The Kaiser Family Foundation released a new analysis recently concluding that a staggering 100 million Americans have medical debt, 41 percent of the nation’s adult population. This crushing debt burden exceeds prior estimates because it includes medical liabilities held through informal loans and credit cards that don’t appear in other analyses.
This finding shocks the conscience no matter what your political position. It is perhaps the best evidence of America’s predatory healthcare system and the need for immediate reform to help ordinary families avoid financial ruin. This debt load is especially heavy during historical inflation when real wages and living standards are declining.
Some policymakers point to the widespread financial devastation from healthcare overcharging to call for socializing healthcare in a Medicare for All system. Yet, there is a far easier solution to protect patients from medical debt while expanding access, choices and competition: healthcare price transparency.
Actual, upfront prices empower healthcare consumers, including patients, employers and unions, to avoid price gouging for the more than 90 percent of healthcare spending that’s not for emergencies. Accurate prices allow patients to choose quality, less expensive hospitals and health insurers, have recourse when overcharged, and enjoy peace of mind that their care won’t result in personal bankruptcy.
Under the opaque healthcare status quo, hospitals and health insurers blind patients to prices, then blindside them with enormous bills that they often never would have agreed to in the mail weeks and months after the care. As a result of this dynamic, care and coverage costs have skyrocketed, growing at more than twice the rate of inflation. Hospitals now charge an average of seven times their cost of care.
Average annual employer-sponsored family health insurance premiums are $22,221 per year, not including deductibles. This healthcare overcharging suppresses employee wages.
Imagine the outrage if any other business, from your neighborhood dry cleaner to your auto mechanic, engaged in such egregious billing practices. Vanderbilt University healthcare economist Larry Van Horn notes, “Not even in the darkest recesses of the market such as payday loans do we require consumers to pay prices not discernable in advance.”
There’s a reason the only industry that causes routine financial devastation is also the only one with hidden prices.
When prices are known, overcharging, upcoding, billing fraud and the debt they cause will end. Hospitals and health insurers that engage in such practices will be bypassed in favor of those that offer quality care at fair market prices. Consumers can compare their employer plans to alternatives and reject outrageous negotiated rates. The competition will reverse runaway costs and make prices affordable like it does in nearly every other economic sector.
This pro-consumer, price-transparent healthcare revolution has already begun. On January 1, 2021, a federal hospital price transparency rule took effect, requiring hospitals to post their discounted cash prices and all negotiated rates by insurance plan. On July 1, a health insurance price transparency rule takes effect requiring insurers to post their historical claims data and secretly negotiated rates so consumers can access actual, upfront prices wherever they get care.
Unfortunately, the hospital rule has been marred by widespread noncompliance. According to a recent study by PatientRightsAdvocate.org, only 14.3 percent of hospitals nationwide follow it. Hospitals are willfully breaking the law to maintain profiteering by keeping consumers in the dark. Fortunately, the Department of Health and Human Services has finally begun issuing fines on non-compliant hospitals one and a half years after the rule took effect. Robust enforcement of this rule and the insurance order can make this pro-consumer, price transparency vision a reality.
When all healthcare and coverage prices are known, patients and employers won’t tolerate paying 10 times more for the same care as the person in the bed next to them. An active, competitive healthcare marketplace will emerge based on choices and financial certainty. Patients can pro-actively avoid most cases of medical debt and take control of their health and wealth, ending this national embarrassment.