Real problem is lack of insurance, not hospital collections

by Lesley Politi on January 15, 2009

Real problem is lack of insurance, not hospital collections

It’s a sad fact that because we lack health insurance coverage for everyone in this country, hospitals often find themselves with stacks of unpaid patient bills. Certainly, no one likes to receive a letter or phone call from a bill collector. And no one wants to spend a day in court disputing hospital charges.

Yet those to whom money is owed, including hospitals, couldn’t survive if all those bills went unpaid. At the same time, hospitals aren’t anxious to litigate: A very small percentage of disputes over hospital bills actually make it to the courtroom. More than 6 million patients are cared for each year in Maryland hospitals.

That’s one of several important points missing from The Baltimore Sun‘s series “In Their Debt.” Less than one-half of 1 percent of those patients end up in court. The rest of these individuals pay their bills on time or work out a payment plan with the hospital.

A second missing piece: In most cases, the reason these cases end up in court is not because of mean-spiritedness but because of a lack of communication. Patients who come to Maryland’s hospital emergency departments are cared for first – regardless of their ability to pay – as required by law. They are seen by a doctor and their condition is treated. Only after patients receive care is information collected regarding their insurance coverage or information that might help qualify them for financial assistance.

Every hospital in Maryland provides charity care to patients with limited means. That totaled $260 million last year. Hospitals provided an additional $600 million in care to those who could not or would not pay their bills.

Hospitals regularly find patients who are eligible for Medicaid or other programs yet don’t know it. But unless patients talk with the hospital and provide important financial information, hospitals can’t connect them with those resources.

It’s also true that many people who have the ability to pay try to evade their legal obligations. That’s not fair to everyone else.

If there were a magic machine that gave us information on a patient’s financial status, hospitals could correctly identify and work with patients of limited means who need assistance as opposed to those who want a free ride. But no such machine exists. The Baltimore Sun series suggests hospitals shouldn’t pursue patients because hospitals already get reimbursed for unpaid bills through Maryland’s hospital rate-setting system. Yet every unpaid bill means higher costs for the rest of us.

Indeed, if hospitals did not pursue unpaid bills, what incentive would any of us have to pay for health care? Why buy health insurance? The entire health care system would collapse.

Under Maryland’s unique hospital rate-setting law, a state panel uses a formula each year to determine how much to reimburse hospitals for uncompensated care. Because it is a formula based on what is expected to happen in the coming year, those reimbursements can be high one year and low the next. Yet over a period of time, it averages out. In fiscal year 2007, Maryland hospitals received less than the actual cost of delivering free health care.

All paying patients in Maryland share equally in supporting this worthwhile objective through charges on their bills. In other states, these rates are buried in markups that hospitals charge, which adds about 34 percent to the cost of care. That doesn’t happen here. Our hospital markups are about 8 percent. However, if hospitals made no bill-collection efforts, those charges would be far higher.

The crux of the problem is that 800,000 people in our state lack adequate health insurance. Employers have tried to cope with high insurance costs by cutting benefits or increasing what employees pay. In some cases, workers are now on the hook for thousands of dollars of out-of-pocket expenses they can’t afford. In this recession, many more people will lose their jobs and their health coverage. But people still get sick; they still need hospital care – with or without insurance.

Gov. Martin O’Malley and the Maryland legislature have made tremendous strides and set our state apart from others by expanding health care coverage to more low-income families. Maryland’s hospitals have fought for and long supported those efforts. Still, significant gaps remain.

Hospitals continue to provide medical treatment first and work out the payments later. We believe patients should be treated with compassion, from the bedside to the billing office. News stories over billing disputes distract from the real problem. Without a national policy to provide health care coverage for all, the chasm between people’s health needs and their ability to pay will grow. That dumps the problem at hospitals’ front door, leaving them with the task of patching together care and coverage one patient at a time – a far less than ideal scenario.


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