Provoking Thought

Is Medical Bankruptcy An Option Americans Should Consider?

How ‘surprise costs’ can undermine an otherwise sound financial plan

December 19, 2019 – The American public pays more for healthcare now than at any other time and is going bankrupt and carrying debt for medical care at an alarming rate.

According to the Boston Globe, in 2007, illness and medical bills contributed to about two-thirds of all personal bankruptcies, up from about half of bankruptcies in 2001. To make matters worse, three-quarters of those medical debtors had insurance — mostly private insurance. But their coverage didn’t protect them from gaps in coverage — deductibles, copayments, surprise bills, and other surprise, uncovered services that caused financial ruin.

This is the subject discussed on the Houston Healthcare Initiative podcast this week. To hear the podcast go to: SoundCloud, iHeart, iTunes, or Spotify.

The Whole Cost Is Staggering

“There are few tragedies that surpass bankruptcy, particularly one caused by medical bills,” said Dr. Steven Goldstein, who leads the Houston Healthcare Initiative (HHI) a member owned, non-profit medical co-op. “You leave the hospital, recover enough to return to work and discover the costs of your treatment are more than you can ever afford to pay.” But the debt does not end at the hospital exit. The costs of health care are much more enmeshed in people’s lives than just the immediate issue of a hospital stay.

The Bureau of Labor Statistics found that in January 2018, a single month, 4.2 million people missed work due to illness, meaning lost wages and, potentially, their jobs. The burden extends to other family members too: helping a family member both in and out of the hospital means missed hours at work, lower pay and the likelihood that patients will use credit cards to pay their bills. The payment by individuals in the U.S. adds up to an incredible expense to everyone in society.

Avoid Bankruptcy If Possible

Dr. Goldstein had several suggestions for people who were in a financial jam because of health costs. The best was to stay in touch and negotiate with the hospital and those working to collect on their behalf. “Don’t ignore letters from the people you owe money to; talk to them,” he suggested. “They prefer to work something out with patients than send them to a collection agency where the percentage of money they recover goes way down.”

There are few tragedies that surpass bankruptcy, particularly one caused by medical bills...

Other steps Dr. Goldstein suggested include:

  • Contact the attending physician or the hospital’s billing department by letter or in person about the situation.
  • Be honest about your current financial state and see if they can cut down your bill to something more affordable.
  • More often than not, a good faith effort will go a long way with the bankruptcy judge should it come to that.
  • If you make a monthly payment of at least $5 on each medical account, there are instances where you can be legally protected, and your wages will not be garnished, or a lien put on your property. This is not an exhaustive list, but these are some of the most important and effective things patients can do.

Medical Pricing Basis

The reasons for medical bankruptcy’s are because of the way the system is set up. Medical pricing arrangements between hospitals and insurance companies are artificially set. “Pricing is based on Medicare charges agreed to by a panel of representatives from physicians, hospitals and government under the auspices of the AMA,” Dr. Goldstein told his listeners. It is a cost-plus system that discourages cost saving measures. It bears no relation to the free market, supply and demand or how well certain treatments work or do not work. “Health care is the only industry where the sellers of care – insurers, doctors, pharmaceutical companies and hospitals – conspire together for pricing contracts with each other and then hide those prices from their ‘customers’ who are patients, employers and taxpayers and it is all legal.”

To learn more about this and other similar issues that affect the medical care business, please visit the web site at www.houstonhealthcareinitiative.org.