Discharged into debt: A chronic ciagnosis  

It is impossible to discuss healthcare without acknowledging the severe financial burden placed on consumers. Financial hardship is practically woven into the DNA of the US healthcare system. Today, medical debt is the number one cause of bankruptcy. To simply stay afloat, Americans have been forced to take drastic measures — over two-thirds of Americans with medical debt have cut spending on necessities such as food, heating, clothing, and housing. Sadly, these sacrifices appear to do little to address the problem. Medical expenses continue to be the largest driver of the nation’s poverty rate, pushing eight million Americans below the federal poverty line.

Now more than ever it is clear that medical debt has become an insidious and inevitable part of the patient journey. From an $18,000 bill for a routine test to $150,000 in post childbirth expenses to the staggering $1 million in unpaid bills that one family faced after experiencing a Covid-related death, the threat of medical debt feels unyielding. These Americans like so many others came to the horrifying realization that one routine procedure or accident can plunge them into financial ruin. The most disturbing point? All of these Americans had health coverage. In fact, 90% of adults with medical debt maintain some level of health insurance coverage.

As the consequences of the pandemic threaten to further entrench millions in a vicious cycle of debt, the country is under heightened pressure to answer the trillion-dollar question: How did we get here and where do we go next?

How Did We Get Here?

The Consumer’s Burden
Over the past four decades, inefficiency, high administrative costs, and the high price of health care have all been noted as contributors to the $4 trillion in healthcare spend. To put individuals in control of their own costs and move towards a more consumer driven healthcare system, high-deductible health plans (HDHPs) emerged as a potential solution. Between 2006 and 2019, enrollment in HDHPs rose from 4% to 30%. While the intended goal was to encourage more cost-conscious decision making, the result has been increased deductibles, high out-of-network costs, and expensive co-payments. Essentially, the system passed the financial burden to the consumer but neglected to provide the tools needed to navigate the system, setting Americans up to fail.

Coverage Inadequacy
Recent years have been marked by a slow but steady increase in the number of people without coverage, reaching 10.3% or 33 million Americans in 2019. For those who have elected to purchase insurance, millions remain significantly cost-burdened, leading to roughly 44M Americans being underinsured today. Unless meaningful changes are implemented into health benefit design, researchers predict this number will continue to rise. Without a safety net to protect nearly one-third of our country, the rates of medical debt and health related bankruptcies will only continue to climb.

The Vicious Cycle of Poverty, Care Avoidance, and Health Consequence
Lower income Americans are forced to make the losing decision between avoiding necessary medical care or further impoverishing themselves and their families. Today, more Americans fear the financial cost associated with a serious illness than the illness itself. The thought of being locked in a “debt trap” with high levels of debt repayment and high interest rates is daunting and often results in individuals forgoing much needed care. While such care avoidance prevents immediate financial impact, extended gaps in treatment leads to adverse health outcomes. We live in a country where for many financial woes and healthcare are inextricably linked. At the end of the day, the sad reality is that healthcare often loses.

The Compounding Effect of the Pandemic

Over the past year, the coronavirus pandemic has wreaked havoc throughout the country. As many as 30 million Americans lost their jobs and nearly 14 million were left uninsured. As a result, many were without the means to pay off medical bills accrued before the pandemic or to cover costs associated with treatment for a disease. As the country pulls itself out of a world-altering health crisis, the U.S. has only started to uncover the massive financial toll Covid-19 has taken on millions of Americans.

Medical Debt’s Disparate Impact on Communities of Color 

The pandemic exacerbated existing health disparities and revealed the longstanding racial inequities endemic to our healthcare system. The legacy of credit discrimination, employment discrimination, wealth inequality, inadequate insurance coverage, and limited care access has set the stage for a disproportionate amount of medical debt to be held by people of color. Today, one in three nonelderly Black Americans are saddled with past-due medical debt, compared to under a quarter of white Americans. Without action, the devastating nature of such debt only serves to further entrench Black and Brown Americans in a vicious cycle of economic and health inequity.

Where Do We Go Next?

To deliver transformational change, healthcare and government stakeholders must focus on helping Americans avoid the accumulation of future medical debt before an individual enters the health system. Readily available healthcare pricing and navigation, institutional change for the treatment of medical debt, and regulatory reform should be core tenets of this transformation. Digital health can play a critical role in supporting efforts across all three areas.

Pricing and Navigation
The opacity of the US healthcare system has made it nearly impossible for the average American to understand the cost of their care and simply, what they will owe. When surveyed, 27% of Americans did not know what an annual deductible is, and 30% did not understand the concept of annual out-of-pocket limits. Surprise medical bills continue to burden health consumers, with  one-third of Americans learning after a hospital visit that their health plan does not cover as much as they expected. Consumers are navigating the healthcare system blindly without the information they need, and by many accounts have long demanded. Equipping consumers with tools that deliver information, assistance, and eliminate insurance barriers, healthcare stakeholders can reduce the overall health expenditures. Luckily, there are a myriad of digital health tools arming consumers with information before they make financial choices related to their health and helping them navigate care decisions with greater confidence.

Transcarent is a notable example of efforts underway to solve this problem, putting the consumer in charge of their health and care. Using a combination of software, technology, data science, and health guides, Transcarent empowers consumers with the kind of unbiased information, trusted guidance, and access to high-value care that leads to better care, better outcomes, and more cost-effective decisions.

Another example is Castlight a health navigation platform that provides users with a comprehensive view of potential out-of-pocket costs related to a medical event. The company provides personalized recommendations to guide consumers to the highest quality, lowest cost providers that have experience with treating their specific conditions.

Institutional Changes for the Treatment of Medical Debt
While increased price transparency is a necessary first step, harsh debt collection practices employed by some healthcare stakeholders have exacerbated the problem of compounding medical bills. Garnishing wages, property liens, and lawsuits have had a devastating impact on many. Though nonprofit hospitals have been barred from conducting such actions, organizations can prioritize building policies with a focus on reducing consumer costs and developing sustainable repayment plan models, particularly for vulnerable populations.

There are a myriad of financially focused digital health solutions aiming to improve the patient experience and collections for hospitals systems. One example is Cedar, a financial engagement platform that creates customized interactions and seamless billing solutions for patients to understand their medical bills and payment options.

A second example is Healthbridge, a new employee benefit that enables patients to receive favorable medical financing terms sponsored by their employer. By informing patients before a medical event, consumers can receive medical financing terms before even entering into the health system.

Other companies like PayZen offer easy to understand billing, flexible, mobile-first payment, and identify the best financial pathway for each patient to deliver a personalized and empathetic consumer experience to increase patient collections.

Regulatory Reform
In the wake of the pandemic, several policy changes have passed to provide Americans with some relief from the crushing weight of medical debt. As part of the Covid-19 Relief Bill, Congress passed the federal “No Surprises Act”, ending most surprise out of network billing. To equip consumers with better healthcare information, CMS published the final Transparency in Coverage Rule, requiring hospitals to disclose prices and cost-sharing information for all services. Companies like Claraprice and Waystar are well poised to partner with hospitals to meet price transparency requirements and provide consumers a user-friendly shopping experience.

While the aforementioned new policies are major steps in the right direction, there is still meaningful regulatory change required to tackle the overarching problem. Strengthening coverage and improving affordability, capping medical debt interest rates, and ending surprise billing for ground ambulances, are just a few potential actions federal and state governments can take to help resolve the US medical debt crisis and protect financially vulnerable consumers.

Given the complex and systemic nature of the country’s crisis, no single solution or course of action can be expected to serve as a panacea. A multi-pronged approach that enlists both public and private health stakeholders and addresses each stage of the medical debt life cycle will be required. Digital health can be one of many tools transforming individuals into informed connected health consumers that are empowered to become stewards of their health and medical financing decisions.  The country should stop at nothing to ensure people have access to quality, affordable healthcare without the fear of devastating financial consequences.

Editor’s Note: Transcarent is a portfolio company of 7wireVentures where the author is a partner.

Photo: JamesBrey, Getty Images


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