As hospitals try to figure out whether and when they should sell delinquent accounts, the competition among debt buyers, as well as the amount of medical debt, is increasing, according to the October edition of Collections and Credit Risk Magazine. Every year, the U.S.’s 6,000 hospitals generate roughly $129 billion in bad debt, and $42.6 billion of that debt is placed or sold every year, according to Kaulkin Ginsberg, a Bethesda, Md.-based research firm. Part of the reason hospitals consider selling medical debt is due to the increasing number of patients, both insured and uninsured, who are responsible for a greater portion of their bills. So-called self-pay accounts have lower collection rates than third-party payers, such as the government or insurance companies. As hospitals struggle to collect this money, experts predict that medical debt-selling will become more attractive.
While the past summer experienced a heavy volume of medical debt deals, it’s largely an unformed market, especially with regard to pricing. Medical debt tends to vary more in price than other debt because hospital portfolios vary depending on demographics and other factors. In addition, hospitals do not write off their uncollected accounts for 180 days, at which point the accounts are sent to at least one agency. Experts believe that the next few years will prove crucial for establishing rules for the market and should help solve some of the debates over whether medical debt sales will mean less work for third-party contingency agencies.
What this says is that roughly one-third (1/3) of all medical debt is passed off as "delinquent." What is not stated is that individuals are charged more than insured parties, partly because insurance companies negotiate better rates to save money and partly because private individuals have a greater risk for default. Another problem for consumers is that charging rates for medical services are not public knowledge. It would be very difficult for a consumer to bargain for the lower insurance rates, even if they knew what they were, as insurance companies often bargain for rates that are exclusive to them.
I have previously written about how collections by medical providers may be detrimental to the health of their patients. It is well known that increased stress levels (like receiving a terse phone call from a collection agent) will reduce the body's defenses. Increased stress levels can also lead to attention deficits which can then lead to an increased risk of accidents and injuries.
The best thing to do is take the burden of payment off of the patients and medical professionals. A centralized payment system for recognized medical treatments would take the burden of collection off of medical providers, and take some of the stress and burden that comes from seeking out medical treatment.