Friday, February 26, 2016

Uninsured rates are down, but hospitals struggle to collect big deductibles from newly insured

Federal health reform has decreased the number of uninsured Americans and charity cases at hospitals, it has also led to an increase in the number of high deductibles they can't collect, a particular problem in rural areas where hospitals are already struggling financially, John Lauerman reports for Bloomberg Business.

The nation's uninsured rate has dropped from 15.7 percent in 2009 to 9.1 percent today. That would be good news if a Centers for Disease Control and Prevention survey hadn't revealed "that in the first nine months of 2015, about 36 percent of the U.S. insured were covered by high-deductible or consumer-directed health plans that can require considerable out-of-pocket payments, compared with about 25 percent in 2010," Lauerman writes. As a result, companies like Community Health Systems Inc., which "operates 195 hospitals in 29 states and is the U.S.’s second-biggest for-profit U.S. hospital chain." earlier this month "revised its fourth-quarter 2015 provision for bad debt up by $169 million—and said that 40 percent, or about $68 million of that amount, was from patients being unable to pay deductibles and co-payments."

"Patients are unlikely to pay medical bills that are greater than 5 percent of household income, according to the Advisory Board, a consulting firm to hospitals," Lauerman writes. "Median household income in the U.S. is at about $53,000, suggesting that when out-of-pocket charges exceed $2,600 hospitals can forget about collecting," said Washington-based analyst Spencer Perlman.

"Rural hospitals have been hit particularly hard," he writes. "Minnesota has long had high rates of care coverage, and many employers have switched to high deductible offerings, according to Joe Schindler, vice president of finance for the Minnesota Hospital Association. Last year, bad debt rose by 20 percent to $425 million at the association’s 140 member hospitals." Schindler told Lauerman, “We have 39 hospitals that have negative margins and the majority of them are rural. They have less of a financial cushion to absorb the losses of bad debt.” (Read more)

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