Medical Bankruptcy – A Possible Solution

We are years away from a viable national healthcare system, pushed even father behind by the Trump administration’s constant erosion of the 2010 Affordable Care Act (the ACA aka Obamacare). Despite the fact that almost every effort Trump has made to grant exemptions to states from the ACA, gnawing away at the law’s clear mandate, has been reversed by the courts, there is no question that he has stalled the intended impact of greater access to healthcare and made the underlying costs skyrocket through his actions.

The late and great John McCain turned his GOP Senate vote against repeal of the ACA, putting nail in Trump’s plan to eliminate federally-supported healthcare for everyone. Clearly, Trump never intended to fulfill his campaign pledge to create a better and less expensive new healthcare plan to be made available to any Americans without coverage, free of an ability for carriers to reject preexisting conditions or impose a lifetime benefits cap. Everything he has attempted to do as her assaults the ACA has been to reduce coverage, create cheap (“skinny”) “plans” that do not cover preexisting conditions with major co-pays and staggering deductibles, while redefining the class of required coverage making insurance premiums skyrocket for those who need coverage the most. That Trump’s action has hurt his base more than almost anything segment seems to fall on their deaf ears.

While there is no legal and separate form of “medical” bankruptcy, in most of the developed world, bankruptcies due to unpaid medical bills are exceptionally rate, and most developed-world medically-related bankruptcies occur by reason of lost earning ability… not unpaid medical costs. Nevertheless, in the United States, unpaid medical bills are the number one cause of individual bankruptcy, even after the ACA was passed. Over 20 million Americans gained healthcare coverage under the ACA, but as that coverage gets more expensive due to Trump administration manipulation, we can expect those numbers of insureds to fall somewhat.

So if we know that Congress under Trump is years away from anything approaching national healthcare for all, or even expanding the ACA to cover more people while reducing costs in segments where they are completely out of control (like prescription drugs), what other paths might we consider? Maybe Congress can entertain a less-impactful approach, a crack in the door if you will. After all, in a gig economy, too many people work without access to any company benefits.

Perhaps by reforming our bankruptcy code, we can encourage medical vendors (hospitals, doctors, surgical facilities, pharmaceutical manufacturers, etc.) to act in a far more reasonable manner when it comes to healthcare costs. To settle their egregious “full freight” claims against uninsured patients. After all, when an individual without insurance is hospitalized and undergoes surgical procedures, they are usually charged at the highest, undiscounted rates at the relevant facility. Not remotely at the pre-negotiated and vastly discounted rates they have with the largest insurance carriers.

So let’s see what bankruptcy provisions might be modified to pave the way for an overall better healthcare system. First, the seven-year waiting period between bankruptcies might be reduced to five years where the majority of the debt sought to be discharged is for the unpaid medical costs.

Second, medical vendors should not be entitled to assert their delinquency claims based on the sums stated on the medical invoices. Rather, they should be required to reduce their claims to reflect the rates they charge their most favored insurance carriers for those billed services and prescription drugs. That would apply to pharmaceutical manufacturers and should embrace pharmaceutical rates charged in any comparable economy (notably Canada, Europe, Australia, New Zealand, Japan and Russia).

Third, the burden of proof of those rates should rest with the vendors seeking unpaid medical bills, and to the extent they supply false information, their underlying debt should be wiped out without further recourse (and they should be required to reimburse the cost of the petitioner’s finding the correct information).

Fourth, any hospital refusing to administer necessary care to anyone seeking emergency medical assistance should be held far more legally responsible for any resulting consequences (not just civil malpractice claims but adding rights to seek punitive damages), well beyond the massive fines and civil penalties that can be assessed for hospitals that violate this legal mandate. Generally, there are state and federal laws that prevent hospitals from turning away emergency room patients in need of immediate treatment. For example, as FindLaw.com tells us:

“At the federal level, we have the Emergency Medical Treatment and Active Labor Act, popularly known by its acronym, ‘EMTALA.’ EMTALA imposes the obligation to provide for examination and treatment for emergency medical conditions and women in labor. The first requirement is that of ‘medical screening.’ The law requires that, in the case of a hospital that has an emergency room department, if any individual presents themselves [sic] to the emergency department and a request is made on the individual's behalf for examination or treatment for a medical condition, the hospital must provide for an appropriate medical screening examination within the capability of the hospital's emergency department, including ancillary services routinely available to the emergency department, to determine whether or not an emergency medical condition exists. The obligation to examine and/or treat does not depend on whether the patient is eligible for Medicare or Medicaid benefits.”

But that doesn’t mean that the person treated gets away without be charged by that hospital if they are not otherwise covered by a government program (e.g., Medicare, Medicaid, etc.) or their own insurance. And sometimes those debts can get transferred to a close relative as well (parents, spouse, etc.).

In the end, we need slowly to envelop the healthcare industry with limits on what they can force people to pay, add increasing pressures to reduce the cost of prescription drugs (not remotely addressed in the ACA in order to win the support of the big pharmas when the law was passed) and target unnecessary expenses and unjustified rates wherever we can. Since individuals lack the bargaining power to reduce medical costs, we need to give them the same leverage that allows big insurance carriers to force price reductions from healthcare vendors. Doing nothing is no longer an option.

I’m Peter Dekom, and besides totally unnecessary tax cuts for the richest Americans, it is time to address the hard economic needs of the rest of us.