New York City, June 4, 2003—According to a new report from The Commonwealth Fund, some patients face unmanageable medical bills that can result in long-term debt because of unclear federal laws and regulations. These rules may encourage health care providers to bill the uninsured more than those with insurance for the same service.
Federal fraud and abuse laws and Medicare rules designed to prevent overbilling may have the unintended effect of discouraging health care providers from offering reduced-cost or free care to patients. In part because of these rules, many hospitals have not established procedures for identifying and offering discounts to patients who lack the means to pay large medical bills.
"Medical debt can undermine the financial stability of low- and middle-income individuals unlucky enough to get sick, forcing them and their families to change their way of life," said Karen Davis, president of The Commonwealth Fund. "Saddling people with large medical bills they can't afford to pay doesn't benefit providers or patients."
In Unintended Consequences: How Federal Regulations and Hospital Policies Can Leave Patients in Debt, lead author Carol Pryor and colleagues with Brandeis University's Access Project recommend several policy options to alleviate burdensome and unmanageable medical bill problems. They say that the federal Centers for Medicare and Medicaid Services (CMS) could clarify its rules to address providers' concerns, for example, and that hospitals could establish standard criteria and simplify applications for free or reduced-cost care.
Federal Regulations Place Burden on Providers
While intended to prevent overbilling and the provision of unnecessary care, Medicare regulations and CMS fraud and abuse laws often end up discouraging hospitals from reducing fees for some of their patients. Routinely waiving fees for Medicare patients, for example, is prohibited because it may violate anti-kickback statutes. While exceptions are allowed, these must be decided on a case-by-case basis, leaving providers unclear about when the prohibition applies and when it does not. One exception allows providers to waive fees based on a patient's indigence, but it is up to the provider to verify the patient's financial status.
Federal law prohibits providers from billing Medicare beneficiaries at a different rate from other patients, which providers view as a requirement to set the same rates for all patients. However, these rates are really only "list" prices. Insurers impose or negotiate discounts, leaving the uninsured as the only ones expected to pay the charges in full.
Medicare regulations also require providers to make "reasonable" collection efforts before they can receive reimbursement for uncollected Medicare patient fees, and the efforts to collect from Medicare beneficiaries must be the same as efforts to collect from non-Medicare patients. Hospitals may be uncertain about whether these regulations apply to collection efforts for uninsured patients, even though they might not in fact be penalized for relaxing efforts for the uninsured.
"While Medicare regulations permit hospitals to be more responsive to the needs of uninsured patients, they have never been interpreted or administered to encourage hospitals to behave more responsibly," said Bruce Vladeck, professor of health policy and geriatrics at Mount Sinai School of Medicine and former head of the Health Care Financing Administration (now CMS).
Hospital Policies Fall Short
The report's authors found that hospitals often do not have procedures in place for negotiating discounts for uninsured patients who are not eligible for free care but lack the resources to pay full charges. Furthermore, a number of financial factors--tight operating margins, the need to maintain high bond ratings to fund capital expenses, and the need to establish a basis for negotiating discounts with insurers--may lead hospitals to charge high fees and aggressively pursue uninsured patients with unpaid bills.
"Medical debt is surprisingly widespread and has devastating consequences for patients and their families," said Pryor. "Clarifying government rules would enable providers to be more accommodating to their patients' financial circumstances."
Policy Recommendations
- The federal government should establish clearer guidelines on how laws and regulations on billing and debt collection should be applied to the uninsured and underinsured.
- States or hospitals should establish clear, standard criteria for eligibility for free or discounted care, and simplify application procedures.
- States should require hospitals to publish and disseminate policies on free and reduced-cost care.
- Hospitals should offer low-income, uninsured people the same discounts they offer to insurers, instead of expecting the uninsured to pay higher prices than the insured.
- Hospitals should be discouraged from aggressive bill collection practices towards patients with limited financial means.
