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What Can We Do To Prevent Medical Bankruptcy?

What Can We Do To Prevent Medical Bankruptcy?

The inability of people without insurance to pay their medical bills is a growing problem in our country.  But now that health insurance coverage is guaranteed issue, and the maximum cost has been set by the ACA to be at most 9.78% of household income, the problem isn’t so much about availability or affordability of health insurance anymore. While it’s true that you might be able to get an uptick in coverage by increasing federal subsidies to reduce net premium to 7% or 8% of household income, the real problem is, how to deal with the approximately 20 million people who are voluntarily uninsured?  Those who are unlikely to buy coverage no matter how low the cost?  Reality is, you can’t force them to buy it, and it’s a big problem.  When those people can’t pay their medical bills, the cost of their care gets absorbed by the medical community.  This additional cost ultimately gets passed on to Medicare and the commercially insured population. This is a significant cause of the rise in medical costs, and therefore the ongoing rise in commercial health insurance premiums.  And of course, it is also the leading cause of personal bankruptcy in the US.

Hence the notion of a federal loan program for medical care, run much the same as the federal student loan program. Such a program would protect people from bankruptcy, while still leaving them responsible for a reasonable share of their medical bills, and give the provider community at least some protection from the cost of uncompensated care. This approach should be a popular notion on both sides of the isle in Congress, and it certainly would win favor in the provider community.

This is how it would work:

  1. Uninsured citizens who have incurred medical bills in excess of $10,000 may apply for a guaranteed line of credit or loan, administered by the current Student Loan program Sallie Mae, to pay for those expenses, subject to the following conditions:
    • Loan proceeds would be paid directly to the providers
    • Providers would have to agree to accept Medicare reimbursement rates as payment in full
    • Medical Loans would be repaid by the consumer on a monthly basis
    • For those who subsequently obtain health insurance, the monthly loan payment amounts would be reduced by some percentage and would continue to be reduced by that same percentage each month for as long as coverage remains in effect.
  2. Opt-out provision: Participation would be voluntary. However, no provider would be obligated to accept Medicare reimbursement rates as payment in full for those who opt out of the program.

As it stands now, we are all paying the cost of uncompensated care through higher health insurance premiums and added costs to Medicare.  The obvious solution is to have those who create the problem bear some portion of those costs, but at the same time, give them a way to do this without driving them into bankruptcy.

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