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January 25, 2007

Gotta Give Them Credit

It certainly is a new day in Washington when the wonderful Elizabeth Warren is being called to testify before the Senate Banking Committee. On that note, I've been remiss in not linking to this startling study (pdf) by Demos connecting credit debt to medical care. According to their findings, about 30% of middle- and low-income households with debt say medical costs have been a contributor. Of that group, 40 percent had more than $10,000 in debt, and those without health insurance carried a crushing $14,512 load. Indeed, the households with medically-related debt had more debt than those in hock for other expenses -- $11,623 to $7,964.

Nowadays, hospitals and health care providers often accept credit cards, which means the uninsured and underinsured are not only paying worse absolute prices (good insurance bargains down the total prices of each unit of care), they're also paying interest on those bad deals. Just another way in which it's really quite expensive to be poor. What I'm really excited for, though, is when HSAs and their mega-deductibles enter wide use and individuals who haven't socked away sufficient money begin putting their care on the plastic. Even now, about half of all HSA users haven't put a penny into their accounts. So the next step isn't only to transfer more risk onto these individuals, it's to help plunge them deep into debt.

January 25, 2007 in Insurance | Permalink

Comments

This is the true 'road to serfdom': a world in which everyone is deep in hock due to medical bills, and unable to file for bankruptcy, so control of their finances is ultimately taken over by someone else, who makes all of their decisions for them.

Posted by: aphrael | Jan 25, 2007 3:02:02 PM

Medical costs can include loss caused by incapacity. Starting off my second marriage I ran into financial trouble caused by sudden drastic loss of income while saddled with childcare payments due my first wife. It took well over a year to sort things out after repossessions, etc. There wasn't anything I could have done to cope. That was over twenty years ago and I won't forget the experience.
Keeping people in that condition sounds like a recipe for violence, drug abuse, crime and more. It can't be in the interests of the state to promote such policy.

Posted by: opit | Jan 25, 2007 3:16:39 PM

Not only do insurers bargain down prices, but individual prices get marked up because the collection rate on individuals is so bad. Health care providers end up wasting resources on collections, and those without insurance who can pay or do have credit end up subsidizing those costs while those who can't pay get their credit ratings ruined. It seems like a vicious circle, where non-payers drive up prices, creating more non-payers.

Posted by: Royko | Jan 25, 2007 3:36:13 PM

It's worth reminding ourselves that the reason people put medical costs on their credit cards (in advance of treatment) is that providers will no longer give treatment to those who don't have insurance unless they pay up front, including co-pays for those who are insured.

The GOP's new feature of the revised bankruptcy law that doesn't recognize medical debt as a reason for excusal of debt in bankruptcy is completely pernicious. The debtor becomes a slave to the credit card company (which is even worse than being in hock to 'the company store' in days of old.)

[note pernicious origins: [Origin: 1515–25; < L perniciōsus ruinous, equiv. to pernici(és) ruin (per- per- + -nici-, comb. form of nex death, murder (s. nec-) + -iés n. suffix) + -ōsus -ous]


Posted by: JimPortlandOR | Jan 25, 2007 4:17:42 PM

Ezra, looks like www.ezraklein.com is down or got snagged by a cybersquatter.

Posted by: No Longer a Urinated State of America | Jan 25, 2007 4:21:01 PM

HSAs really do highlight the very real left-right divide. To a lefty like me, there's a basic problem with them, which Ezra points to:

The poorer you are, the more likely you are to end up either not managing to save into the HSA, or raiding it to cover some other emergency, meaning that when a medical emergency turns up... you're screwed.

To the right, this is not a bug, but a feature. They firmly believe that punishing people in this way is not only acceptable, but the right thing to do. Hence, they see no need for schemes to avoid this happening.

Posted by: Meh | Jan 25, 2007 5:45:10 PM

worst absolute prices? that's an understatement. try no less than double what the insured pay, and often times 3-4 times what the insured pay, for any particular test or procedure. see here, here, here, here

The first link I provided has a GA court saying that hospitals can bilk the crap out of the most vulnerable if they so desire. Gotta love capitalism.

Posted by: CE Petro | Jan 25, 2007 8:10:10 PM

$100,000/year to undergo treatment for kidney stones without health insurance. I will never forget getting sucked dry by every little wolf in the medical industrial complex. I walked into a hospital having just shit my guts out to prepare for a lithotripsy and suffering from the pain that only those who have had a kidney stone (or been shot) can know, and before I went to surgery they demanded a check for $10,000 or they would show me the door. The collection agents were like fucking vampires; they really seemed to have absolutely no compunction about what they did. And going to the county hospital uninsured got me butchered by a catheter and permanently injured. The symptoms are stable enought to enable me to work in a government job and maintain health insurance, but some days just barely, and every day of my life is and always will be full of physical suffering.

Posted by: R/W | Jan 25, 2007 10:04:20 PM

I hasten to add that I was lucky enough that I could pay it and that the downward spiral eventually bottomed out. A first hand view of the nightmare of the american health care system though. I really did think it would completely consume me, financially, physically, and spiritually. I am not at all the same person.

Posted by: R/W | Jan 25, 2007 10:41:22 PM

Here's a good one for you, Ezra (and it is on-topic)

My daughter, a Type I diabetic, is a freshman at Swarthmore. She over-exercised before Christmas and seeing the boyfriend, went low the next morning, fell out of bed, roommate freaked, called campus security, they freaked, called the ambulance, she went to emergency room (for about 6 hours before being released at our behest). We get the bill: $12847 (the hospital ran all kinds of unnecessary tests (including a cat scan!); all it was a hypoglycemic low, to the pass-out, but not seizure, point).

Yesterday, we get the EOB from Blue Cross. Covered charges (the hospital, thank God, was in-network): $3083.28. That's 24% of the amount billed.

Now, if I was uninsured, and therefore, of course, "out-of-network", guess what we would owe? And then, can you imagine putting that on your 22% interest Mastercard?

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Posted by: JUDY | Sep 26, 2007 4:20:10 AM

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