The twin problems of medical debt and underinsurance
Medical debt is the one of the leading causes of bankruptcy in the United States, and is estimated to be a factor in half of all mortgage foreclosures.
Medical debt is a growing problem for those with health insurance: three out of four families with medical debt had insurance at the time they got sick. These families were "underinsured," meaning that their insurance didn't cover a significant portion of their medical costs.
25 million Americans are now estimated to be "underinsured," a 60 percent increase since 2003. Middle-income families experienced the largest growth in underinsurance, with the number of underinsured nearly tripling from 2003 to 2007.
We can solve these problems by changing public policy at the state and national levels.
There are two main things states can and should do to protect consumers from medical debt:
- States should set standards to protect uninsured and underinsured consumers from being overcharged by doctors and hospitals.
- States should set standards for health insurance to ensure that people who buy health insurance will be covered when they need it.
Health Access and other IOU partners have made progress toward these goals at the state level, including passage of the HMO Patients' Bill of Rights in 1999 and the Hospital Fair Pricing Act in 2006.
America also needs comprehensive health reform, and Health Access and our allies are working toward that goal.
But, because the American system relies on the states to implement national policy, we will also continue to work on solving the problems of medical debt & underinsurance at the state level. Problems we are focusing on in 2009 include:
- Overcharging for emergency room visits. Uninsured and underinsured patients who go to an emergency room are often charged many times what an insurer or government program actually pays. Without bargaining power, these "self-pay" patients receive inflated bills from the hospital and from attending physicians. In 2006, California passed a law to prevent hospitals from collecting more from uninsured and underinsured patients than what Medicare would pay for the same service. However, it is still common for emergency room doctors and anesthesiologists to overcharge uninsured patients.
- Insurance with no out-of-pocket maximum. Many plans marketed as "catastrophic" set no maximum limit on how much money a consumer may be liable for. People with such plans who experience a major illness, injury, or chronic condition can reach their coverage limit quickly and then be liable for hundreds of thousands of dollars in additional costs, which can eventually lead to bankruptcy.
- "Hospital only" coverage. Some insurance plans are marketed as offering financial protection in case of "catastrophic" illness, but have large gaps in coverage that leave consumers paying, in effect, to be uninsured. For example, many so-called "catastrophic" plans offer "hospital-only" coverage, even though the majority of surgeries and chemotherapy treatments are now done in outpatient settings. A consumer with such a plan who gets diagnosed with cancer or another serious illness could find herself needing tens of thousands of dollars worth of care, for which she will be completely uninsured. Other forms of junk insurance include plans that do not cover any hospital care, or that cover only a tiny fraction of the cost of hospital care, which can easily run over $1,000 per day.
- Impossibility of comparing plans in the individual insurance market. Trying to buy insurance on your own is a difficult task. Because different plans have different deductibles, copayments, covered benefits, and annual or lifetime maximums, it is nearly impossible for a consumer to compare "apples to apples" in order to identify the best plan for them. As a result, too many consumers pay for plans that do not offer the coverage they need. With the ongoing economic downturn and the erosion of employer-sponsored coverage in California,8 more families are turning to the individual market for coverage. For small business owners and the self-employed, the individual market is often the only option available, yet it can leave people unwittingly underinsured.
- Misleading sales practices. To help understand their insurance choices, some consumers and many smaller businesses consult with an insurance agent or broker. Agents are paid by insurance companies on a commission basis but have no obligation to disclose their commission amounts to their customers. Insurance agents thus have a financial incentive to sell coverage, even if that coverage may not be the best financial product for the consumer.
For more information on how Health Access and the other IOU partners are working to address medical debt and underinsurance through public policy, click on the links below.
Health Access
- Underinsurance and Medical Debt
- Patients' Rights
- Comprehensive Health Care Reform
- Public Health Insurance Plans