Health care change hits wallets
Bad debt is rising at Colorado Springs hospitals, and officials suspect patients who have newer, cheaper health insurance plans with higher out-of-pocket expenses aren’t able to pay their hospital bills.
“Bad debt hasn’t been out of the ordinary until this year, when along came high-deductible health plans,” said John Suits, associate administrator of business development and government affairs for Memorial Health System.
City-owned Memorial officials expect to have uncollected billings of $56.5 million this year, with $64.6 million forecast for 2007 — nearly double the $33 million the hospital had in 2004.
Memorial has formed a task force to address the bad debt situation, Suits said.
Hospitals typically shave bad debt off profits or shift costs to paying patients and their insurance companies, said Rick O’Connell, chief executive officer of Penrose-St. Francis Health Services, which is also seeing its bad debt rise.
O’Connell said high-deductible plans could be a contributing factor, although he questions whether usage is widespread enough to draw that conclusion.
High-deductible health plans were introduced Jan. 1, 2004, as part of President Bush’s consumer-driven health care initiative. Designed as a tax incentive to make health care affordable for the uninsured, such plans also give consumers more responsibility in buying health care services.
The plans often include a tax-deferred health savings account.
“It’s a little early in the process to know exactly how this will play out, but there’s no question when you go to higher deductible plans, you see an increase not only in bad debt but also the need for charity assistance,” said Peter Freytag, chief operating officer of the Colorado Health and Hospital Association, an industry advocacy group. “It’s a problem that requires a solution.”
Because high-deductible plans are new, hospitals have not tracked how much bad debt comes from people who cannot pay their deductibles. Certainly not all bad debt — money billed to patients who do not qualify for government assistance and who do not pay within 120 days — can be attributed to high-deductible health plans, Suits said. But he doesn’t think the escalating number of unpaid bills is a coincidence.
“We’re starting to think there isn’t enough money in health savings accounts to cover patients’ costs, but increasing costs of health care in general are contributing, too,” he said. “It’s truly becoming a financial burden on the hospital. Will we get to the point of asking at registration, ‘We see you have a $2,000 deductible — how are you going to pay for that?’”
Employers, particularly those with fewer than 50 employees, find high-deductible plans attractive because they can significantly lower premiums, said George W. Martin III, president of Benefit Resources.
Colorado has been leading the nation in enrollment among several insurance carriers, including UnitedHealthcare. The Colorado Division of Insurance estimates about 25,000 people who work for small businesses statewide enrolled in high-deductible plans last year. The division doesn’t know how large employers are using high-deductible plans.
Nationwide, about 4 percent of all covered workers, or 2.7 million people, are enrolled in such plans, according to the Kaiser Family Foundation, a nonprofit foundation.
“We’re seeing a strong local response to (the savings accounts) because they change people’s thought processes and behaviors as they realize health care is a matter of spending your own money,” Martin said.
Martin takes issue with hospital officials pointing the finger at high-deductible plans. He says an increasing number of employers are increasing deductibles even for traditional plans to lower their costs. The problem with high-deductible plans, Martin said, is that some employers do not put money saved from lower premiums into employees’ health savings accounts.
On average nationwide, employers contribute $950 for individuals and around $1,500 for families to the accounts yearly, he said. Employees are responsible for the rest of the deductible.
Meanwhile, hospital charges keep going up. Memorial plans to raise its charges across the board by 6 percent in 2007, according to Steve Goldstone, chairman of the hospital’s budget and finance committee. The hospital increased its prices 6 percent this year. Penrose-St. Francis increased its charges by 5 percent this year, O’Connell said. Next year’s budget hasn’t been finalized, he said.
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HIGH-DEDUCTIBLE HEALTH PLANS
- Function like traditional health insurance plans with employees paying a portion of a monthly premium, which is 20 percent to 55 percent lower than traditional health plan premiums.
- Do not have co-payments. Instead, charges from doctor’s visits, prescriptions, lab work, outpatient procedures and hospital stays are applied to the deductible. Deductibles average $2,000 for individuals and $4,000 for families and can be as much as $10,000.
- Pay a percentage of charges after the deductible is met, covering as much as 100 percent of health care costs.
- Often cover preventive care at 100 percent.
- Often include a health savings account, in which employers and employees contribute tax-free dollars to apply toward the deductible.
- Can accumulate up to $2,700 in individual savings accounts and $5,450 for family accounts for 2006. Money in the accounts sometimes can be saved for the next year.
