Financial Health of Patients Is an Afterthought
By Jonathan Wiik
Most healthcare providers offer exceptional levels of care to their patients. After all, we patients expect it. But what most patients don’t expect is the rising cost of healthcare, and unfortunately, financial health is often an afterthought for both parties.
The average deductible for a single person enrolled in an employer-sponsored health plan reached $1,217 in 2014, just under a 7 percent increase over the previous year, says a 2014 study published in JAMA. What’s more, the Affordable Care Act (ACA) Bronze Plan—the new 2015 HDHP (high-deductible health plan) entry plan for patients—establishes its average annual deductible at $5,203.
By 2019, providers could see a 50 percent increase in the amount of revenue requiring a collection from patients. Of that amount, 30 percent (as much as $200 billion) will be written off as uncollectable, according to estimates from Citi Retail Services, a division of Citigroup. Among households with incomes over 400 percent of the poverty line, almost half cannot afford the higher deductible amounts.
For these reasons, many healthcare consumers are reluctant to pursue adequate and timely medical care. The fact is, they simply cannot afford it.
Consider these facts:
- A recent report issued by the Consumer Financial Protection Bureau (CFPB) found that medical debts account for a majority of debt-collections actions appearing on consumer credit reports.
- An earlier Kaiser Family Foundation report found that one in three Americans struggle to pay medical bills, in spite of 70 percent of them being insured.
- Unpaid medical bills are the highest cause of bankruptcy filings, outranking both credit card and mortgage debt.
- Once in debt, many people may delay or forego other needed care to avoid incurring further unaffordable medical bills.
The number one complaint from patients typically concerns confusion with their medical bills, an issue that could be alleviated with proactive, data-rich discussions on the front end of the cycle. Accordingly, financial clearance—an industry term—is gaining momentum. Screening patients for eligibility under their insurance plan, confirming benefits are payable for the services they are about to receive, and ensuring they can afford to fund their out-of-pocket costs are paramount processes that should occur as early as possible.
Similarly, 501(r), a component of the IRS tax code covering not-for-profits, is garnering a lot of attention. The rule, which takes effect in January 2016, requires that not-for-profit hospitals demonstrate the effectiveness of their financial screening for charity programs, among other initiatives.
Additionally, under certain provisions in the law, providers must offer charity care to qualified patients and refrain from pursuing aggressive collection actions for those who would have otherwise been eligible. Documentation of charity assistance, processing, discounting, and collections must all occur prior to billing.
From a high level, financial clearance helps ensure three important things:
- That patients are paying within their financial means and are receiving financial assistance where possible.
- That providers and government programs are maximizing their scarce resources for charity and other programs.
- That bad debt, bankruptcy, and collection issues are reduced for provider and patient alike.
A patient’s financial health is becoming increasingly important in healthcare. Providers, for their part, must ensure that they have sophisticated tools and workflows to put both parties on the same page from the start.
Jonathan Wiik is principal consultant at TransUnion Healthcare.