I’ve written about medical debt in the past, explaining that not all medical debt is bad. However, medical debt is growing due to Obamacare. I’ve also explained that medical debt has many causes and it’s not always a lack of money. People sometimes refuse to pay because they think their bill is wrong (it often is). Or patients don’t pay outstanding bills because they believe their health plan is liable for the balance. This is just my opinion, but I suspect some outstanding medical debts are because patients think the bill is unfair. That reminds me, I wonder if the Georgia hospital that billed a lady $700 for her 7-hour wait in the emergency room ever got paid? She left the ER without being treated after waiting seven hours and was later billed $100 an hour for every hour she waited.
Some hospitals are more aggressive than others at collecting medical debt, placing liens on houses and harassing patients for payment. A lot of poor people should qualify for charity care, but hospitals don’t screen them for charity care unless patients know to ask. It’s a Catch-22 of sorts. To qualify for charity care you have to apply in advance. If you apply in advance, you’re less likely to receive care of any kind. Just imagine, you’re sitting at the admissions desk and you inquire about free or reduced-cost care. Do you really expect the hospital to admit you if you let them know you’re a charity care patient?
Hospitals work with medical finance companies that sometimes saddle patients with medical charge cards at exorbitant interest rates. Arizona capped the interest rate that can accrue on past medical bills. It’s not clear how the new law affects companies like CareCredit. There is even a nonprofit organization that buys medical debt and discharges it. The going rate is a penny on the dollar. I wonder if more patients would agree to pay if the hospital offered them a deal, say, 25% of the bill rather than waiting and selling it for $0.01.
Four hospitals in Columbus, Ohio area are working with city officials to erase nearly one-third of a billion dollars of medical debt.
Mount Carmel Health System, Nationwide Children’s Hospital, OSU Wexner Medical Center and OhioHealth are collectively writing off $335 million in debt for care received between 2015-2020.
Columbus residents are eligible if they earn between 200-400% of the federal poverty line — $55,500-$111,000 for a family of four, city leaders said.
This is expected to impact around 340,000 local residents, the city estimates, with the average amount forgiven coming to nearly $1,000.
The city of Columbus is contributing $500,000 to help cover the cost of verifying eligibility and mailing letters to those affected. Is this a grand gesture of benevolence? Not really.
Health care providers may have been more inclined to erase this debt, which ranges from three to eight years old, because it may have been difficult to collect at this point, Dorans speculates.
Basically, you have 340,000 people with outstanding debts ranging from three to eight years old. The average debt is less than $1,000. Therefore, the average debt is worth less than $10 if sold to collection agencies. Indeed, many of these outstanding debts may be worth nothing. The cost of debt collection letters is probably more than $1 for every mailing. In other words, the four Columbus hospitals will derive far more benefit from the favorable publicity of writing off the debts than if they continued to try to collect. Moreover, the hospitals are getting $500,000 in city money to promote this public relations initiative. Both the hospitals and the city will take credit.
What is bogus about this plan is that it had to go this far. Hospitals should have been working with their customers all along, rather than waiting three to eight years and pretending it’s a community service. Notice that debts less than three years old are not eligible because the hospitals still hope to collect something from them.