What Can Be Done About Medical Debt?

The reason for medical debt in the U.S. — too-high healthcare prices — seemed to be unanimously agreed on at Thursday’s Senate Health, Education, Labor, & Pensions Committee hearing on the topic. The disagreement came in terms of what to do about it.

“A Uniquely American Phenomenon”

Committee Chairman Sen. Bernie Sanders (I-Vt.) set the stage. “Today we are going to be talking about one of the most outrageous and cruelest aspect of this dysfunctional healthcare system, and that is that people who are trying to deal with terrible illnesses — cancer, heart disease, whatever — not only have to struggle to try to get well, struggle to get the treatment that they need, but then in the midst of all that they’re consumed with the reality that their family may go bankrupt because of the outrageous cost of healthcare,” he said.

“Let’s be clear, the medical debt crisis our nation is experiencing is a uniquely American phenomenon,” Sanders continued. “It does not exist in other countries around the world. We are the only major country on earth where an emergency visit to a hospital can cause patients to lose their homes and their life savings because of the high cost of medical care … How insane is that? I live 50 miles away from the Canadian border. In Canada, if you spend a month in the hospital dealing with some terrible illness, you come out and the bill you get is zero.”

“The medical debt crisis in America has become so horrific that about one out of every four cancer patients in America either declared bankruptcy or lost their homes to eviction or foreclosure as a result of medical debt in 2022,” he added. “In my view, needless to say, we need to transform our entire healthcare system, and move to Medicare for All. But what we’re at least looking at today is how in the short term we can protect the many, many, many millions of people who are struggling financially because they committed the crime of getting sick.”

Are Existing Programs Working?

Sen. Bill Cassidy, MD (R-La.), the committee’s ranking member, had a different view. “You may hear today about Medicare for All — it’s been mentioned — but I also say that a healthcare system in which you think it’s free because the taxpayer is footing the bill, you’ve never seen how expensive something could be until you perceive that it is free.”

Instead, Cassidy urged people to look at how current programs designed to help financially struggling patients may not be implemented properly, especially by hospitals. As an example, he cited the 340B program, in which hospitals that serve a high proportion of low-income patients receive a discount on outpatient and oncology drugs; they are supposed to use the savings to better serve low-income patients.

However, “it is unclear if these discounts are actually being passed to patients,” Cassidy continued. “Since last year, I’ve led an investigation in how these different entities are using this 340B revenue … It’s an important topic to consider if we’re going to address both a root cause of medical debt and [look at] why are the things that we’re putting out there that may potentially address this not addressing it? If we just put in one more program which is poorly implemented, we’re gonna be back in this hearing 5 years from now.”

The High Personal Cost

Some of the witnesses told stories of the harm to their families from medical debt. Allyson Ward, a neonatal nurse practitioner at the University of Chicago, said that her twin sons, who were born at 30 weeks’ gestation, “were diagnosed with mild cerebral palsy, which required extensive physical therapy. I often worked a second job, working up to 60 plus hours per week in order to pay for these necessary treatments.”

“During some of our most dire economic times, we would meet with the children’s therapist and ration out the most necessary care at that particular moment and reassess again the following month, knowing what a detriment missing these sessions could be for their overall health and well-being,” she said.

Fumiko Ladd Chino, MD, a radiation oncologist at Memorial Sloan Cancer Center in New York City, discussed what happened when her husband Andrew was diagnosed with a fast-growing cancer that had already spread throughout his body. “Within 6 months of Andrew’s diagnosis, we exhausted his prescription benefit and had to start paying out of pocket thousands of dollars for his medications,” she said. “Another couple of months later, we met a lifetime cap. His health insurance stopped paying for his treatment, and we were left on the hook to pay to keep him alive. I cashed out my 401(k), we postponed our plans to start a family, and we borrowed money. We even considered moving to Canada.”

Even after her husband died, “the debt remained,” she said. “I was hounded by debt collectors. One even called me when I was at his funeral. The debt was like a black cloud. It followed me and cast a shadow over my entire future. It wasn’t until years later that I discovered that despite the threatening phone calls and letters, I wasn’t really responsible for Andrew’s medical debt. Even today, I get calls from collectors trying to cash in on his sickness.”

Sen. Chris Murphy (D-Conn.) asked witnesses about the use of medical credit cards, noting that some hospitals are starting to offer them. “In one North Carolina hospital, they went from 9% of their patients paying interest on their bills to 46% of their patients paying interest on bills because the hospital brought in a credit card company,” Murphy said. “Instead of just putting patients on installment plans, they now send them to a credit card company. These credit card companies are charging extraordinary interest rates and are often over-hyping the benefits of the card.”

Abdul El-Sayed, MD, DPhil, director of the Wayne County (Michigan) Department of Health, Human & Veterans Services, agreed that the introduction of credit cards was “a huge problem. And you can imagine a world where the same private equity firm owns the credit card and owns the hospital that provides the care, and if you think about the conflicts of interest, it’s profound,” he said, adding that with the cards’ high interest rates, “this is an extremely pernicious new way of trying to further financialize the cost of getting exorbitantly high-priced healthcare in this country.”

What Can Be Done?

Witnesses had a variety of opinions on how to solve the medical debt problem. “How should we fix medical debt? It’s very simple,” said Ge Bai, PhD, CPA, professor of accounting and health policy at Johns Hopkins University in Baltimore. “We should correct policy failures that have inflated medical prices in the first place.”

“Number one, level the playing ground,” she said. “Let’s fix the 340B program; let’s [implement the] site-[neutral] payment program, and let physicians freely compete and innovate. Number two, let patients control their healthcare dollars so they can personally benefit from better health and lower healthcare prices. And number three, let’s codify transparency” in healthcare prices.

Luke Messac, MD, PhD, an emergency medicine instructor at Harvard Medical School, in Boston, had other suggestions. “In exchange for their tax exemptions … nonprofit hospitals are required to publicize their policies on financial assistance. This aid is meant to keep low-income patients from incurring debt in the first place, but applying for assistance currently involves needless paperwork. To fix this, the IRS [Internal Revenue Service] can use existing authority to allow hospitals to verify patient income and to tell patients at the point of care that there will be no bill.”

“We can also cancel existing debt in a way that helps struggling hospitals while delivering the most possible benefit for Americans’ health and financial outcomes,” he added. “Recent research suggests that debt cancellation works best if done before debt collectors start pursuing patients with threatening letters and lawsuits.”

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