Biden Administration Wants To Make Medical Debt Less Of A Threat To Consumers’ Financial Health: ‘People Who Get Sick Feel Like The System Is Out To Get Them’

Biden administration wants to make medical debt less of a threat to  consumers' financial health: 'People who get sick feel like the system is  out to get them' - MarketWatch

Source: MarketWatch, by Andrew Keshner

Medical debt can be a serious drag on consumers’ financial health, but the Biden administration hopes it has a dose of strong medicine coming.

The administration is asking federal agencies to erase medical debt as an underwriting factor in credit programs for certain consumer and small businesses whenever possible, the White House said Monday.

For example, the rural housing loans that run through the U.S. Department of Agriculture are going to stop incorporating medical debt loads when devising borrower repayment plans, the White House said.

Meanwhile, the Department of Veteran Affairs is looking at its guidelines after taking other steps to curb medical debt reporting. The Small Business Administration is reviewing its lending programs to spot ways to pull medical debt out of the equation when it comes to accessing capital, the White House said.

“Credit scores essentially are supposed to measure how responsible you are with your money,” Vice President Kamala Harris said Monday afternoon. “Having medical debt because you were sick or injured should not lower your credit score and make it more difficult to secure the help you need to get out of debt. It’s not logical.”

Alexander Sentayhu, a 25-year-old Washington D.C. resident who served in the U.S. Coast Guard, spoke at a Monday afternoon White House press conference about his family getting hounded by debt collectors while he recovered from multiple open heart surgeries and complications. It was a “crushing weight,” he said. Through a GoFundMe page, Sentayhu was able to raise more than $100,000, but he said that shouldn’t be the solution.

The White House announcement comes weeks after Equifax EFX, -0.25%, Experian EXPN, -1.61% and TransUnion TRU, -1.02% — the three major credit reporting companies — said they would overhaul how medical debt affects people’s credit scores. The change will remove nearly 70% of medical debt from credit reports, and paid medical bills sent to a collections department will not be included in reports, effective July 1.

The moves by the credit reporting companies are “important steps,” the White House announcement said Monday. But there’s more to do because medical debts amassed from health procedures and emergencies are not a reliable indicator of a person’s creditworthiness, the administration said.

That echoes consumer advocates who hailed the credit reporting companies’ announcements as a good first start to address the side effects of medical debt.

Approximately 43 million people had amassed $88 billion in medical debt on their credit reports as of June 2021, according to a recent Consumer Financial Protection Bureau estimate, which noted that the pandemic is only going to make a bad situation worse. Some 11 million people have at least $2,000 in medical debt, while 3 million people owe more than $10,000, the White House said Monday.

Medical debt isn’t shared equally, studies suggest. Black households, adults in the 35-64 year-old demographic (who aren’t yet eligible for Medicare), people making less money and households in the South tend to shoulder larger shares of medical debt, according to researchers at the Peterson Center on Healthcare and Kaiser Family Foundation.

While the Biden administration has government agencies looking at what they can do, it’s also reviewing what others are doing beyond the Washington D.C. beltway.

The Department of Health and Human Services is asking over 2,000 healthcare providers for information including bill collection approaches, lawsuits against patients owing money and financial aid, Monday’s announcement said.

“We look forward to learning more about this new initiative from the Administration. Hospitals and health systems are committed to treating all people equitably, with dignity, respect and compassion,” said Stacey Hughes, executive vice president of the American Hospital Association.

Collections are a “last resort,” Hughes said, noting that hospitals have given nearly $745 billion in uncompensated care to patients over the past two decades. ” The reality, however, is that the health care system must be adequately financed to ensure that hospitals and health systems are able to stay open and be there for their communities in times of need,” she said.

The CFPB is also investigating whether credit reporting and debt collection that’s tied to medical debt ever violates patients’ and consumers’ legal protections.

The agency’s director, Rohit Chopra, has previously said his agency is weighing whether medical debts should be included on credit reports. “In theory, credit reports are supposed to be an accurate repository of data about whether you have met your obligations on loans you have taken out. This theory is far from reality,” he said at a press conference tied to his agency’s look at medical debt.

On Monday, Chopra said the current consequences of medical debt make too many people feel like they are getting kicked while they’re down. “One of the things that many people who get sick feel like is that the system is out to get them,” he said.

Younger Consumers Favor Income Stream Life Insurance Benefits

Forty percent of consumers under 40 prefer a monthly life insurance income benefit while about 30% favor a lump-sum payment, according to a LIMRA survey. Scott Kallenbach of LIMRA noted that life insurance is most often paid as a lump sum. But the study reveals that products offering monthly income would have strong appeal among younger and middle class consumers. Offering these products could be a way to reach these consumers more effectively. Sixty-one percent of all consumers own life insurance to replace lost income, and 44% own life insurance to supplement retirement income. When consumers were asked about a policy that could change with their needs, 70% expressed interest with one third being very or extremely interested in these flexible products.

Wellness Plans & Smokers

Sixty-six percent of consumers in wellness programs say their program does not include a medical test for nicotine use, according to HealthMine study. Also, 66% of wellness programs don’t offer financial incentives to quit smoking. More than half of smokers lie on health forms, according to CDC data. The survey also reveals the following about employees in a wellness program:

  • 57% say their program does not offer a smoking cessation program.
  • 34% say their program does offer an incentive to quit smoking.
  • 48% say that colleagues who smoke should pay a penalty or premium.
  • 32% say they have smoked within the past two years, and 11% have participated in a smoking cessation program through their wellness plan.
  • 80% say they probably wouldn’t complete a smoking cessation program without a financial incentive.

Consumers Resist Robo Advisors

Financial services firms may be banking on automated robo advisors, but consumers are not buying into the idea. In a new GfK Global survey, only 9% of consumers said they would be likely to use an investment advisory service that offered just digital (text or online chat) contact with human advisors. The 25 to 34 age group is most open to the idea (15%) while less than 5% of those 50 and above would embrace an all-digital service approach from their investment firms.

Tom Neri, managing director of GfK’s Financial Services team in North America said, “Financial service companies need to be cautious in deploying robo-advisor technology, making sure to provide their high-value customers with the service they need. A one-size-fits-all seems certain to alienate even young investors. Financial firms are betting on an increasingly automated customer service approach to help them stay lean in an unforgiving consumer marketplace. But even digitally native Millennials are only lukewarm to this vision when it comes to the difficult area of investments.”

Consumers are least open to completely automated customer service for investments and mortgages. They are slightly more willing to accept an all-digital service plan for checking and savings accounts. Not surprisingly, just 10% of those surveyed would trust a computer algorithm over a human to give financial advice. Trust in robo-advisors is highest among the 25-to-34 group (17%) and lowest among those age 65 and over (6%).

Thirty percent would pay more for access to a person for help with financial services, and 45% would not be willing to forgo live customer service in return for paying less. Consumers’ hesitation to embrace automated investment services may stem from disappointing experiences. Only 27% agree that it is easy to get the information they need from the websites of financial service firms

Exchange Consumers Are Becoming Savvy Shoppers

People who get health insurance through the public health insurance exchanges are increasingly confident about their ability to afford coverage. Also, they are just as satisfied with their coverage as are people with employer coverage, according to a Deloitte Consulting survey. Seventy percent of exchange consumers were able to manage their out-of-pocket expenses in the past year and only 25% had higher out-of-pocket costs than expected. However, lower-income people had a hard time paying for out-of-pocket costs.

Greg Scott of Deloitte said, “Health care consumers’ expectations for information and transparency are increasing, as is their interest in intuitive tools to access relevant information. Meeting these expectations should lead to increasingly more confident and satisfied customers.” Paul Lambdin of Deloitte said, “Out-of-pocket costs… are making exchange consumers pay close attention to the details of their coverage and changes in benefits and premiums.”

Knowing what costs to expect could also be increasing confidence. More exchange consumers understand the costs of their coverage than do people with employer insurance. Sixty-one percent of exchange consumers look at the total costs – not just premiums – when evaluating coverage options.

Also, more exchange customers are willing to accept network tradeoffs for lower payments than in 2015. These tradeoffs include a smaller network of hospitals (27% in 2016 as compared to 18% in 2015), a network that does not include their primary-care provider (26% in 2016 as compared to 16% in 2015), and a smaller network of doctors (26% as compared to 18% in 2015).

Sixty-six percent of exchange consumers used online tools to compare out-of-pocket costs compared to 58% of consumers with employer coverage. Scott said, “Exchange consumers continue to shop around for coverage and evaluate costs before making decisions and appear to be responding to messages about going online to look for health insurance information.”

Low Income Consumers Give Their Take on Reducing Health Care Costs

The California Healthcare foundation (CHFC) asked consumers what are the most acceptable ways to reduce harmful and wasteful medical care. They interviewed lower- to middle-income health plan members from Covered California and CalPERS and people with Medi-Cal. Participants got background information about the overuse of three common medical services — antibiotics for adult bronchitis, c-sections for first-time normal deliveries, and MRIs for common low back pain. These are their reactions:

  • 57% support oversight of physicians. This approach would change physician behavior through external approval, internal monitoring, or stricter rules about when the intervention will be covered.
  • 21% support patient cost sharing. A minority say that the patients should pay a higher copayment or pay the extra cost of care if they insist on an ineffective medical intervention.
  • 13% support physician payments to encourage appropriate and cost-effective care. A much smaller percentage support penalties or nonpayment to physicians.
  • 9% support taking no action. Fewer than one in 10 agree with leaving the decision entirely to individual doctors and patients.

Bill Aims to Protect Consumers Amid Health Care Mergers

This week, the Senate Health Committee will hear S.B. 932 (Hernandez). The bill would require state regulators to scrutinize proposed health industry consolidations to ensure that they are in the interest of consumers. The public would have opportunities to offer comment and feedback on the deals. The bill would prevent hospitals from making anti-competitive demands when negotiating with health plans and insurers. Hospitals, especially those with a large market share, would not be allowed to insist on contract provisions that result in them being the only option for care.

This bill has been introduced in the midst of a wave of pending health care mergers in California. Two of four major health insurance mergers have been finalized: Blue Shield of California acquired Care1st last year, and Centene’s proposal to acquire Health Net was approved with conditions by state regulators last month. Two other health insurance mergers are still pending, Aetna-Humana and Anthem-Cigna. Other hospital and health mergers have also taken place, including the Daughters of Charity Health System purchase by an investment firm in 2015.

Anthony Wright, executive director of Health Access California said, “Health industry mergers have led to price increases, less choice, and greater consolidation. Companies…almost always say that the merger will lead to efficiencies and savings, but they rarely…pass those [savings] to consumers, if [the savings] ever actually materialize. Companies that want to merge need to show that the merger causes no harm to consumers, and that consumers will actually benefit. Some of these health mergers are required to face public hearings and scrutiny while others fly under the radar. It’s time to set a clear standard of…oversight for all these deals that have such a profound impact on the health system.”

Changing Consumers’ Views on Limiting Patient and Doctor Choice

The public is deeply skeptical about limiting patient choice and physician autonomy regardless of the medical evidence, according to a study by the Center for Patient and Consumer Engagement published in the April issue of Health Affairs. Most people believe that clinicians should be free to depart from guidelines or evidence in individual situations.

Many equate clinical evidence with a doctor’s experience and clinical judgment rather than with clinical research. However, when people learn about medical evidence, they give more weight to it. For example, study participants were more willing to limit patient choice and physician autonomy when they learned about and discussed the threats of antibiotic resistance. Nonetheless, 25% continued to believe that physicians should have unfettered freedom to provide treatments that research shows won’t work. However, people don’t necessarily believe others should have to pay for such treatments.

Consumers Are Not Preparing for Retirement

Consumers are more confident that they will have a comfortable retirement than they were during the recession, but they have not done much to plan for retirement, according to a survey by the Employee Benefit Research Institute (EBRI) and Greenwald & Associates. The survey reveals the following about workers in 2016:

  • 21% are very confident about having enough money for a comfortable retirement compared to 22% in 2015 and 13% in 2013.
  • 42% are somewhat confident compared to 36% in 2015.
  • 19% are not confident compared to 24% in 2015.
  • 11% with a plan are not confident about their financial security in retirement compared to 38% of workers without a plan.
  • 83% without a plan have less than $10,000 in their household’s savings and investments, excluding the value of their primary home and any defined benefit plans. In contrast, 35% of workers with a retirement plan have $100,000 or more in savings and investments.

Greater Insurer Competition Leads to More Satisfied Consumers

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Health plan members are most satisfied when there is more competition among health plans, according to a J.D. Power study. The study rated satisfaction on a 1,000-point scale. The study rates satisfaction as follows:

  • Cost: 610 in competitive markets versus 606 in markets dominated by a single plan.
  • Customer service:743 in competitive markets versus markets 740 dominated by a single plan.
  • Information and communication: 646 in competitive markets versus 641 in markets dominated by a single plan.

When one carrier controls more than 50% of the market, member satisfaction is significantly lower when it comes to communication and customer service. Greg Hoeg of J.D. Power said, “Carriers are shifting toward member satisfaction as they face more legal restrictions on profitability. Having a choice of providers boosts member satisfaction in markets with less competition. “Sometimes, having fewer, simpler plan choices makes it easier for the member,” says Hoeg.

The ACA’s medical-loss ratio has forced health insurers to focus on increasing their market share to compensate for slimmer margins. Carriers are paying particular attention to cost management. One way to do that is to combine with other carriers, says Hoeg. Traditional plans are merging to reduce costs and increase market power. Examples are the merger of blue plans, national deals like Aetna/Humana, and Anthem/Cigna, and major market-driven acquisitions for UnitedHealthcare/Optum. Many have speculated that Anthem’s proposed acquisition of Cigna will harm competition and consumers by reducing the ability of other health insurers to compete with Blue plans.

Member satisfaction averages 688 in 2016, up from 679 in 2015, and 669 in 2014. Driving increased satisfaction are coverage and benefits (+12 points), information and communication (+11), and customer service (+10). Nationwide, member satisfaction has improved nine index points in 2016 at 688. This follows a 10-point improvement in 2015. Member satisfaction with health plans reached a low in 2014, following the introduction of the health insurance marketplace as part of the Affordable Care Act (ACA).

Health plans with integrated delivery systems are poised for success as health insurance focuses more on member satisfaction. An integrated system includes a hospital organization, a multi-specialty medical care delivery system, the capability of contracting for any other needed services, and a payer. Integrated plans have an average satisfaction score of 746, which is 63 points higher than that of non-integrated plans.

There has been a slight decrease in members’ monthly premiums. On average, the monthly premium for a family plan is $355 in 2016, down from $374 in 2015 while individual plan premiums are $207, down from $216.

Satisfaction is highest among health plan members in California (707), Michigan (699), Mid-Atlantic states (698); Illinois-Indiana (697), and Northwest states (692). Satisfaction is lowest among members in the Southwest (661) and Minnesota–Wisconsin (666) regions.

Last Updated 05/25/2022

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