Financed Medical Care: Only Fair
U.S. hospitals are justified in selling patients’ unpaid bills to banks, credit-card companies, and other financial concerns, which collect the money from the patients and charge interest. Pro or con?
Pro: Services Require Payment
Doctors and nurses get paid salaries. Drugs cost money. Surgical instruments cost money. Bedding, sterilization equipment, and towels cost money. So do property insurance, heating, and water. Hospitals and other medical facilities need an inflow of revenue every month to pay for such things. To afford these expenses, they need to collect money from patients.
It’s that simple.
Yes, finding a way to get coverage for uninsured Americans — and more-comprehensive plans for the underinsured — sounds more humane than handing over outstanding hospital bills to interest-charging third parties. But until a grand solution is realized, hospitals have no choice but to make deals with outside health-care financing entities.
Consumers who defer payments for hospital bills are in essence forcing the hospital to give them a loan, according to Yaron Brook, president of the Ayn Rand Institute in Irvine, Calif.
“There’s no reason a hospital should be funding its patients for anything other than what the hospital’s policy calls for,” says Brook. “If people default, the hospitals shouldn’t have to worry about collecting it. That’s not a hospital’s area of expertise, and is that really something it should expend its resources on? As long as nobody’s breaking patients’ legs for not paying, third-party collectors are fine.”
Con: It’s Just Too Much
Most people default on hospital bills not because they’re dishonest, but because they lack the resources to pay for a service they need. In the U.S., 63 million people have either no insurance at all or some coverage that leaves them responsible for a significant part of the medical costs.
So the solution is to sic over-glorified collections agencies on them? Charge them double-digit interest rates that rise in accordance with how long they take to pay their bills? Wrong.
“Hospitals often know when somebody has poor insurance and that it won’t cover everything, so they know they’ll have to wait for the full payment,” says Katherine Swartz, a professor at Harvard’s School of Public Health. “Third-party collectors don’t know that, so they hound people. It’s better for the hospital to work out payment agreements with patients.”
Furthermore, patients and any accompanying family members generally arrive at emergency rooms harried and consumed with worry. They have little time to consider a hastily completed document that obligates them to comply with payment terms they’d need a lawyer to understand.
Indeed, some consumers have complained they thought they were signing up for an insurance plan that would require them to pay only a modest co-payment. Instead, they get a credit plan with interest rates that in some cases rise as high as 27% if payments are late. Not that such payment plans are totally without effect: They’ll certainly do a great job of perpetuating the circle of poverty.