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Testimony
before the House Energy & Commerce Subcommittee on Oversight &
Investigations
by
Mark Rukavina, The Access Project
"A
Review of Hospital Billing and Collection Practices"
Thank
you for inviting me to speak before this panel on the important issue of
hospital billing and collection practices with respect to uninsured patients.
My name is Mark
Rukavina, and I am the executive director of The Access Project. The Access
Project is a national resource center providing support to local organizations
seeking to improve access to health care.The
Access Project works in partnership with the Heller School for Social Policy and
Management at Brandeis University in Massachusetts.In our work with local groups since 1998, we have undertaken numerous
research and policy analysis projects and produced a series of reports on
subjects relating to health care access barriers. Over the last four years, our
work has increasingly focused on the problem of medical debt and its
consequences. Through our research, and that of others, we have learned that the
problem is widespread and its causes diverse.Hospitals practices around pricing, billing and collections are prominent
among the causes of medical debt.The
existence of medical debt on a large scale, and the consequences of this debt,
belies many prevalent misconceptions about the uninsured and their ability to
access health care. In my remarks, I would like to clarify some of these basic
misunderstandings.
(1) The first
misconception is that uninsured patients can get the care they need from
safety-net institutions for free or at affordable prices.
The Access Project documented
the actual experiences of the uninsured through a survey it conducted in 2000 of
uninsured people who had received care in local safety-net institutions.In the 24-site survey of nearly 7,000 uninsured respondents, 60 percent
said they needed help paying for their medical care, and nearly half (46%) said
they owed money to the facility where they received care. For those who received
care in hospital emergency rooms, the percentages were even higher.
These findings are reinforced by
other national research. For example, the Commonwealth Fund's recent report, The
Affordability Crisis in U.S. Health Care: Findings from the Commonwealth Fund
Biennial Health Insurance Survey (March 2004), found that two out of five
adults in 2003, and 6 out of 10 among those who lacked insurance, had problems
related to medical bills or accrued medical debt.
Moreover, medical debt has a
direct effect on people's ability to access health care. In our 24-site
survey, among the respondents with unpaid bills, almost a quarter said the debt
would deter them from seeking care at the facility in the future.In another Access Project study, we interviewed low-income
consumers with medical debts in three communities. More than half said their
medical debts made it harder for them to get medical care. They reported that
providers discouraged them from seeking additional services by requiring cash
payment upfront, flatly refusing care, or encouraging them to seek new
providers.
A 2000 study done by the
National Association of Public Hospitals and Health Systems found that even
safety-net providers do not automatically provide free care to uninsured
patients.More than 80 percent of
the public hospitals surveyed had implemented cost-sharing plans and an
increasing number implemented pharmacy co-payment plans.
Medical debt can erode
not only individuals' access to care, but also their overall financial
security and that of their family. One survey found that more than a quarter of
families in which one or more members were uninsured reported having to
"change their way of life significantly" to pay medical bills, a figure that
rose to nearly 40 percent when all family members were uninsured.In the recent Commonwealth Fund survey, among the
uninsured respondents who had medical bill problems or medical debt, almost 4 in
10 said they were unable to pay for basic necessities such as food, heat or
rent; over half said they used all or most of their savings to pay medical
bills; and more than 2 in 10 said they had taken on large credit card debt
or loans against their homes to pay medical bills.
(2)
Another misconception is that uninsured people expect to get their care for
free, or are simply unwilling to pay for it.
In fact, the uninsured
do pay a significant portion of their bills.As the Commonwealth Fund survey indicates, many exhaust their savings,
take out loans, or assume large credit card debt to pay their medical bills.A recent report by the Kaiser Commission on Medicaid and the
Uninsured, The Cost of Care for the
Uninsured: What Do We Spend, Who Pays, and What Would Full Coverage Add to
Medical Spending? (2004), estimates that people who are uninsured for an
entire year pay over a third (35%) of their health care costs out-of-pocket,
considerably more than the 20 percent share paid by those with insurance.According to the report, the uninsured can be expected to pay 32.6
billion dollars for their care in 2004.
Our interviews with
low-income people with medical debt found that many respondents had a strong
desire to pay off their debt and tried to negotiate payment plans, but found
that the terms of the plans hospitals offered were difficult to maintain,
given inflexible hospital collection practices and their own tenuous financial
circumstances.Here are what some
of our survey respondents told us.
".they demanded I pay a
certain amount bi-weekly.I
couldn't afford it.They didn't
want to help.I was willing to pay
some money, as much as I could."
"I (said) I couldn't pay
$500, that I could pay $100, but the person answered no, that it had to be
$500."
Moreover, not being able to pay
their medical bills in full caused many people tremendous anxiety and stress.Again, here is what some of our respondents told us.
"I am constantly worrying
about my medical debt.I feel hopeless.I
am a single mom and think that in the future I will not be able to better my
life."
"Owing money affects every
part of your life.You don't stop
worrying about it anytime."
"I couldn't sleep.I just
slept a few hours and it (the debt) even took my appetite away."
One factor that makes it
especially difficult for uninsured people to cover the entire cost of their care
is that they are often expected to pay more for the same services than other
payers.Uninsured patients don't
have access to the discounts negotiated by insurers or set by the government.Uninsured patients are expected to pay full charges or "the rack
rate."A Wall Street Journal
article in March of 2003 told the story of Rebekah Nix, a 25-year old uninsured
woman in New York who was billed $14,000 - not including doctor's fees -
for a two-day stay for an appendectomy.The
state's Medicaid program would have paid about $5,000 for the procedure, and
Medicare about $7,800.
In testimony before the House
Ways and Means Committee this past March, University of Southern California
Professor Glenn Melnick showed that nationally, hospitals increased their
mark-ups - the amount charged over and above the cost of care - from 159% in
1993 to 211% in 2003.Average
mark-ups across states ranged from 135% to 300%.Given this, it's no surprise that the uninsured can't cover these
costs.
Adding insult to injury, many
hospitals enforce these payments through aggressive billing and collections
practices, a situation that has been documented in the press and by various
community groups. Reports of hospital billing and collections practices in
Connecticut, New York and Illinois led to a series of articles in the Wall
Street Journal. The Journal articles, as well as articles in other
newspapers across the country, have detailed cases of the devastating effects of
harsh collections practices in which people were hounded by collection agencies,
charged high interest, had wages garnisheed and property attached, had liens put
on homes, and were even arrested as they struggled to pay their bills. For
example the Journal documented the case of Quentin White, who had been
paying Yale-New Haven Hospital for over 20 years for the debt from his late
wife's medical care.The hospital
charged 10 percent interest, placed a lien on the White's home, and in 1996
nearly cleaned out Mr. White's bank account.Over the years, Mr. White paid nearly $16,000 on what was originally a
bill of just less than $19,000.However,
his outstanding balance had ballooned to about $39,000 in 2003 because of the
interest charges.In another case
in Champaign, Illinois, Marlin Bushman was arrested and jailed after missing a
court hearing on a $579 hospital bill.Kara
Atteberry was briefly jailed because she missed two court hearings on a $1,678
hospital bill incurred for a miscarriage.
Hospitals have used other
tactics to improve their collection rate.Some
have arrangements with commercial banks to facilitate the initiation of loans to
cover medical expenses.Others have
created open-ended credit accounts that are marketed as Trouble-Free Payment
Plans but fail to disclose interest rates or other fees at the time of
application.We even know of a
hospital that is issuing its own credit card to patients.
Some hospitals take drastic
measures through their collection agents.Earlier
this month, the Wall Street Journal reported on a practice in New York where
hospital collection agencies attach the bank accounts of patients with hospital
bills going back as far as 15 years.Some
hospitals had even written off some of these bills and had received partial
reimbursement from a state-run bad-debt pool.
There should be no place for
such high-pressure tactics used against low-income people who have the
misfortune of getting sick.
Given recent attention on this
issue, the financial community is beginning to scrutinize hospital billing and
collection practices.The
Health Capital Group provides an illustration. The Health Capital Group offers
services to hospitals and other medical providers relating to mergers,
acquisitions and investment banking, as well as an array of other related
"transactional" services including sophisticated valuation services. They recently expressed concern that hospitals failing to inform
certain patients who might reasonably qualify for financial assistance or
'charity care' would be exposed to class action lawsuits as well as the
possibility of direct intervention from state attorneys general.They fear that this could create enormous contingent liabilities that
could, in turn, significantly impair their access to capital.
As a result The Health Capital
Group announced that they will cease issuing valuation opinions, validating bond
ratings, rendering creditworthiness opinions, certifying debt capacity, making
recommendations to bond funds or issuing compliance comfort letters and related
analyses unless a hospital or hospital system demonstrates that it has written
policies and procedures to inform patients of financial assistance, pricing and
collection policies and publicizes these policies and procedures.
Just last week it was reported
that a federal class action lawsuit was filed in federal courts in eight states
against nearly one dozen non-profit hospital systems challenging whether tax
exempt status should be granted to these institutions.Clearly the billing and collection practices of hospitals that have
created problems for uninsured patients are now creating problems for the entire
hospital industry.
(3)
A third misconception is that the "truly needy" are not billed or subject to
aggressive collection actions because they qualify either for public programs or
for hospitals' indigent care programs.
While most hospitals do claim to
have financial assistance programs to assist people without the means to pay for
their medical care, research indicates that many who might qualify for these
programs never learn about them. In our 2000 survey of the uninsured, almost
half (48%) of those needing help paying for care
said they were never offered financial assistance, such as being informed
about the facilities' own charity care programs. Among those who received care
in urban or suburban hospital emergency rooms, 70 percent said they were never
offered assistance. This lack of information about available financial
assistance is consistent with findings from subsequent research that The Access
Project and others have done, and is a wholly avoidable cause of medical debt.Again, here is a comment from one of our survey respondents:
"I would like the hospital to
make the help office, the one that helps you pay the bill, more accessible to
the people.Because I have a lot of
bills that could have been paid, had they told me about that office sooner.Instead, my bills are now in a collector's office when I qualified for
financial assistance, because they did not give me the necessary
information."
In this regard, I would like to
share with you The Access Project's own experience trying to obtain
hospitals' financial assistance policies. Last December, the American Hospital
Association issued guidelines for its members recommending that all hospitals
have written financial assistance policies that they disseminate widely in their
communities.In 2003, both Tenet
and HCA healthcare systems announced with fanfare programs to help the uninsured
with discounts and sliding scales.Learning
about the HCA program in the third quarter of 2003, and unable to find
information on their website, I contacted the company to request a copy of the
policy. I received no response.I
made another request a month later.Finally,
in December, I was told that while the policy had been implemented, HCA didn't
want to post it until they saw if it "worked as intended", probably around
the beginning of the new year.In
February of this year, we invited HCA, along with Tenet and other area
hospitals, to meet with community leaders in Florida to provide information
about their financial assistance policies.Unfortunately, both HCA and Tenet declined to attend.
Only in late April, more than
six months after we first requested information, did the hospitals provide us
with their policies.The Access
Project is hopeful that working with these systems will be far easier in the
future.However, I share this story
to point out that if it takes the professional staff at a national health care
resource center over half a year to find out about the hospitals' financial
assistance program, one can imagine the difficulties faced by uninsured people
who try to do so, especially while they are ill and vulnerable.
It is possible for hospitals to
inform uninsured patients of the financial assistance programs that are
available to them.However,
providing information is often not enough.Hospital can and must do more than that.We recently identified a program at The Cooley Dickinson Hospital in
Northampton, Massachusetts.Cooley
Dickinson case managers visit each uninsured patient and review their individual
health care needs.They help
patients complete program applications, they refer them to a local network of
physicians offering care on a sliding fee scale and assist them in applying for
hospital charity care.By providing
this assistance, they have enrolled hundreds of patients in Medicaid and other
programs.The hospital gains needed
revenues and the patients avoid crushing debt. The hospital and the patient are both better off.The crucial point is that case managers review payment alternatives with
patients at the front end of the process, not after the bills have been sent to
collection.Without such help, many
patients would be reluctant to go back to the hospital.
(4) A final misconception is
that hospitals and other healthcare providers bear the full burden of providing
care for the uninsured.
I have already discussed that
the uninsured themselves in fact pay a significant portion of the costs of their
care. In addition, while hospitals definitely do bear a portion of this burden,
they also receive funding from a variety of sources to help defray these costs.As Secretary of Health and Human Services Tommy Thompson pointed out in a
letter to the American Hospital Association, "Medicare and Medicaid have a
long history of doing their part to help the uninsured that includes paying
hospitals $22 billion each year through the disproportionate share hospitals
provisions to help hospitals bear the cost of caring for the poor and
uninsured."In addition, most states and many counties and local
communities have programs that help fund care for the indigent and uninsured.
A word is warranted here about
the "uncompensated care" that hospitals provide. Most hospitals report their
uncompensated care as a combination of bad debt and charity care, without
disaggregating the two. While both types of uncompensated care similarly affect
a hospital's bottom line, their effects on patients are starkly different.
"Bad debt," even after a hospital has written it off, still burdens the
patient. Collection efforts by outside collection agents may continue
indefinitely, and the debt may be a blot on a consumer's credit record for
years; it may hinder people from buying homes, getting loans, or even affect
their employment. So while from the hospital's perspective the services are
uncompensated (at least that portion of the bill a patient is unable to pay),
from the patient's perspective the bad debt write-off is by no means
"charitable" and should not be confused with the legitimate benefits of a
hospital's charity care program.
Recommendations
The widespread problem
of medical debt is clearly a symptom of much that is wrong with our fragmented
health care system that leaves so many people exposed to lack of access to care
and to financial ruin.While this
situation cries out for systemic solutions, some steps can be taken in the
interim to reduce the burdens of unaffordable health care costs on low-income
uninsured people.
(1) Offer uninsured
hospital patients discounts equivalent to those extended to people with
insurance.
The current situation
reflects the lack of clout that uninsured consumers have in the healthcare
marketplace compared to all of the other players - employers, insurers, and
providers.Charging the highest
rates to those least able to pay is simply unfair, especially when it comes to
necessary medical care.
By itself, however, this is not
sufficient.From the standpoint of
the low- or even middle-income consumer struggling to pay his medical bills, the
salient issue is not only the prices a hospital charges but also the
availability of financial assistance programs. Even with changes in hospital
pricing practices - the immediate concern of the subcommittee - problems of
medical debt will remain for those who require medical treatment but are unable
to pay the (albeit reduced) fees for which they are responsible. For low-income
people, or those with very high bills relative to their income, even discounted
prices may not prevent devastating medical debt.For a family earning slightly more than the federal poverty level,
reducing a bill from $50,000 to $25,000 does not provide enough help.For people at this income level, a bill of a few thousand
dollars, or even less, may simply be beyond their means to pay.
(2) Screen uninsured hospital
patients and provide assistance to all patients who are eligible for public
programs to ensure that they are enrolled in them.
This is a win-win situation for
the hospital and the uninsured patient; it provides hospitals with some
reimbursement for services rendered, and it helps prevent people from being
saddled with unmanageable debt.We
know of hospitals that have adopted very proactive programs to ensure that all
of their uninsured patients know where to get help in applying for these
programs.And they have continued
to fund these programs because they have found them to be financially beneficial
to the hospital as well as the patient.
(3) Have consistent and
well publicized charity care policies for hospital patients who are not eligible
for public programs and stop aggressive collection actions as an integral part
of a hospital's service to their communities.
In this regard, we are hopeful that the recent HHS
guidance on billing and collections practices, as well new guidelines from the
AHA and a number of state hospital associations, will help to reduce the role
hospitals play in imposing medical debt and its harsher consequences. Hospitals
must take a proactive role in informing their patients of charity care and they
must stop aggressive collection actions against uninsured patients.Such actions cost hospitals money and provide little financial return
while ruining the credit of uninsured patients.
(4) Establish clear
rules of accountability for funds that hospitals receive through the Medicaid
DSH program and other sources to help defray the costs of uncompensated care.
Disproportionate Share Hospital payments provide vital funding
for America's healthcare safety net.Hospital
receiving DSH payments should be required to provide details on how this funding
is used to support services to poor and uninsured patients.
(5)
Build on the American Hospital Associations Guidelines and Principles for
Hospital Billing and Collection Practices by establishing a Financial Assistance
Initiative for Uninsured Patients.
We call on the AHA to
create an initiative with the purpose of providing financial assistance to
patients with no insurance.An
essential part of this effort would be for hospitals to work in partnership with
community and consumer advocacy organizations that work with, and represent,
people with no health insurance. These
community and consumer advocacy organizations could assure that hospitals have
transparent policies that are understood and supported by their uninsured
patients.Hospitals participating
in this initiative would have clear, written policies governing their practice
for screening uninsured patients for financial assistance, as well as for
billing, charity care, and debt collection practices related to uninsured
patients. The
AHA should enroll hospitals in this initiative to bring clarity and decency to
billing and collection practices.One
basic principle could drive the initiative - Do No Harm.Hospitals must start treating their patients of limited resources with
dignity, respect and justice. If hospitals are unwilling to comply, legislation
might well be in order.
It is only after
hospitals improve their billing and collection systems, that they should seek
additional funds to support the cost of providing health care to uninsured
patients.
(6) Create a system of
affordable health care for all.
We recognize that
hospital bills are only one component of medical debt. As health care costs rise and employers and insurers shift more of the
costs on to consumers, medical debt from all sources is likely to grow.While improved hospital financial assistance programs are an important
step in alleviating this problem, systemic efforts that include all types of
healthcare providers and significantly expand coverage will ultimately be needed
to address the underlying factors that leave many patients - both uninsured
and insured -with unmanageable
medical debt.
On behalf of the more than 43
million American with no health insurance, thank you for the opportunity to
testify today.
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