The Revolving Door of American Medical Bankruptcy

“Too many Americans have been shocked by surprise medical bills 

and forced to pay up through credit report coercion.” 

Rohit Chopra, director of the federal Consumer Financial Protection Bureau (CFPB)

As the only major developed country that does not have universal healthcare for its residents, the United States continues to have the most expensive healthcare system on earth. Over 19% of our GDP is spent on healthcare, almost double the percentage of the next most expensive system. We still pay more than double per capita on health coverage and prescription drugs than the average cost in the rest of the developed world. While the Affordable Care Act (aka Obamacare or the ACA) addressed healthcare for millions of Americans, there are millions still left behind with no coverage. Even those with health insurance often find that co-pays, exclusions and deductibles are well beyond their capacity to pay.

The ACA Medicaid expansion provision offered to the states, helping low-income Americans, was uniformly accepted by blue states and rejected by virtually all red states. In 2010, in order to pass Congress, the nascent ACA was modified to cater to the special interests (read: major contributors to political campaigns on both sides of the aisle) by guaranteeing that private insurers would not face new government competition and that the new ACA healthcare exchanges would not use their massive bargaining power to negotiate lower prescription drug rates from the big pharmaceutical companies. Congress and the courts have further limited the ACA, eliminating a major source of financial support by killing the healthcare mandate.

In California, a frustrated legislature and governor have begun exploring what the ACA could not do nationally: a single payor universal healthcare system for the entire state. Red states have drawn a dark red line against exploring this alternative. While this legislation is a long way from reaching a vote, pressure is mounting. But what is equally clear, too many Americans simply cannot afford healthcare in any format, even when covered by insurance. True that many services were provided by the government for COVID prevention, but it crystal clear that our private healthcare system was not remotely able to handle this catastrophe.

For those struggling to deal with medical costs, they are faced with a double whammy: heartless collection agencies, armed with threats and legal remedies that are life destroying and outrageous costs. Including: Unscrupulous practices, like hospitals billing even insured patients extra for “out of plan” specialists called in emergencies that were not even requested by those patients, often massive add-ons. The federal No Surprises Act bans this billing practice, but that law did not come into effect until January 1st.

Los Angeles Times columnist, David Lazarus, presents the nasty details in his January 18th contribution: “A 2019 study found that medical bills were a primary factor in about two-thirds of U.S. personal bankruptcy filings. More than half a million U.S. families go bankrupt annually because they can’t afford healthcare… 

“But the new [No Surprises] law won’t help people already feeling the squeeze from unpaid medical bills… The Consumer Financial Protection Bureau warned debt collectors and credit agencies last week that they need to step more carefully when it comes to trashing people’s credit scores because of stratospheric medical bills.”

Routine minor medical procedures – like getting stitches – join more complex procedures administered in hospitals where huge mark-ups jack hospital costs through the stratosphere – many in the 575%-675% multiple range automatically added by standard hospital billing software – to help defray other unreimbursed hospital costs and to insure profitability. See also, my January 9th Americans - The Biggest Healthcare Suckers on Earth blog. The excuse, as Lazarus discovered, is that “nearly all medical facilities, charges patients not just for treatment but also for the cost of maintaining healthcare resources and treating anyone who seeks emergency care.” 

In short, those who pay big hospital bills subsidize those who don’t or against whom big insurance carriers have successfully negotiated vastly lower rates. Simply put, “it’s completely intolerable for residents of the richest, most powerful country in the world to have to choose between a livelihood (or paying the rent, or putting food on the table) and receiving healthcare,” says Lazarus. Enter heavy handed debt collectors, ready to put the squeeze on ordinary Americans trying to stay healthy and alive faced with a medical system that top-to-bottom places the needs of medical facilities, carriers, pharams and doctors well above the welfare of their patients.

While Lazarus notes that “most hospitals [say they] will work with patients facing financial difficulties. [But if] such contingencies were sufficient, though, there’d be no need for debt collectors or other strong-arm tactics. The fact that medical bills drive so many people into bankruptcy shows that whatever financial assistance hospitals offer, it isn’t doing the trick… According to the CFPB, 17% of U.S. adults ‘had major, unexpected medical expenses’ in 2020, with the median bill running as much as $2,000. Nearly a quarter of Americans ‘went without medical care due to an inability to pay,’ the agency said.”

In a world where the rich are loath to pay more taxes, where wealth per se is almost never taxed (just revenue) with a “line in the sand” political party protecting the rich from paying their fair share, we are still willing to render the health of so many Americans as expendable to preserve the luxurious lifestyle of the billionaire one percenters who own the majority of asset value in the nation. And there is no national outrage pushing to fix this anomaly.

I’m Peter Dekom, and when I look at the German universal healthcare system – one where insurance companies act as administrators for coverage that includes vision care, dental and hearing care – I see what a nation governed by special interests and not the people looks like: the United States of America