New Jersey Department of Health],” CarePoint wrote.
This included an alleged bad faith proposal to acquire Christ Hospital and HUMC, the true intent of which CarePoint said was to “gain market knowledge and gather competitive intelligence, and use this newly-acquired information to freeze programmatic growth and any significant hiring or construction at Christ Hospital.” The process had a negative impact on CarePoint’s employee retention and staffing, according to the suit.
The plaintiff also alleged that RWJBarnabas used its political connections to influence whether state departments granted CarePoint Certificates of Need for multiple revenue-generating projects as well as COVID-19 relief funding.
Further, CarePoint accused RWJBarnabas of strategically adjusting its service offerings in competitive markets to drive uninsured or underinsured patients to CarePoint facilities while using its relationships with Horizon and ambulance operators to drive emergency room traffic and well-insured patients, respectively, to competing locations.
These collective actions constitute violations of the Sherman Antitrust Act as well as the New Jersey Antitrust Act, CarePoint wrote.
“The idea that [RWJBarnabas Health] would use its influence to jeopardize the health of that community and the care providers of a competing hospital not only directly contradicts its own vision, but clearly demonstrates that [RWJBarnabas Health] is far more interested in anti-competitive and predatory business activities than serving the New Jersey community,” CarePoint wrote.
RWJBarnabas Health discounted the allegations in an email statement.
“This is yet another in a series of baseless complaints filed by CarePoint, an organization whose leadership apparently prefers to assign blame to others rather than accept responsibility for the unsatisfactory results of their own poor business decisions and actions over the years,” a spokesperson for the system told Fierce Healthcare. “RWJBarnabas Health has a longstanding commitment to serve the residents of Hudson County, and is proud of the significant investments we have made in technology, facilities and clinical teams as we advance our mission.”
RWJBarnabas Health treats over 3 million patients per year and employs 37,000 people. The academic healthcare system runs 12 acute care hospitals and four specialty hospitals alongside other locations and services. It disclosed more than $6.6 billion in total operating revenues across 2021.
The system’s merger and acquisition activity placed it in the federal spotlight this past year after the Federal Trade Commission moved to block its planned integration of New Brunswick-based Saint Peter’s Healthcare System. The deal was called off in June.
Children, young adults will be impacted disproportionately, with 5.3 million children and 4.7 million adults ages 18-34 predicted to lose coverage.
Roughly 15 million people could lose Medicaid coverage when the COVID-19 public health emergency ends, and only a small percentage are likely to obtain coverage on the Affordable Care Act exchanges, according to a new report from the Department of Health and Human Services.
Using longitudinal survey data and 2021 enrollment information, HHS estimated that, based on historical patterns of coverage loss, this would translate to about 17.4% of Medicaid and Children’s Health Insurance Program (CHIP) enrollees leaving the program.
About 9.5% of Medicaid enrollees, or 8.2 million people, will leave Medicaid due to loss of eligibility and will need to transition to another source of coverage. Based on historical patterns, 7.9% (6.8 million) will lose Medicaid coverage despite still being eligible – a phenomenon known as “administrative churning” – although HHS said it’s taking steps to reduce this outcome.
Children and young adults will be impacted disproportionately, with 5.3 million children and 4.7 million adults ages 18-34 predicted to lose Medicaid/CHIP coverage. Nearly one-third of those predicted to lose coverage are Hispanic (4.6 million) and 15% (2.2 million) are Black.
Almost one-third (2.7 million) of those predicted to lose eligibility are expected to qualify for marketplace premium tax credits. Among these, more than 60% (1.7 million) are expected to be eligible for zero-premium marketplace plans under the provisions of the American Rescue Plan. Another 5 million would be expected to obtain other coverage, primarily employer-sponsored insurance.
An estimated 383,000 people projected to lose eligibility for Medicaid would fall in the coverage gap in the remaining 12 non-expansion states – with incomes too high for Medicaid, but too low to receive Marketplace tax credits. State adoption of Medicaid expansion in these states is a key tool to mitigate potential coverage loss at the end of the PHE, said HHS.
States are directly responsible for eligibility redeterminations, while the Centers for Medicare and Medicaid Services provides technical assistance and oversight of compliance with Medicaid regulations. Eligibility and renewal systems, staffing capacity, and investment in end-of-PHE preparedness vary across states.
HHS said it’s working with states to facilitate enrollment in alternative sources of health coverage and minimize administrative churning. These efforts could reduce the number of eligible people losing Medicaid, the agency said.
The Inflation Reduction Act of 2022extends the ARP’s enhanced and expanded Marketplace premium tax credit provisions until 2025, providing a key source of alternative coverage for those losing Medicaid eligibility, said HHS.
WHAT’S THE IMPACT?
While the model projects that as many as 15 million people could leave Medicaid after the PHE, about 5 million are likely to obtain other coverage outside the marketplace and nearly 3 million would have a subsidized Marketplace option. And some who lose eligibility at the end of the PHE may regain it during the unwinding period, while some who lose coverage despite being eligible may re-enroll.
The findings highlight the importance of administrative and legislative actions to reduce the risk of coverage losses after the continuous enrollment provision ends, said HHS. Successful policy approaches should address the different reasons for coverage loss.
Broadly speaking, one set of strategies is needed to increase the likelihood that those losing Medicaid eligibility acquire other coverage, and a second set of strategies is needed to minimize administrative churning among those still eligible for coverage.
Importantly, some administrative churning is expected under all scenarios, though reducing the typical churning rate by half would result in the retention of 3.4 million additional enrollees.
THE LARGER TREND
CMS has released a roadmap to ending the COVID-19 public health emergency as health officials are expecting the Biden administration to extend the PHE for another 90 days after mid-October.
The end of the PHE, last continued on July 15, is not known, but HHS Secretary Xavier Becerra has promised to give providers 60 days’ notice before announcing the end of the public health emergency.
A public health emergency has existed since January 27, 2020.
Republican-led states that have resisted expanding Medicaid for more than a decade are showing new openness to the idea.
Driving the news: In the decade-plus since the landmark Affordable Care Act was enacted, 12 states with GOP-led legislatures still have not expanded Medicaid coverage to people living below 138% of the poverty line (or nearly $19,000 annually for one person in 2022).
But there’s evidence that the political winds are changing in holdout states like North Carolina, Georgia, Wyoming, Alabama and Texas, as leaders court rural voters, assess new financial incentives and confront the bipartisan popularity of extending health care coverage.
Why it matters: Medicaid expansion, a key component of the Affordable Care Act, means increasing access to federal health insurance coverage for low-income residents, in exchange for a 10% state match of the federal spending.
Experts say it expands access to care, lowers uninsured rates and improves health outcomes for low-income populations.
More than 2 million Americans would gain coverage if the 12 states expand Medicaid, according to a 2021 estimate from the Kaiser Family Foundation.
The big picture: Some Republican states have already expanded Medicaid through executive authority or — in states where it’s legal to do so — citizen-led ballot initiatives.
Referendums on the issue passed in Nebraska, Utah and Idaho in 2018 and Missouri and Oklahoma in 2020.
Medicaid expansion is on this November’s ballot in Republican-controlled South Dakota. (Voters there in June rejected a GOP proposal to make it harder to pass.)
Be smart: In most of the remaining non-expansion states, neither ballot initiatives nor executive authority are options, leaving the legislature with the authority to make the decision.
State of play: In Georgia, as first reported by Axios Atlanta, conversations about a path forward have been taking place behind the scenes in both parties. This follows the stunning support of full expansion legislation by North Carolina’s top Republican this spring, first reported by Axios Raleigh.
“If there is a person that has spoken out more against Medicaid expansion than I have, I’d like to meet that person,” Republican Senate leader Phil Berger said at a May press conference after reversing his stance. “This is the right thing for us to do.”
Brian Robinson, former spokesman for the first Georgia governor to reject Medicaid expansion, argued in June it’s time to make the change. Politically, it would “steal an issue” from Democrats, he told Axios Atlanta.
Policy-wise, “this isn’t what we would do,” Robinson said of Medicaid’s much-criticized structure. “But Republicans can’t agree on what we would do. This is the policy and the law, and it’s not going away. It would bring home hundreds of millions from a program we’re paying into already.”
What they’re saying: “There is real momentum on Medicaid expansion in these conservative states that have been holding out,” said Melissa Burroughs of Families USA, a health care advocacy group working with partners in non-expansion states to push the policy.
Burroughs told Axios there are Republicans championing or discussing expansion in every non-expansion state, but often “political dynamics and leadership” stand in the way.
Former Alabama Gov. Robert Bentley,who had refused to expand Medicaid himself, is now urging his fellow Republicans to pass it for the benefit of rural parts of the state.
The bipartisan legislative movement on expansion this year has given advocates in Wyoming hope.
In Texas, the state with the highest percentage of uninsured residents per capita, some Republicans have co-sponsored Medicaid expansion bills. That indicates “cracks” in Republican opposition, Luis Figueroa, legislative and policy director at progressive think tank Every Texan, told Axios Austin’s Nicole Cobler and Asher Price.
Tennessee’s Republican lieutenant governorsuggested possible openness to the policy last year, though there’s been no meaningful legislative movement.
Details: The winds are shifting for several reasons, experts told Axios.
Money: The 2021 federal pandemic relief law sweetened the deal for non-expansion states, with a provision designed to offset states’ costs entirely for the first two years. Plus, Republicans’ initial fears that the federal government would pull its 90% matching funds haven’t come to pass.
COVID-19: Under the federal state of a public health emergency, Medicaid access was automatically extended. But those temporary allowances could lift next year and millions could lose coverage, putting additional pressure on leaders.
Politics: Medicaid expansion continues to be broadly popular, and the Republican campaign to “repeal and replace” the Affordable Care Act has failed in the courts and Congress — neutralizing what was once a key argument against expansion.
Health care access: As hospitals across the country close, deepening the rural health care crisis, the benefit of getting more reimbursement from additional Medicaid recipients is difficult to ignore for rural hospital revenues — though the policy is not a silver bullet to end the crisis.
The intrigue: Democrats in these states, including gubernatorial candidates like Georgia’s Stacey Abrams and Texas’ Beto O’Rourke, continue to campaign heavily on Medicaid expansion — banking on polling showing the policy to be consistently popular among the public.
“I think a lot of Republican members would like to extend Medicaid even more than they will say it,” Texas Democratic State Sen. Nathan Johnson, who has led the push for expansion there, told Axios Austin’s Cobler and Price.
He said Republicans “are handcuffed by the ideological and political constraints. They will try to do some things to help people, but they need to get over the reflexive opposition to Medicaid expansion.”
Between the lines: Even in non-expansion states, partial expansion proposals have gained traction.
Kaiser Health News found that nine of the 12 states have sought or plan to seek an extension of postpartum Medicaid coverage, including for up to one year in North Carolina, Tennessee, South Carolina and Georgia.
What we’re watching: Even in holdout states showing signs of momentum, the issue remains politically fraught.
North Carolina’s most powerful politicians say the state’s negotiations this year were torpedoed by hospitals, though Democrats and Republicans alike are optimistic about its chances next session.
The national uninsured rate reached an all-time low of 8 percent in the first quarter of 2022, according to an HHS report released Aug. 2.
The report analyzed data from the National Health Interview Survey and the American Community Survey, according to an Aug. 2 HHS news release.
Three things to know:
1. The previous record low uninsured rate was 9 percent, set in 2016.
2. The uninsured rate among adults ages 18-64 was 11.8 percent in the first quarter of 2022. The uninsured rate for children ages 0-17 was 3.7 percent.
3. About 5.2 million people have gained health coverage since 2020. Gains in coverage are concurrent with the implementation of the American Rescue Plan’s enhanced ACA Marketplace subsidies, the continuous enrollment provision in Medicaid, several state Medicaid expansions and enrollment outreach efforts.
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.
Leukemia Lymphoma Society (LLS) supports actions that regulate or prohibit “junk insurance” plans that discriminate against people with pre-existing conditions, offer no meaningful coverage in the case of a cancer diagnosis or neglect to cover essential healthcare services like prescription drugs
The problem
LLS advocate Sam Bloechl thought he was doing everything right. After experiencing back pain that wouldn’t go away, he spoke to an insurance broker about upgrading his insurance plan to better cover any treatment he might need. Sam’s broker insisted she had the perfect plan for him. It wasn’t.
A month later, Sam was diagnosed with non-Hodgkin lymphoma. After chemotherapy and radiation, Sam achieved remission. But his health plan refused to cover the bill, leaving Sam with more than $800,000 in medical debt. It turns out he was sold a short-term, limited-duration plan—a type of “junk insurance.”
Sam isn’t alone. Patients with pre-existing conditions are penalized by low-quality policies, known as “junk insurance” Because such plans are exempt from important consumer protections, they can leave patients vulnerable when they most need timely access to quality, affordable care.
The patient impact
Most short-term, limited-duration plans leave patients on the hook for thousands of dollars if they face serious health problems—much more than they’d face if they had traditional health insurance, a recent Milliman study funded by LLS reveals. The plans often rely on misleading marketing and are misunderstood by consumers who buy them. And patients have no right to appeal plan decisions.
Moreover, junk plans drive up more than a patient’s out-of-pocket costs—they threaten prices across the health insurance market. As younger and healthier individuals choose these cheaper “junk plans” over comprehensive insurance, premiums for comprehensive insurance are expected to rise.
Solutions
LLS supports actions that regulate or prohibit “junk insurance” plans that discriminate against people with pre-existing conditions, offer no meaningful coverage in the case of a cancer diagnosis or neglect to cover essential healthcare services like prescription drugs. These plans include:
• Short-term, limited-duration insurance • Health care sharing ministries • Farm Bureau plans • Grandfathered plans • Multiple employer welfare arrangements and association health plans • Spurious single-employer self-insured group health plans • Minimum essential coverage-only plans • Excepted benefit plans
A report published by 30 patient organizations, including LLS, explains these types of plans in depth—and details how state and federal lawmakers can help protect patients and consumers from these dangerous plans.
LLS works to stop policy proposals that would allow insurers to reinstitute lifetime limits, eliminate the current cap on patient cost-sharing and cover fewer essential services for cancer patients.
HENRY KOTULA 