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Unaffordable Health Care: Financial Roulette

The two troubling trends squeezing Americans' wallets

By Richard Eisenberg

A few months back, I wrote a provocative Next Avenue blog post called “Is Obamacare Becoming the Unaffordable Care Act?” It was largely about the rise of so-called “consumer-driven” high deductible health plans and the huge out-of-pocket costs some employees with them are facing. (The New York Times just ran a similar piece.)

I’m now back from a stimulating health-care economics journalism fellowship at the nonpartisan American Institute of Economic Research (AIER) in Great Barrington, Mass., and am sad to report that things are even worse than I thought.

What 'Financial Roulette' Means

The reason is a phrase that Georgia State University Assistant Professor of Law Erin C. Fuse Brown shared with us at the Society of American Business Editors and Writers (SABEW) program: “financial roulette.”

That was Brown’s description for the game patients are unwittingly playing due to hospital billing and debt collection practices, sometimes finding themselves owing sizable amounts of money and getting dunned by debt collectors painfully. Certain hospitals are garnishing wages, putting liens on patients’ homes and pushing them into bankruptcy due to unpaid medical bills. (Read the eye-opening ProPublica/NPR 2014 story, “From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages.”)

Medical debt in America is enormous. The federal Consumer Financial Protection Bureau (CFPB) says “medical collections make up 52 percent of collection accounts on credit reports, far outpacing all other types of debt.” Some 43 million consumers with an account in collection have medical debt. Some people with medical debt don’t even know they owe it until they apply for a loan or credit card. “Then, they can’t qualify for that mortgage or business loan,” said Brown.

“Financial roulette” also aptly describes the growing possibility that your hospital care will be provided, at least in part, by out-of-network physicians — some of whom you’ve never met. And you’ll pay stiff bills for their services because of that out-of-network status.

Narrow Networks and Balance Billing

One of the effects of the Affordable Care Act (aka Obamacare) has been the rise of “narrow networks,” where only a small number of local doctors are part of a particular health plan. According to a recent University of Pennsylvania study, 83 percent of health plans offered in Georgia had narrow networks. An October 2015 Journal of the American Medical Association (JAMA) article found that about 15 percent of Obamacare “silver” plans lacked an in-network physician for at least one specialty.And in a new survey of 4,611 adults by the Transamerica Center for Health Studies, 10 percent said access to general or family practice doctors has decreased since 2014; 11 percent said their access to specialists has fallen.

When you’re treated by out-of-network docs (say, a new-to-you anesthesiologist who shows up in the operating room to put you out), you then become subject to what’s known as “balance billing.” That’s health insurance jargon for your health provider requiring you to pay the entire amount of whatever portion of its bill your insurer doesn’t pay, not just your co-pay or deductible. “Surprise medical bills are ubiquitous,” said Brown.

One thing you might not know about the Obamacare law: it caps out-of-pocket costs, but not out-of-network costs.

There’s no federal protection against balance billing, either. State rules vary; according to Kaiser Health News, roughly a quarter of states ban balance billing in certain circumstances, but the rest do not. Although "some states are starting to move against balance billing,” said Brown.

The Problems With New IRS Rules on Medical Debt

The Internal Revenue Service (IRS), of all places, recently issued rules that might seem to prevent harsh hospital billing and collection practices. But these rules actually left a loophole big enough to drive an out-of-network ambulance through.

The rules, which grew out of the Obamacare law, only apply to the roughly 60 percent of U.S. hospitals that are tax-exempt. Most patients don't choose their hospitals by their tax status, said Brown. They go to the one their doctor referred them to or the nearest facility in an emergency.

The other problem with the IRS rules: they’re vague and arbitrary.

Tax-exempt hospitals can continue using aggressive debt collection practices if they’ve made “reasonable efforts” to determine the patient’s eligibility for financial assistance. Talk about a term of art. And "eligibility" is in the eye of the hospital.

“Some hospitals are very generous and forthright when determining eligibility, and some are not,” said Brown, who has reviewed the billing and collection rules of 140 not-for-profit hospitals in 14 states. “What the rules don’t do are tell hospitals how to determine eligibility. Hospitals have complete discretion.”

In some cases, she noted, patients are ineligible for financial assistance if they have any form of insurance — even if their bills are steep, out-of-network ones or the patients have high deductibles. In certain instances, to qualify for financial assistance, a patient's income can’t be more than 100 percent of the poverty level; in others, it's 600 percent.

“And I’ve seen hospitals make it very hard to apply for financial assistance,” added Brown. “The list of things they ask for can be worse than tax forms or the FAFSA forms for college financial aid.”


What's more, Brown added, the IRS hasn’t enforced these rules yet. “It could yank a hospital’s tax-exempt status and charge penalties, but it’s loath to do that,” she said.

Brown believes it’s time to broaden the protections of fair hospital billing and collection practices to all hospitals and financially vulnerable patients. She thinks any hospital that takes Medicare (which is to say, pretty much every hospital) should then be required to engage in fair pricing and collection practices.

“There’s no reason to limit these rules to tax-exempt hospitals,” she said. “Your house, car, college and hospital are the four biggest expenses in your life and you have no control over the bill for the fourth one.”

What Could Curb These Trends

Some help might be on the way.

The site  has a new tool in beta that lets some users search for Obamacare health plans by doctor, to easily see whether particular physicians would be in network or out-of-network. I think of it as the Expedia of Obamacare.

Right now, though, you’ll only be able to use the tool if you’re randomly selected. “The goal is that this will be open to everyone by the end of open enrollment” on January 31, 2016, Justin Giovannelli, project director at the Center on Health Insurance Reforms at Georgetown University’s Health Policy Institute, told our fellowship group.

The CFPB is also deciding whether medical debt should be treated just like other debt, and some members of Congress are pushing the agency in that direction. If that happens, the CFPB might require credit bureaus to address credit reporting practices related to medical debt and expand the IRS billing and collection rules to include for-profit hospitals.

Later this month, the National Association of Insurance Commissioners may come out with rules requiring insurers give people more choices of doctors in their health plans.

The biggest assistance for health consumers might come after November 2016.  Linda Blumberg, a senior fellow in the Health Policy Center of the Urban Institute, said at my fellowship that “health care affordability issues extraordinarily depend on how the next election works out.”

In the meantime, if you’re dealing with medical debt issues, I suggest you read the CFPB’s advisory: 7 ways to keep medical debt in check.

And you might want to hire a patient advocate or medical billing advocate to go to bat for you. There's no guarantee this pro can solve all your health care cost problems, but he or she may offer assistance and, if nothing else, lower your stress.

And who knows? Maybe that could lower your blood pressure and keep your health costs down.

Photograph of Richard Eisenberg
Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More
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