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Elsie was covered by an employer-sponsored health plan with a $1,000 deductible per person. Then she had a baby. At birth, her son acquired additional $1,000 deductible. That meant, both Elsie and her son were liable for additional cost-sharing expenses up to an annual Out-of-Pocket (OOP) limit, Those cost-sharing charges could vary depending on the type of service. For example, an emergency room visit could be as much as $150, not to mention the add-on costs of the doctors who treated her and her son, but also the medicines and supplies needed for treatment.

Things got worse for Elsie (and her son). Within a year after giving birth, Elsie needed surgery and her son needed hospitalization twice before he turned three. The cost-sharing bills totaled $20,000 for mother and son.

Then there are what are known as surprise charges.

Elsie’s husband Richard had separate insurance through his employer whose insurance didn’t cover outpatient charges. So even though Richard’s OOP maximum was $3,000, when Richard got injured in a car accident (not on the job), he had to pay $45 for every three-times-a-week physical therapy treatment, adding up to almost $500 a month or $6,000 per year. Surprise charges.

The sky had fallen on Elsie and Richard who now were in a position of trying to cope with huge medical bills, as it has also fallen on millions of other Americans. Of course, Elsie and Richard were unable to pay their bills and they were turned over to collections. (Elsie and Richard are examples, but both are actual cases, even though they are not husband and wife.)

Surprise charges also come from out-of-network (OON) providers. Those can be any contract employee of a hospital who is not a member of the insurer’s provider network. For example, someone goes to the emergency room with a laceration that needs stitches. The emergency room doctor works as a contractor for the hospital, and the hospital doesn’t pay him. The patient does. If that doctor is OON, the doctor will send a bill to the patient because the insurance company won’t pay that OON doctor. Patients often don’t even know that the doctor repairing the wound doesn’t have a deal with the insurance company, and of course, never think to ask. After all, that doctor is working at the hospital.

Another surprise charge, it may not even a doctor but some other service. Kaiser Family Foundation gives the example of George. After surgery, he was too frail to go home, so his doctor recommended an inpatient rehabilitation unit of the hospital. Trouble was, though physically attached to the hospital, that unit wasn’t part of the hospital but was independently owned and operated by a separate company, and that company wasn’t part of the plan network. That bill ended up $23,000, all on George.

Some 43 million people in the US are in Elsie’s, Richard’s and George’s shoes, about one person in five who have credit reports, writes Liz Weston in her September 4, 2017 column. What’s worse is that under 8 percent of the collections are paid.

The total amount of medical debt can’t be calculated because not all of it shows up as medical debt. The Kaiser Family Foundation reports in “Medical Debt Among People with Health Insurance”: “The total dollar amount of medical debt held in the U.S. is difficult to measure. Medical debt may be masked as other forms of debt, for example, when someone uses a credit card to pay a doctor bill. The amount reflected on a credit report will indicate credit-card debt.” A person may also skip a mortgage payment, or more than one, to pay a medical debt.

It’s even worse for the uninsured. The Kaiser Family Foundation reports that “Among non-elderly patients, nearly half (45%) of the uninsured report problems paying medical bills.”

Medical providers, doctors, hospitals, and such, can turn an account over to a collection agency just one day after it is overdue. They often don’t, but they can. Common practice is that the collection agency will not report the debt until it is 180 days in default, so it doesn’t show up as a collection until then. Even so, it shows as a past-due balance on a credit report.

The folks with medical bills in collection may also have difficulty getting more medical care. Providers may refuse to treat patients who can’t pay their bills. The Kaiser Family Foundation used the example of Kieran. “One hospital to which she owed money refused to pre-register his wife for a hospitalization until overdue bills were paid.” Others want to avoid further medical bills so they forgo care, even continuing care.

But that’s only part of the story. Even if someone is making regular payments on a medical bill, the creditor may still turn the debt over to collections even without notifying the debtor. Some people may be surprised by the call or letter from the collection agency about a bill they didn’t even know they had. It could be a bill that was sent to the wrong address or even not sent at all before the bill was turned over to collections.

It only gets worse. Some 62 percent of bankruptcies are because of medical debt reported nerdwallet.com in 2013.. That results in many of the debts being discharged completely with a Chapter 7 bankruptcy or placed in a payment plan in a Chapter 13 bankruptcy.

But the effect on the economic lives of the people who fall victim to medical debt is enormous. A credit score can fall more than 100 points, say, for someone with a pre-collection 780 FICO score. That means he or she will have difficulty renting an apartment, will pay a higher interest rate for a car loan, and may not be hired for a job. Then there is job loss. Sometimes people lose their jobs because of their health problems or have to quit their jobs to care for an injured or ill family member.

Some people lose their homes because they stop making mortgage payments to make their payments on the medical debt. Some people stop making car payments and have their cars repossessed. Others have their electricity shut off. And it may be all for naught because they end up filing bankruptcy anyway.

It’s a terrible thing when medical financial problems plague people, and something that needs fixing. But there is little or nothing we can do personally except write to our Senators and Congresspeople.

We have to empathize with them, but they are in financial trouble and our businesses depend on consistent income. Empathy and business go only so far. If someone can’t pay the rent or has wages garnished, that is our concern and something we can and must do something about.

By Robert L. Cain

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