Majority of debtors to US hospitals now people with health insurance

Jessica Glenza

The Guardian

Originally posted 11 Jan 24

People with health insurance may now represent the majority of debtors American hospitals struggle to collect from, according to medical billing analysts.

This marks a sea change from just a few years ago, when people with health insurance represented only about one in 10 bills hospitals considered “bad debt”, analysts said.

“We always used to consider bad debt, especially bad debt write-offs from a hospital perspective, those [patients] that have the ability to pay but don’t,” said Colleen Hall, senior vice-president for Kodiak Solutions, a billing, accounting and consulting firm that works closely with hospitals and performed the analysis.

“Now, it’s not as if these patients across the board are even able to pay, because [out-of-pocket costs are] such an astronomical amount related to what their general income might be.”

Although “bad debt” can be a controversial metric in its own right, those who work in the hospital billing industry say it shows how complex health insurance products with large out-of-pocket costs have proliferated.

“What we noticed was a breaking point right around the 2018-2019 timeframe,” said Matt Szaflarski, director of revenue cycle intelligence at Kodiak Solutions. The trend has since stabilized, but remains at more than half of all “bad debt”.

In 2018, just 11.1% of hospitals’ bad debt came from insured “self-pay” accounts, or from patients whose insurance required out-of-pocket payments, according to Kodiak. By 2022, the proportion who did (or could) not pay their bills soared to 57.6% of all hospitals’ bad debt.

The info is here.

The US Healthcare system needs to be fixed:

Not all health insurance plans are created equal. Many plans have narrow networks and limited coverage, leaving patients responsible for costs associated with out-of-network providers or specialized care. This can be particularly detrimental for people with chronic conditions or those requiring emergency care.

Medical debt can have a devastating impact on individuals and families. It can lead to financial hardship, delayed or foregone care, damage to credit scores, and even bankruptcy. This can have long-term consequences for physical and mental health, employment opportunities, and overall well-being.

Fixing the US healthcare system is a complex challenge, but it is essential to ensure that everyone has access to affordable, quality healthcare without fear of financial ruin. 

Medical Debt Is Disappearing From Americans’ Credit Reports, Lifting Scores

Noam Levey

KFF Health News

Originally published 2 Nove 23

The share of American consumers with medical debt on their credit reports has declined dramatically over the past year as major credit rating agencies removed small unpaid bills and debts that were less than a year old, according to a new analysis from the nonprofit Urban Institute.

At the same time, millions of Americans have seen their credit scores improve, making it easier for many to get a job, rent an apartment, or get a car.

“This is a very significant change,” said Breno Braga, an economist at the Urban Institute and a co-author of the study. “It affects a lot of people.”

For years, medical debt has depressed credit scores, undermining the financial security of tens of millions of patients and their families.

Under mounting pressure from patient advocates and government regulators, the three major credit agencies over the last two years have taken a series of steps to remove some medical debts from credit reports, including unpaid medical bills under $500.

The changes appear to be having an impact. As of August, just 5% of adults with a credit report had a medical debt on their report, down from almost 14% two years earlier.

Urban Institute researchers also found that Americans with a medical debt on their credit report in August 2022 saw their VantageScore credit score improve over the next year from an average of 585 to an average of 615.

The info is here.

Here is my summary:

The article discusses a study conducted by the Urban Institute, focusing on the impact of removing medical debt from credit reports. The study reveals that eliminating medical debt from credit reports can significantly improve individuals' credit scores and financial well-being. The research found that once medical debts were removed, more than two-thirds of affected individuals experienced an increase in their credit scores, with an average rise of 16 points. This is particularly crucial as medical debt is often incurred unexpectedly, and its presence on credit reports can lead to long-lasting financial consequences for individuals, affecting their ability to secure loans or access favorable interest rates.

Furthermore, the study suggests that removing medical debt from credit reports can contribute to reducing racial and ethnic disparities in credit scores. It highlights that individuals from communities of color are disproportionately affected by medical debt and its consequences on creditworthiness. By addressing this issue, there is an opportunity to promote greater financial equity and inclusivity. The findings underscore the potential benefits of policy interventions or industry practices aimed at mitigating the adverse impact of medical debt on individuals' credit histories, thereby fostering a more equitable financial landscape.