Spiraling out-of-pocket costs and intermediaries have put 1 of 4 Bexar County residents in medical debt. The time has come to restore the direct relationship between PROVIDER and patient.
BY Dr. M Reza Mizani, Founder of LASO Health and TIm Kaufeldt, CEO of LASO Health
1. INTRO: The medical debt crisis in Bexar county
Although every single person reading this article has received a “surprise” medical bill at some point in their life, very few know the magnitude of the medical debt crisis in Bexar County.
According to the Urban Institute’s interactive debt map, as of March 31, 2021, approximately 43% of Bexar County residents – 2 out of every 5 of our neighbors – have medical debt in collections averaging $2,099. And as with many aspects of healthcare, the impacts on underserved and minority communities are even more dire. Whereas about 20% of white communities in Bexar County have medical debt in collections, nearly 50% of communities of color are burdened by the weight of medical debt. And according to RIP Medical Debt – a national non-profit that abolishes medical debt for pennies on the dollar – Bexar County has over $100 million dollars of medical debt in collections. Perhaps even more shocking is that is just the amount owed by people at or below twice the federal poverty level in Bexar County – not for everyone – and this is important to note because surprise medical debt affects people at all income levels. And according to a Lending Tree survey, medical debt has prevented 72% of families from reaching milestones in life such as buying a house or having children.
2. Surprise bills and medical debt are symptoms, rising costs and care deferment are the epidemic
How did we – like counties all over the United States – end up here? We may or may not actually be getting sicker, but the costs of getting better have certainly gotten much higher. Our health insurance – literally an artifact of World War II, accidentally invented as a response to price and wage controls – has rapidly put the cost burden on the patient in terms of rising deductibles, premiums, and co-pays. How much has the burden shifted? Consider this chart from Kaiser Family Foundation that demonstrates the inflationary effects since the passage of the Affordable Care Act since 2009:
It is evident from the above statistics how this rapid cost escalation has pushed the payment burden onto the patient in terms of out-of-pocket expenses. It is also easy to see why so many families default to the “Maybe it will get better” approach to healthcare – which means not seeking care at all. According to a Harris poll in 2019, 54% of Americans will defer seeking healthcare due to concerns about cost.
The path from there is very linear: the illness either does “get better”, or it turns into a ride to urgent care or an ER. By the time this patient seeks care, it is indeed time in surgery and a stay in the hospital. This treatment now undoubtedly leads to large follow-on bills for a host of different services and providers which – according to a 2021 Credit Karma survey – over 60% of American families cannot afford to pay immediately. These unpaid bills then become medical debt, which can often lead to bankruptcy. How often? Depending on the annual data you are looking at, it is calculated that 67-70% of all consumer bankruptcies are medical debt related.
3. When health insurance is no longer insurance.
Many will assume that these bankruptcies are being filed by Americans without insurance, currently estimated to be some 31 million people, (pre-COVID numbers). What will shock most even further is that of those medical debt bankruptcies, 68% of those that filed bankruptcy due to medical debt had health insurance at the time of injury or illness! So how does this happen exactly?
This goes back to the rising costs illustrated above of course. But with real wages and savings not keeping pace, there is a growing group of unfortunate souls: the “functionally uninsured”. In short, if a family’s health insurance plan deductible exceeds their available savings, they are functionally uninsured. For most working age adults that are younger and healthy, perhaps this imbalance is never noticed. But should that same family face a catastrophic illness or suffer a major injury – such as that ruptured appendix – they will quickly find themselves incredibly burdened financially, and perhaps become a bankruptcy statistic themselves.
How can we blame these families? For many years, employer-sponsored health insurance (ESI) had plenty of value and utility – remember “Cadillac plans”? So many Americans with ESI were conditioned to see their health insurance card as a credit card. The first thing the medical receptionist asks after hello is “who is your insurance with?”. And like Pavlov’s Dog, we hand over our policy and group number immediately.
And while much of the focus on solving the issues of surprise billing and medical debt focuses on the patients, you may have a hard time finding Physicians that are fans of the current state of insurance-driven healthcare either. Billing, coding, negotiating, collecting – this is a system that has created billing- and insurance-related (BIR) costs of $0.17 on every dollar spent for private insurance payers. On top of the waste and excess cost, the time this BIR administration takes means less time and attention for actual patient care – the reason most become Physicians and healthcare providers to begin with.
4. THE CURE: restoring the direct relationship between the healthcare Consumer and the provider
Any sober look at the last 20+ years of “healthcare reform” will reveal platitudes at best, and powerful unintended consequences at worst. The only Congressionally-passed attempt at major healthcare reform – 2009’s Affordable Care Act – was intended to provide health insurance to all Americans and to stem the tide of rising costs. With its subsidies for those that qualify, it did succeed in insuring more Americans. But for those that didn’t qualify, the high premiums and deductibles drove the healthy payers out of the Marketplace, and according to CMS data national health expenditures (NHE) exploded from $2.6 trillion in 2010 to $3.8 trillion in 2019 – 17.7 percent of our GDP. The Trump administration did attempt to pass laws to help protect consumers from surprise billing and promote price transparency. But there is limited scope on enforcement, and studies are showing an already low compliance rate from hospital health systems on the Price Transparency Act: one study found 65% of hospitals “unambiguously noncompliant” with CMS rules. With findings like that it should come as no surprise that nothing has changed for the healthcare consumer.
As the current health-insurance system is a relic of the 1940’s, perhaps it benefits us to look even further back in history for the answer to its issues. Prior to World War II, most Americans paid their providers directly out of pocket at the time of service. When they did require insurance to assist, it was often with fixed-fee costs. One nurse could support the patients, the front office, and perhaps even a couple Physician’s at one time – the opposite of today’s modern staff ratios. And above all else, the relationship between the Physician and the patient was direct – there were no intermediaries between illness and care. In other words, before the advent of the health insurance industry, you had price transparency and a direct relationship between the Physician and the patient.
The terrible state of current healthcare has hit a tipping point. The patient has now become the Consumer, and change is now being driven from the outside where “innovation, not regulation” is the answer. Some innovations are within the insurance industry offerings themselves – such as defined contribution healthcare plans – that employers large and small are rapidly demanding and embracing. There are also many Physicians opening subscription-based “direct primary care” model practices that remove the intermediary.
But price transparency, direct access and convenience are the keys to greater consumer participation, and the biggest advancements for the new healthcare consumers will come through technology. Our smartphones have irrevocably changed the human existence, and if in the Uber analogy we think of insurance-driven healthcare as the “old taxi” that everyone complains about, then the solution – represented in apps like LASO – should be similar: a free market platform with upfront pricing, direct access to Physicians, and convenient booking right from a mobile device at the time and place convenient to you. When we accomplish this, seeking the care you need now will then be as easy as “getting a ride in minutes”. And with the participation of innovation-minded partner Physicians in this effort, we can make a lasting impact on how retail healthcare is delivered, and simultaneously end care deferment and the scourge of medical debt.
LASO Health is a health technology startup founded in San Antonio, Texas by Dr. M Reza Mizani, MD, and is currently seeking health and wellness providers of all kinds to join us in our effort. For more information on becoming a LASO provider, please visit us at https://www.lasohealth.com/md-partners/ or call (210) 624-7715.