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  • Widespread medical debt is a uniquely American problem.

  • The United States has by far the greatest burden of health care bills and individuals.

  • 7.4% of US residents faced catastrophic health care bills each year.

  • That's more than double the next closest country.

  • 100 million people in this country currently have some kind of health care debt.

  • That's about 40% of adults.

  • U.S. medical debt totaled at least $195 billion in 2019.

  • Having insurance doesn't always insulate people in the U.S.

  • from debt. Over 90% of the U.S.

  • population has some kind of health insurance, but medical debt is still a persistent issue.

  • Basically, our health care system is creating debt on an industrial

  • scale.

  • The history of medical debt is basically a history of the changing answer to the following question: When the

  • patient can't pay the bill, who foots it?

  • You've got two things that have been going on.

  • One, high prices of medical care.

  • And number two, patients that have to shoulder more of the burden of paying

  • those bills that 20 or 25 years ago might have been covered mostly or entirely by their

  • health insurance plan.

  • The rise of the insurance industry may have been a catalyst for price inflation.

  • 1965.

  • That's when the inflation bomb was lit.

  • That's when it really went off because that just kick started the third party payer

  • system.

  • So how did the medical debt crisis begin in the U.S.

  • and how can we fix it?

  • Health-care costs have been climbing for the past century as the system has gotten more complicated.

  • The U.S. was spending nearly seven times as much per capita in 2020 on health care than it did in

  • 1970. Before the recent spike in inflation, health-care spending had consistently

  • outpaced overall consumer prices.

  • It used to be that health care was only 10% of our economy.

  • Now it's about 20% of our economy.

  • There are many complicated reasons for the rise in the cost of care, such as not prioritizing preventative

  • care or a lack of price transparency.

  • But one thing that kick started inflation that may seem counterintuitive was the introduction of health

  • insurance.

  • It was when you get this third party payer system where the patient doesn't have to pay all of the

  • cost of it directly, the insurer pays a chunk of it.

  • That gives you relentless upward pressure on pricing, because if you're going to get

  • paid, why not get paid some more?

  • By the late 1960s, most Americans had some form of health insurance, such as a hospital based plan,

  • a government plan like Medicare or Medicaid or insurance through their job.

  • Medicare at the time had reimbursements that were quite generous, and hospitals and

  • physicians took advantage of those.

  • They were able to charge them basically what they saw fit.

  • This insurance concept is called fee for service.

  • That means for every service that your doctor delivers to you, that doctor

  • is billing for each individual thing.

  • And that can create an incentive called provider induced demand,

  • which is basically that your doctor has an incentive to do more things to you.

  • There are many different ways that health care systems are organized around the world, whether

  • the system is more like the UK, where it's a government system or more like Germany or

  • the Netherlands. These countries all do one thing that we don't, and that is put effective

  • limits on how much a health insurance plan can require people to pay out of pocket

  • when they go to the doctor or the pharmacy or the hospital.

  • By the 1980s, there was a push, particularly by the Reagan administration and by Congress at the time, to

  • rein those costs in.

  • A 1983 law passed under Reagan changed the way Medicare reimburse doctors and

  • hospitals. This made it so hospitals received a fixed rate for care rather than getting to bill the

  • government whatever they wanted.

  • If they spent below the fixed rate, they made a profit.

  • Otherwise, they operated at a loss.

  • About 10% of hospitals closed in a period during the 1980s, in part

  • due to those declining reimbursements.

  • It was a real period of struggle.

  • Hospitals really were hard up to pay their bills.

  • Some of them turned to much more aggressive medical debt collection and became much less

  • forgiving of patients in debt.

  • They would charge patients, and instead of allowing for lenient payment

  • plans or discounted care, they instead said, Please put it on your credit card.

  • The 1990s was the culmination of this effort to rein in costs in Medicare and

  • Medicaid. And then at the same time, the growth of the HMO movement and

  • other efforts to rein in the costs of private health insurance.

  • HMOs or health maintenance organizations are a type of health-care plan that requires patients to see only

  • specific doctors if they want their insurance to pay for it.

  • There's no out-of-network coverage, and they must get approval to see specialists.

  • The network is much smaller and you have no benefits.

  • If you go out of network, you have full benefits.

  • If you stay in network and follow the rules, if you will.

  • By that nature, the HMO is able to negotiate better prices because they would channel

  • patients towards the contracted providers.

  • And so other providers are worried about losing patients, so they contracted to and accepted those

  • prices.

  • Hmos grew rapidly in the 1970s and '80s until there was a backlash in the 1990s.

  • Beginning in the mid '90s.

  • A lot of people have been put into an HMO by their employer, like it or not,

  • and we're going to have to change providers.

  • They got really upset and then the media grabbed it and started.

  • Running an alternative health coverage model called PPOs or preferred provider organizations

  • began to take the place of HMOs.

  • PPO plans provide partial coverage to go to out-of-network doctors, and also usually don't require

  • patients to get approval to see specialists.

  • That shift took place and prices were starting to rise again because of it.

  • There was less control over it because it was a wider network.

  • The insurance industry turned back to something they had started to do already back in the

  • '70s and early '80s, which was increasing cost sharing to get people to

  • change their behavior.

  • That was initially the primary motive for the cost sharing is to make you think twice about something.

  • While health care costs continued to rise, patients were being asked to take on more responsibility

  • for a larger portion of the bill at the point of care.

  • In the early 2000s, federal legislation paved the way for a major restructuring of how

  • insurance plans shared costs.

  • Now I'm honored and pleased to sign this historic piece of

  • legislation.

  • The 2003 Medicare Modernization Act further increased the

  • pressure on patients and on hospitals by helping in the proliferation of high

  • deductible health insurance plans.

  • A deductible is the amount of policyholder has to pay upfront before their health insurance plan kicks in.

  • The George W. Bush administration said that patients would be better consumers, more

  • discerning consumers of health care if they had some skin in the game, if they had to pay more

  • upfront at the point of care.

  • The theorytouted by many who knew betterwas going to get skin in the game.

  • Now, since you're going to have to pay a lot of this money out of your pocket and there's going to be this

  • big gap in coverage, you're going to pay attention.

  • You're going to be an informed consumer.

  • If you're well-educated, and it's a kind of a routine thing.

  • Yes, you can do your research.

  • You're having watching chest pain or you've been in a crash or you just don't

  • know. And the doctor says you need this type of pain treatment.

  • You know, what are you going to do?

  • Say, I want to look that up and do my own research?

  • No.

  • The average deductible for an individual in 2022 is around

  • $760, which is double what it was in 2006 when adjusted for

  • inflation.

  • This dramatic rise in high-deductible health insurance predated the Affordable Care Act,

  • but the Affordable Care Act didn't do anything to really arrest that change.

  • More and more of us are ending up in these health insurance plans that

  • require us to pay thousands of dollars out of pocket before our coverage kicks in.

  • Roughly 70% of lower income adults said they wouldn't be able to afford a $500

  • unexpected medical bill.

  • Nearly a quarter of those in households with an income of at least $90,000 also said

  • they wouldn't be able to immediately afford it.

  • It doesn't really take a Nobel Prize in economics to realize that if most people can't afford a

  • $500 bill and the average deductible on a health plan that someone gets at

  • work is north of $1,500 now, that's going to create a problem because you can't

  • walk into an emergency room or a hospital in this country and get out

  • usually for less than a few thousand dollars.

  • We are done. There's no question that

  • as bad as the medical debt situation in the United States is now, it would be worse

  • if not for the Affordable Care Act.

  • One of the important things that the Affordable Care Act did was it provided federal funding

  • to states to expand Medicaid to working-age adults who are

  • not historically covered by this program.

  • But as a result of legal challenges to the Affordable Care Act, the decision

  • of whether to expand eligibility was left up to states, and most states have done it.

  • But 11 states still have not expanded eligibility.

  • And if you look at where medical debt is concentrated in this country, it is concentrated

  • in the South, which is where Medicaid expansion is least common.

  • So the effect of the ACA on medical debt was largely through the expansion of Medicaid.

  • But at the same time, that law did allow for patients to purchase high deductible

  • health insurance plans on the marketplace, so it didn't stem the tide of that problem with

  • insurance itself.

  • There's no question that providing health insurance is a critical

  • protection against medical debt.

  • The issue just is whether or not it's adequate.

  • People may also incur debt if they're hit with a surprise bill, meaning they thought their insurance

  • company would cover a specific medical expense, but it didn't.

  • A federal law called the No Surprises Act went into effect January 2022, hoping to

  • address that problem.

  • Now, people who inadvertently go to an out-of-network provider,

  • for example, by going to an in-network hospital but being seen by an out-of-network doctor,

  • that patient is held harmless and then it's up to the insurance company and the doctor to kind of work out

  • how much gets paid to them.

  • I think it's a little early to know whether the No Surprises Act is working as intended.

  • It doesn't eliminate the problem entirely.

  • It creates a system that is designed to protect patients and force a system of