Medicare savings provisions are often included among broader proposals to reduce the federal deficit and debt.  Over the long-term, Medicare faces financial challenges due to the aging of the population and rising healthcare costs (that affect all payers);¹  however, over the next decade, Medicare spending, is projected to grow slower than private insurance on a per capita basis, and at about the same rate as the economy.  Total Medicare spending increased by 3 percent in 2012 and is projected to increase by 4 percent in 2013, the lowest rates of growth since 2000.²   Nonetheless, ongoing efforts to constrain the growth in Medicare spending are often viewed as important components of deficit and debt reduction proposals.Since 2010, policymakers have enacted legislation that includes reductions in Medicare spending and have also made several attempts to constrain the federal debt.  Medicare savings provisions were included in the Affordable Care Act (ACA) of 2010, the Budget Control Act of 2011, the American Taxpayer Relief Act of 2012, as well as other major efforts to reduce the federal deficit and debt.  This brief provides a side-by-side comparison of Medicare provisions included in broad-based deficit- and debt-reduction packages put forward by the President and the Chairmen of the House and Senate Budget Committees:

»         President Obama’s Budget for Fiscal Year 2014, released by the Office of Management and Budget on April 10, 2013;

»         The Senate Concurrent Budget Resolution for Fiscal Year 2014, S.Con.Res. 8, passed by the Senate on March 23, 2013; and

»         The House Concurrent Budget Resolution for Fiscal Year 2014, H.Con.Res. 25, passed by the House of Representatives on March 21, 2013.

The brief also summarizes the Continuing Appropriations Resolution, 2014 (H.J. Res. 59), which was passed by both houses and signed into law by President Obama on December 26, 2013.  The law is a combination of the “Bipartisan Budget Act of 2013” and the “Pathway for SGR Reform Act of 2013” and is projected to lower the federal debt by approximately $23 billion between 2014 and 2023.³  The law postpones until April 1, 2014 a reduction in Medicare payments to physicians that was scheduled to occur on January 1, 2014, and replaces it with a 0.5 percent payment increase between January 1 and April 1, resulting in projected increases in Medicare spending of about $7.3 billion between 2014 and 2023.  It also extends sequestration for two years (with modifications to the sequestration of Medicare spending in FY2023), reduces Medicare payments for some stays in long-term care hospitals, and extends several Medicare programs and payments to providers.  In total, the law is projected to increase Medicare spending by approximately $3.5 billion between 2014 and 2023.⁴ 

In addition, this brief summarizes Medicare provisions included in other deficit- and debt- reduction proposals released since January 2012 (Appendix A) and describes recent activities that pertain to Medicare and the federal budget, including Medicare’s role in the ACA, the fiscal cliff and sequestration (Appendix B).

• Appendix A: Summary Of Other Deficit- And Debt-Reduction Proposals With Major Medicare Provisions (Introduced since January 2012)
• Appendix B: Timeline of Medicare’s Role in Recent Federal Budget and Deficit Reduction Activities, January 2010 – December 2013

.APPENDIX A: Summary Of Other Deficit- And Debt-Reduction Proposals With Major Medicare Provisions (Introduced since January 2012)

This appendix summarizes additional deficit and debt reduction proposals with major Medicare provisions, including the following:

• Joseph Antos, as described in “Medicare Makeover:  Five Responsible Reforms to Make Medicare Healthy,” American Enterprise Institute, December 17, 2012 and “Saving Medicare: A Market Cure for An Ailing Program,” American Enterprise Institute, December 2012.

• Robert Berenson, John Holahan and Stephen Zuckerman, as described in “Can Medicare Be Preserved While Reducing the Deficit?” March 2013.

• Bipartisan Policy Center, as described in “A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment,” April 18, 2013.

• Erskine Bowles and Former Senator Alan Simpson, as described by Moment of Truth Project, “A Bipartisan Path Forward to Securing American’s Future,” February 19, 2013.

• Brookings Institution (Engelberg Center for Health Care Reform), as described in “Bending the Curve:  Person-Centered Health Care Reform: A Framework for Improving Care and Slowing Health Care Cost Growth,” April 29, 2013.

• Brookings Institution (The Hamilton Project), as described in “15 Ways to Rethink the Federal Budget,” February 26, 2013.

• Senators Richard Burr and Tom Coburn, as described in “The Seniors’ Choice Act,” February 16, 2012.

• Business Roundtable, as described in “Social Security Reform and Medicare Modernization Proposals,” January 16, 2013.

• Center for American Progress, as described in “The Senior Protection Plan,” November 13, 2012.

• Congressional Progressive Caucus, as described by Economic Policy Institute Policy Center, “The ‘Back to Work’ Budget: Analysis of the Congressional Progressive Caucus budget for fiscal year 2014,” March 13, 2013; and H.Amdt. 3 to H.Con.Res. 25 in the 113^th Congress, introduced March 20, 2013.

• Senator Bob Corker, as included in S. 3673, “The Dollar for Dollar Act of 2012,” 112^th Congress.

• Senator Orrin Hatch, as described in Letter to Colleagues, January 24, 2013.

• House Democratic Caucus, as described in Amdt. 5 to H.Con.Res. 25 in the 113^th Congress.

• National Coalition on Health Care, as described in “Curbing Costs, Improving Care: The Path to an Affordable Health Care Future,” November 8, 2012.

• Senators Rand Paul, Lindsey Graham, Mike Lee, and Jim DeMint, as included in S. 2196, “Congressional Health Care for Seniors Act of 2012,” 112^th Congress; and Senator Rand Paul, “Congressional Health Care for Seniors Act,” released March 15, 2012.

• Republican Study Committee, as described in “Back to Basics: A Budget for Fiscal Year 2014,” March 18, 2013; and Amdt. 4 to H.Con.Res. 25 in the 113^th Congress, introduced March 20, 2013.

.

Joseph Antos (December 17, 2012)

Age of Medicare eligibility:  Would increase the eligibility age from 65 to 67, and allow seniors between the ages of 62 and 67 to buy into the program.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would convert Medicare into a defined-contribution/premium support system, with plans competitively bidding in local markets.  Would establish a plan option that offers a network of high-quality providers who will accept lower Medicare payments in exchange for recognition of their superior service.  Would provide beneficiaries with better tools to compare Medicare Advantage plan options and traditional Medicare, including information on the cost of Medigap insurance and the expected out-of-pocket costs. 

Part B and Part D premiums: Would increase the base premium for Part B from 25 percent to 35 percent of program spending and impose a premium for Part A.

Medicare cost sharing: Would unify cost sharing for Part A and B, with 20 percent coinsurance on all services.  Would establish health savings accounts for enrollees in traditional Medicare.  Would increase the cost-sharing for high-income beneficiaries.

Medigap, employer-sponsored, and other supplemental coverage: Would change Medigap so that policyholders are sensitive to the cost of their medical care.  Would modify rules to require insurers to offer Medigap coverage whenever beneficiaries apply for it. 

Physician payments/sustainable growth rate (SGR) formula: Would repeal the SGR mechanism for physician payments and replace it with a stable payment system that would spread cuts among physicians, other providers and beneficiaries.  Would allow physicians to charge patients a different rate than what Medicare pays, if the physician gives advance notice to the patients.  Would institute a new physician payment methodology that rewards quality and prudent medical practice.

Other Medicare provisions: Would allow Medicare authorities greater latitude to adopt innovative payment schedules and management practices that reward improved health care delivery.  Would develop other payment models, including competitive bidding for specific services, bundled payment, performance-based payment, and payment methods that encourage management of chronic disease.

Source: Joseph Antos, “Medicare Makeover:  Five Responsible Reforms to Make Medicare Healthy,” American Enterprise Institute, December 17, 2012; and Joseph Antos, “Saving Medicare: A Market Cure for An Ailing Program,” American Enterprise Institute, December 2012.

.

Robert Berenson, John Holahan, and Stephen Zuckerman (March 7, 2013)

Constraints on federal health/Medicare spending, including the Independent Payment Advisory Board (IPAB): Would cap growth of per capita spending under traditional Medicare to GDP per capita.

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Age of Medicare eligibility:  Would increase the age of eligibility to age 67 by two months per year, beginning in 2014.  Would be combined with an income-related buy-in that would allow beneficiaries ages 65 and 66 to purchase Medicare at higher premiums; would provide buy-in subsidies for beneficiaries with incomes below 400 percent of the federal poverty level (FPL).

Private plan payment reforms, including premium support, competitive bidding, and other such reforms:  Would maintain Medicare Advantage plan benchmarks at a maximum of 95 percent of per capita traditional Medicare costs in the highest cost areas and reduce plan benchmarks to 100 percent of per capita traditional Medicare costs in all other areas. 

Medicare cost sharing: Would set a maximum on beneficiaries’ out-of-pocket expenses that would vary by income.  Would reduce premiums and deductibles for beneficiaries with incomes below 300 percent of the FPL.

Prescription drugs:  Would require drug manufacturers to provide rebates to Part D plans that are no lower than the Medicaid minimum rebate level for drugs prescribed to dual-eligible beneficiaries.  Would eliminate cost-sharing for generic medications and set the co-payment on the substitutable brand-name drugs at $6 for LIS beneficiaries.

Physician payments/sustainable growth rate (SGR) formula:  Would repeal the SGR mechanism for physician payment.

Other Medicare provisions: Would increase the Medicare payroll tax by 0.5 percent beginning in 2017.  Would reduce indirect medical education (IME) payments to teaching hospitals.  Would reduce payments to skilled nursing facilities (SNFs) and home health agencies.  Would reduce provider payments for many tests, imaging, and procedures and would eliminate site-of-service differentials for services provided in both outpatient hospitals and physician offices.  Would require CMS to conduct surveys of lab fees paid by large payers for clinical lab services to assess the appropriateness of fees in Medicare, and would reduce Medicare lab fees accordingly.

Source: Berenson, Robert, John Holahan, and Stephen Zuckerman, “Can Medicare Be Preserved While Reducing the Deficit?” March 2013. 

.

Bipartisan Policy Center (April 18, 2013)

Constraints on federal health/Medicare spending, including the Independent Payment Advisory Board (IPAB): Would limit growth in federal contributions per Medicare enrollee to more than per capita GDP+05 percent, and apply separately for traditional Medicare, Medicare Networks, and Medicare Advantage, no earlier than 2020.

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would implement a competitive bidding system in regions where plans are currently paid less than the average costs of traditional Medicare.  Would update the Medicare Open Enrollment website. Would improve the Medicare Advantage risk adjustment system by incorporating a measure of functional status, and implementing a reinsurance system for Medicare Advantage plans by 2016.  Would require all Medicare Advantage plans to provide prescription drug coverage.  Would allow Medicare Advantage plans to adopt tiered provider networks.  Would end the CMS bonus demonstration program and eliminate bonuses in markets with competitively bid payments. 

Part B and Part D premiums: Would establish lower income-related premium thresholds, reducing the lowest income-threshold from $85,000 to $60,000 for individuals, so that approximately 17 percent of beneficiaries pay income-related premiums, beginning in 2016.

Medicare cost sharing: Would unify cost sharing for Part A and B, with a unified deductible of $500 (exempting physician office visits), copayments for most services after the deductible is met, no cost-sharing for preventive care and annual wellness visits, and a limit on out-of-pocket expenses of $5,315.  Would federalize cost-sharing assistance to cover 50 percent of cost-sharing for beneficiaries with incomes between 100 percent and 135 percent of the federal poverty level (FPL), and 25 percent of cost-sharing for beneficiaries with incomes between 135 percent and 150 percent of the FPL, with no limit on assets and eligibility based on an individual’s modified adjusted gross income (MAGI).

Medigap, employer-sponsored, and other supplemental coverage: Would require Medigap and employer-provided plans (including TRICARE for Life and FEHBP) to include a deductible of at least $250, cover no more than 50 percent of beneficiaries’ copayments and coinsurance, and provide an out-of-pocket limit no lower than $2,500, beginning in 2016.

Prescription drugs:  Would adjust the cost-sharing for beneficiaries who qualify for the Part D low-income subsidy (LIS) program to encourage the use of lower-cost drugs. Would change the reimbursement of Part B drugs to the average sales price (ASP) plus a flat rate, and would convert drugs paid the average wholesale price (AWP) to the ASP payment method.  Would prohibit “pay for delay” agreements that restrict access to generic drugs, and implement reforms to close the “REMS loophole” to encourage generic drug development.

Dual-eligible beneficiaries:  Would support the adoption of a broad strategy to deliver Medicare and Medicaid services to dual-eligible beneficiaries through a single program.  Would eliminate asset tests for the existing Medicare Savings Programs and Part D low-income subsidy (LIS) program, and further promote the availability of the programs.

Physician payments/sustainable growth rate (SGR) formula: Would repeal the SGR mechanism for physician payments and provide payment updates based on the Medicare Economic Index (MEI) only to physicians that participate in the Medicare provider network option, beginning in 2017; payments would be frozen through 2023 for physicians not accepting financial risk.

Other Medicare provisions: Would offer within traditional Medicare an option for beneficiaries to enroll in a network of providers, similar to ACOs, and the provider networks would have spending targets; beneficiaries who enrolled in the Medicare Network program would receive a premium discount.  Would accelerate payment reforms by expanding the voluntary payment bundling demonstration and requiring bundles for inpatient care, physician services, post-acute care, and hospital readmissions by 2018.  Would implement lower benchmarks for some equipment types in the durable medical equipment competitive-bidding program.  Would equalize payments for evaluation and management services across sites of care and equalize payments for certain procedures provided in both physicians’ offices and outpatient departments.  Would further limit physician self-referrals.  Would reform graduate medical education payments, including reduce indirect medical education (IME) percentage add-on to inpatient hospital admissions from 5.5 percent to 3.5 percent, provide incentive payments to high-performing institutions, increase residency slots with half of the additional slots for primary care and other providers for which there are shortages, reduce the variation in direct graduate medical education payments, and explore the allocation of resources to train non-physician professionals.  Would prioritize electronic sharing of information among providers as part of the Medicare and Medicaid electronic health record incentive programs.

Source: Bipartisan Policy Center, “A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment,” April 18, 2013.

.

Erskine Bowles and Former Sen. Alan Simpson (February 19, 2013)

Constraints on federal health/Medicare spending, including the Independent Payment Advisory Board (IPAB): Would allow IPAB to make recommendations for all providers (no exemptions), and be given the authority to change Medicare’s benefit design and cost-sharing.  Starting in 2018, would set target for growth of total federal health care spending per beneficiary at GDP per capita. If the growth in spending exceeded GDP per capita, then would consider a variety of reforms ranging from premium support to an all-payer system.  Absent reforms, would implement a combination of the following to enforce the cap on spending: reductions in provider payments with a “value based withhold;” across-the-board increases in Medicare premiums; and a reduction in the value of the employer health tax exclusion.

Sequestration of Medicare spending:  Would replace the sequestration with other savings and revenue provisions.

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Age of Medicare eligibility:  Would gradually increase the eligibility age by one month per year beginning in 2017 until it reaches age 66, and then 2 months per year until it reaches age 67.  Would be combined with an income-related buy-in that would allow beneficiaries ages 65 and older to purchase Medicare; would provide buy-in subsidies for lower-income beneficiaries, including 100 percent subsidy for beneficiaries with incomes below 100 percent of the federal poverty level (FPL) in states that do not expand Medicaid eligibility with a sliding scale of subsidies for beneficiaries with incomes between 100 percent and 400 percent of the FPL.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would reform the Medicare Advantage program by making payments based on competitive bidding, if such a system would reduce costs without damaging quality.  Would recoup erroneous payments to Medicare Advantage plans.  Would eliminate double bonus payments to Medicare Advantage plans.

Part B and Part D premiums: Would increase income-related premiums under Medicare Parts B and D by 15 percent, such that the lowest income-related premium would be increased from 35 percent to 40.25 percent of projected per capita expenditures.  Would create a new lower income-related premium threshold at a level that would result in 15 percent of beneficiaries subject to income-related premiums, and freeze the income-related thresholds through 2030.

Medicare cost sharing: Would replace current Medicare cost-sharing with a unified deductible, and uniform co-insurance up to an initial out-of-pocket limit, with 5 percent coinsurance required for expenses between the initial limit and a maximum out-of-pocket limit; out-of-pocket limits would be income-adjusted and low-income beneficiaries would have lower deductibles than higher income beneficiaries.  Would make the modifications to the benefit package such that the average out-of-pocket costs (including premiums) are held constant.  Would provide CMS the authority to adjust coinsurance rates based on the value of the procedure, on a net cost-neutral basis. Would have CMS offer an alternative Medicare benefit package focused on care coordination that would, for example, merge Parts A, B, and D into a single benefit package and offer lower cost sharing for beneficiaries who use high-value providers and services; the package could also offer coverage above the standard package to minimize the need for supplemental insurance, could be targeted to high-cost populations, and could be offered alongside traditional Medicare and Medicare Advantage or as a demonstration project.

Medigap, employer-sponsored, and other supplemental coverage: Would prohibit Medigap and TRICARE for Life plans from covering the Medicare deductible and no more than 50 percent of the base coinsurance, up to the initial limit; in the interim, would apply a surcharge to the Part B premium of Medigap plans.  Would apply a surcharge to the Part B premium of beneficiaries with retiree health plans, and give retirees the option of cashing out the value of their health plan in the form of a Part B premium subsidy; beneficiaries with Federal Employees Health Benefit (FEHB) plans would be required to cash out the value of their plan.

Prescription drugs:  Would require drug manufacturers to provide rebates to Part D plans that are no lower than the Medicaid minimum rebate level for drugs prescribed to dual-eligible beneficiaries.  Would prohibit “pay for delay” arrangements between brand and generic manufacturers.

Physician payments/sustainable growth rate (SGR) formula: Would replace cuts required by the SGR formula with a smaller reduction in payments.  Would allow CMS to make budget-neutral adjustments to payments to improve the quality of care.  Would direct CMS to establish a new physician-payment system that promotes new models, such as Accountable Care Organizations and patient-centered medical homes, and encourage care coordination, prioritizes primary care, and reduces Medicare costs.  Would default to the reinstatement of a re-based SGR mechanism if a new physician-payment mechanism was not implemented by CMS.

Other Medicare provisions: Would increase funding for CMS pilots and demonstrations. Would expand the Hospital Readmissions Reduction Program to include more medical conditions and higher penalties on more types of physicians; would calibrate penalties to adjust for demographics, types of conditions, and timing of readmission, and allow lower penalties for providers who reduced readmissions or complications over time or demonstrated that readmissions lead to lower mortality rates. Would expand the Medicare Acute Care Episode (ACE) demonstration program and moving towards a system with more bundled payments for care. Would expand competitive bidding for medical devices, laboratory tests, radiologic diagnostic services, and other services. Recommends that CMS study new ways to increase transparency of prices and quality, prohibit “gag clauses,” require CMS to publicly release Medicare and Medicaid claims data, and mandate public reporting of prices for a basket of routine elective procedures. Would enact Medicare malpractice reforms. Would adopt the President’s proposal to reduce the annual growth in payments to SNFs, IRFs, long-term care hospitals, and home health facilities. Would phase out all reimbursements for bad debts, reduce subsidies for graduate medical payments, and reduce payments for rural hospitals. Would provide the Secretary of HHS the authority to better align clinical lab payments with the private sector, and reclassify certain payments to hospital outpatient evaluation and management visits so that they are treated similarly to physician office visits. Would implement multiple steps to reduce fraud and abuse, including validating high-cost, high-fraud physician orders, provide the IRS the authority to penalize providers with delinquent debt, require prior authorization for advanced imaging, further restrict physician self-referrals, and adopt the reforms in the Coburn-Carper FAST Act, as well as other measures.

Source: Moment of Truth Project, “A Bipartisan Path Forward to Securing American’s Future,” February 19, 2013. 

.

Brookings Institution, Engelberg Center for Health Care Reform (April 29, 2013)

Constraints on federal health/Medicare spending, including the Independent Payment Advisory Board (IPAB): Would cap growth of per capita spending under traditional Medicare to GDP per capita.

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would require Medicare Advantage plans to report the same quality measures as Medicare Comprehensive Care (MCC) organizations.  Would update capitated payments to Medicare Advantage plans by GDP per capita.  Would change the payment system to provide 100 percent of the difference between plans’ bid and the benchmark (i.e., the maximum amount Medicare will pay) if the plan uses the entire amount to reduce premiums, and provide 50 percent of the difference if the plan uses the amount to provide additional benefits.

Medicare cost sharing: Would set a maximum on beneficiaries’ out-of-pocket expenses and require copayments, rather than coinsurance, for most services.  Would require MCCs to provide clear information on enrollees’ costs for their services.  The benefit restructuring changes (including changes to Medigap) would be implemented so that they do not increase beneficiaries’ overall cost sharing.

Medigap, employer-sponsored, and other supplemental coverage: Would require Medigap plans to have an actuarially-equivalent co-pay of at least 10 percent. 

Dual-eligible beneficiaries:  Would make permanent the CMS Capitated Financial Alignment Demonstration.

Physician payments/sustainable growth rate (SGR) formula: Would repeal the SGR and replace it with an alternative system to promote better coordinated care, and provide higher payments to providers participating in MCCs.

Other Medicare provisions:  Would create MCCs that would receive capitated, case-based, or bundled payments based on current beneficiary spending and quality of care, with spending limits increased by GDP per capita; MCCs could offer enrollees reduced premiums or cost-sharing.  Would expand bundled payments with performance measures, in order to help implement MCC payment reforms.

Source: Engelberg Center for Health Care Reform at Brookings, “Bending the Curve:  Person-Centered Health Care Reform: A Framework for Improving Care and Slowing Health Care Cost Growth,” April 29, 2013.

.

Brookings Institution, The Hamilton Project (February 26, 2013)

Medicare cost sharing:  Would unify Parts A and B with a combined annual deductible of $525 and set the coinsurance rate above the deductible equal to 20 percent up to an annual out-of-pocket maximum that would vary by income, ranging from $1,983 for beneficiaries with incomes between 100 percent to 200 percent of the FPL to $5,950 for beneficiaries with incomes above 400 percent of the FPL.  Deductibles for beneficiaries with incomes below 200 percent of the FPL would be reduced to $250. (Proposal authored by Jonathan Gruber)

Medigap, employer-sponsored, and other supplemental coverage:   Would apply an excise tax of up to 45 percent on Medigap plan premiums, and employer-sponsored retiree coverage for beneficiaries over age 65 (not for early retirees).  (Proposal authored by Jonathan Gruber)

Other Medicare provisions:  Would implement global payment model (operating independently from traditional Medicare) to pay provider systems to cover all beneficiary spending, and would implement regulatory neutrality between Medicare Advantage plans and Accountable Care Organizations (ACOs) with equivalent payments for both models. (Proposal authored by Michael Chernew and Dana Goldman)

Source: The Hamilton Project, “15 Ways to Rethink the Federal Budget,” February 26, 2013. 

.

Sens. Richard Burr and Tom Coburn (February 16, 2012)

Constraints on federal health/Medicare spending, including the Independent Payment Advisory Board (IPAB): Would repeal the IPAB.

Age of Medicare eligibility:  Would increase the age of eligibility from 65 to 67, by increasing the age of eligibility by two months each year, beginning in 2014.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: In 2016, would transition Medicare to a premium support program in which traditional Medicare and private plans would compete with each other, providing actuarially equivalent benefits with all plans covering basic hospital, surgical, physician and emergency care.  The federal contribution would be tied to the weighted average bid and increase each year based on plan bids.  Beneficiaries would pay the difference between the defined federal contribution and the bid for the plan in which they choose to enroll.

Part B and Part D premiums: Would raise Medicare Part B premiums by 3 percent of overall program costs, beginning in 2013, so that a 9 percent increase is achieved by 2016; lower income beneficiaries would be held harmless from increased Part B premiums.  In 2016 and thereafter, higher income beneficiaries would receive lower federal contributions and pay higher premiums, and lower income beneficiaries would receive higher federal contributions and pay lower premiums.

Medicare cost sharing: Would unify Parts A and B with combined annual deductible of $550; set coinsurance rate equal to 20 percent up to an annual out-of-pocket total of $5,500 and coinsurance rate equal to 5 percent for out-of-pocket expenses between $5,500 and $7,500 per year; set annual out-of-pocket maximum at $7,500, with higher out-of-pocket limits for beneficiaries with incomes greater than $85,000/individual, $170,000/couple.  Would require beneficiaries with incomes exceeding $1 million to pay the full cost of their Part B and Part D premiums, and have higher unified deductibles than other beneficiaries.

Medigap, employer-sponsored, and other supplemental coverage: Would prohibit Medigap plans from covering the first $500 of beneficiaries’ cost-sharing and limit coverage above $500 to 50 percent of the next $5,000 of Medicare cost-sharing.

Physician payments/sustainable growth rate (SGR) formula: Would freeze current physician payment rates until a premium support model is implemented in 2016.

Other Medicare provisions: Would offer a new, voluntary care coordination benefit.

Source: Senator Richard Burr and Senator Tom Coburn, “The Seniors’ Choice Act,” February 16, 2012.

.

Business Roundtable (January 16, 2013)

Age of Medicare eligibility:  Would gradually raise Medicare eligibility age from age 65 to 70, for people younger than age 55 in 2013.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms:  Would offer beneficiaries the choice between private plans and traditional Medicare by 2015.  Private plans would be allowed to sell across state lines and modify the existing set of Medicare benefits.  The traditional Medicare program would compete with private plans and would have the flexibility to modify the Medicare benefit package.  Premiums would be community rated, plans would be required to accept all applicants, and payments to plans would be risk adjusted. 

Medicare cost sharing:  Would consider additional means testing for Medicare services by 2015. 

Dual-eligible beneficiaries: Would retain existing financial support low-income beneficiaries with improvements in care coordination and a focus on wellness and chronic care management.

Source: Business Roundtable, “Social Security Reform and Medicare Modernization Proposals,” January 16, 2013.

.

Center for American Progress (November 13, 2012)

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would set Medicare Advantage benchmarks based on the average plan bid, beginning in 2014, and would improve the accuracy of adjustments for coding intensity differences.

Part B and Part D premiums: Would freeze the share of beneficiaries who will pay income-related premiums at 10 percent for 2019 and thereafter, and would increase the premiums for beneficiaries paying income-related premiums by 15 percent, beginning in 2014.

Medicare cost sharing: Would set annual out-of-pocket limits, ranging from $5,000 per year to $10,000 per year, based on beneficiaries’ incomes.  Would direct the Institute of Medicine to recommend additional improvements to align incentives with high-quality care.  Would implement the changes such that average cost-sharing would not increase and the value of the benefit package would not decrease.

Medigap, employer-sponsored, and other supplemental coverage: Would prohibit Medigap plans from covering the first $500 of beneficiaries’ cost-sharing for beneficiaries with incomes above 400 percent of the federal poverty level, with exemptions for primary care and care for chronic disease. 

Dual-eligible beneficiaries: Would coordinate care for dual-eligible beneficiaries, by allowing dual-eligible beneficiaries to choose a primary care medical home and allowing states and medical homes to retain a share of any savings if quality standards are met.

Prescription drugs:  Would extend Medicaid rebates to low-income beneficiaries; maximize use of generic drugs; prohibit “pay for delay” agreements that restrict access to generic drugs; and shorten the exclusivity period for brand-name biologic drugs.

Physician payments/sustainable growth rate (SGR) formula: Would repeal the SGR mechanism (holding beneficiaries who do not pay income-related premiums harmless from premium increases resulting from the repeal); incentivize alternatives to fee-for-service payment by reducing payments to specialists by 3 percent and reducing payments to primary care physicians who are not participating in a certified primary care medical home by 3 percent, beginning in 2017; permanently increase payments for primary care services by 10 percent; identify and correct overpriced physician services;  and expand the ban on physician self-referrals.

Other Medicare provisions: Would use competitive bidding for all health care products, including durable medical equipment, imaging services, laboratory tests, and other health care products; publicly release claims data, including Medicare claims data; accelerate use of alternatives to fee-for-service payment, including bundled payments; promote shared decision making; strengthen value-based purchasing for hospital readmissions; reduce payments to skilled nursing facilities with high rates of rehospitalization; implement value-based purchasing for ambulatory surgical centers; reduce payments for graduate medical education (GME); make GME payments performance-based and other additional GME requirements; reduce payments to home health providers, skilled nursing facilities, hospital inpatient and outpatient services, rural hospitals, and end-stage renal disease facilities; reduce Medicare bad debt; and reduce fraud and improper payments.

Source: Center for American Progress, “The Senior Protection Plan,” November 13, 2012.

.

Congressional Progressive Caucus (March 12, 2013)

Sequestration of Medicare spending:  Would repeal the sequester.

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Prescription drugs:  Would allow the Secretary of Health and Human Services (HHS) to negotiate Medicare Part D prescription drug prices with pharmaceutical manufacturers; and prohibit “pay for delay” agreements that restrict access to generic drugs.

Other Medicare provisions:  Would broaden the Medicare hospital insurance tax on wages to include income from S corporations for employee-shareholders of businesses with three or fewer principal shareholders; and accelerate the use of bundled payments.

Source: Economic Policy Institute Policy Center, “The ‘Back to Work’ Budget: Analysis of the Congressional Progressive Caucus budget for fiscal year 2014,” March 13, 2013; and H.Amdt. 3 to H.Con.Res. 25 in the 113^th Congress, introduced March 20, 2013.

.

Sen. Bob Corker, S. 3673 (December 12, 2012)

Age of Medicare eligibility:  Would increase the age of eligibility by 2 months per year for individuals who attain age 65 after January 1, 2014 but before 2025, such that the age of eligibility will be 67 in 2025 and thereafter.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would sunset Medicare Advantage plans, beginning in 2017, and would allow beneficiaries the option of enrolling in a Total Health plan or traditional Medicare, beginning in 2017.  All Total Health plan sponsors would be required to provide a plan that provides the standard basic benefit package (same benefits as traditional Medicare), and may also provide plans with supplemental coverage.  All beneficiaries would be guaranteed a choice of at least 2 plans in an area.  The federal contribution for beneficiaries not subject to income-related premiums would be equal to 85 percent of the 40^th percentile of the monthly plan bid amounts (excluding supplemental coverage benefits), weighted by enrollment, and including traditional Medicare as a bid.

Part B and Part D premiums: Premiums for beneficiaries not subject to income-related premiums would be equal to the difference between the plan bid and the federal contribution, but would not be allowed to be less than $0.  Beneficiaries with annual incomes greater than $50,000 (for individuals) would be subject to income-related premiums in 2013 or thereafter; beneficiaries with annual incomes greater than $250,000 (for individuals) would receive no federal contribution.  The income thresholds to determine applicability of income-related premiums would continue to be frozen until December 31, 2021, with no adjustment for inflation.

Medicare cost sharing:  The basic benefit package for traditional Medicare would have a unified deductible of $550, followed by 20 percent coinsurance up to total out-of-pocket expenses of $5,500, which would then be followed by 5 percent coinsurance up to an annual out-of-pocket limit of $7,500, beginning in 2015 with thresholds indexed to increase by the Chained Consumer Price Index for Urban Consumers (CPI-U).

Medigap, employer-sponsored, and other supplemental coverage:  National Association of Insurance Commissioners (NAIC) would be required to review and revise the Medigap benefit packages to allow for revised benefit packages to be implemented by January 1, 2015.  Revised plans would be prohibited from covering the unified deductible and more than 50 percent of the cost-sharing after the unified deductible.  Medigap policies could not be issued after December 31, 2016 to beneficiaries who previously were not covered by a Medigap policy.

Dual-eligible beneficiaries:  States could apply for a waiver of any or all requirements to offer a Total Health plan for dual-eligible beneficiaries to coordinate Medicare and Medicaid; all proposals would be required to not increase federal expenditures and state Total Health plans would be required to provide coverage that is at least a comprehensive as other Total Health plans.  State waivers would be limited to 5 years, with options to renew the waivers thereafter.

Other Medicare provisions: Would limit payments for graduate medical education (GME) to no more than 120 percent of the national average salary paid to medical residents in 2010, increased by the Chained CPI-U; and reduce payments for indirect graduate medical education (IME), home health, and bad debt.

Source: S. 3673, “The Dollar for Dollar Act of 2012,” as introduced by Senator Bob Corker on December 12, 2012, 112th Congress.

.

Sen. Orrin Hatch (January 24, 2013)

Age of Medicare eligibility:  Would gradually raise the age of eligibility from 65 to age 67, by increasing the age of eligibility by two months each year.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms:  Would provide a federal contribution to beneficiaries “based on” bids submitted by private plans and traditional Medicare.  The federal contribution would help cover the plan premium; beneficiaries who chose plans that cost less than the contribution would receive the differences through lower premiums or additional health benefits.  Plan coverage requirements would be defined by the federal government. 

Medicare cost sharing:  Would unify cost sharing for Part A and Part B, by creating a combined annual deductible and setting a coinsurance rate and annual out-of-pocket maximum.

Medigap, employer-sponsored, and other supplemental coverage:  Would limit Medigap plans from providing first-dollar coverage for cost-sharing.

Dual-eligible beneficiaries: Would limit the amount of federal dollars spent on each Medicaid beneficiary (block grant), including dual-eligible beneficiaries, with adjustments for eligibility categories and health status.  Federal government would also monitor Medicaid programs on quality, access, and coverage metrics.

Source: Letter to Colleagues from Senator Orrin Hatch, Ranking Member of the Committee on Finance, January 24, 2013.

.

House Democratic Caucus (March 20, 2013)

Sequestration of Medicare spending:  Includes a policy statement that the sequester should be repealed and replaced with spending reductions and revenue increases.

Medicare provisions in the ACA:  Includes a policy statement that the ACA should not be repealed.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms:  Includes a policy statement that any legislation that would transform the Medicare program into a premium support system should be rejected.

Physician payments/sustainable growth rate (SGR) formula: Would create a deficit-neutral reserve fund for improvements to Medicare that could be used to introduce legislation to reform the Medicare payment system for physicians and other care providers, building on delivery system reforms underway.

Other Medicare provisions:  Would create a deficit-neutral reserve fund for extending expiring Medicare, Medicaid, or other health provisions.

Source: Amdt. 5 to H.Con.Res. 25 in the 113^th Congress, introduced March 20, 2013.

.

National Coalition on Health Care (November 8, 2012)

Medicare provisions in the ACA:  Would retain the changes made by the ACA.

Medicare cost sharing: Would empower the Secretary of HHS to vary cost-sharing based on evidence, and lift curbs on tiered cost-sharing in Medicare Advantage.

Dual-eligible beneficiaries: Would increase beneficiary protections in the state demonstrations; allow Medicare pilot ACOs to also assume risk for Medicaid long-term services and supports for dual-eligible beneficiaries; expand the PACE program, pay PACE providers based on Medicare Advantage benchmarks, improve the risk adjustment system for PACE plans, and create outlier financial protection for new PACE sites; and streamline state contracts with Special Needs Plans for dual-eligible beneficiaries.

Prescription drugs:  Would integrate medication adherence measures into initiatives; shorten the exclusivity period for brand-name biologic drugs from 12 to 7 years; encourage use of generic drugs in the low-income subsidy population; and reform reimbursement for Part B drugs.

Physician payments/sustainable growth rate (SGR) formula: Would eliminate the SGR mechanism for paying physicians, test and implement new value-based models of provider payment, provide financial incentives for providers to move towards a value-based payment model, and encourage and reward primary care; equalize payment rates for services delivered in outpatient and physician office settings; and reduce payments for primary care physicians who fail to meet flu shot benchmarks for their patient population.

Other Medicare provisions: Would expand participation in CMS demonstrations and pilots by allowing rolling application; apply payment incentives for participation in quality and value initiatives; sustain CMS funding; encourage bundled payments; expand penalties for potentially avoidable health care-acquired complications and readmissions; reform post-acute and home health payment; implement a value-based withhold for provider payments if savings do not materialize; implement a Medicare Health Rewards program; require Medicare to cover participation in the Diabetes Prevention Program for eligible pre-diabetics; pilot reference pricing for treatments and diagnostic tests; expand competitive bidding for durable medical equipment; include the provision of palliative care in the quality metrics for the Value-Based Purchasing Program; support education of palliative care professionals; provide behavioral health providers access to incentive payments for the meaningful use of health information technology; re-evaluate payment codes for traditional Medicare; strengthen anti-fraud programs; dedicate penalties imposed on Medicare and Medicaid providers that fail to meet standards for the use of health information; and reduce payments for advanced imaging.

Source: National Coalition on Health Care, “Curbing Costs, Improving Care: The Path to an Affordable Health Care Future,” November 8, 2012.

.

Sens. Rand Paul, Lindsey Graham, Mike Lee, and Jim DeMint (March 15, 2012)

Age of Medicare eligibility:  Would increase the age of eligibility from 65 to 70, by increasing the age of eligibility by three months each year, beginning in 2014.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms: Would allow all beneficiaries to use a federal contribution to either enroll in a plan offered as part of the Federal Employees Health Benefit Plan (FEHBP), or, for beneficiaries with employer-sponsored insurance, use towards the purchase of an employer-sponsored health plan, beginning in 2014.  Federal contributions would be the same as current FEHBP contributions, which are approximately 75 percent of the cost of the “average plan.”  Beneficiaries would pay the difference between the defined federal contribution and the bid for the plan in which they chose to enroll. A new “high-risk pool” for the highest-cost beneficiaries would be created for the costliest 5 percent of all people enrolled in FEHBP; health care plans would be reimbursed for 90 percent of the total medical expenses of high-cost people.

Part B and Part D premiums: Beneficiaries who could not afford to pay plan premiums would receive additional premium assistance and cost-sharing through Medicaid.  Low-income beneficiaries, for whom monthly plan premiums would exceed monthly Social Security benefits or Railroad Retiree benefits, could pay to OPM the amount the beneficiary desires. Beneficiaries with incomes between $85,000 and $1,000,000 per individual would receive smaller federal contributions, phasing down from 80 percent to 15 percent of the defined federal contribution towards plan premiums; millionaires would receive no federal subsidy and would pay the full cost of premiums.

Medicare cost sharing: Private plans offered as part of the FEHBP would have a limit on out-of-pocket spending, with the limit varying by plan.

Medigap, employer-sponsored, and other supplemental coverage: Medigap policies would be terminated as of January 1, 2014.

Other Medicare provisions: No Medicare bonus or incentive payments, and no payments for graduate medical education would be made after January 1, 2014.

Source: S. 2196, “Congressional Health Care for Seniors Act of 2012,” as introduced by Senator Rand Paul on March 15, 2012, 112^th Congress; and Senator Rand Paul, “Congressional Health Care for Seniors Act,” released March 15, 2012.

.

Republican Study Committee (March 18, 2013)

Medicare savings in the ACA:  Would retain Medicare savings in the ACA.  Would repeal the other health care provisions in the ACA, including other Medicare provisions.

Age of Medicare eligibility:  Would increase the age of eligibility by two months per year beginning in 2024, until the eligibility age reaches 70.

Private plan payment reforms, including premium support, competitive bidding, and other such reforms:  Would transition Medicare to a premium support system, as proposed by the House Republican Budget, beginning in 2019.  Entitlement would not change for individuals ages 60 or older in 2013.  Would create a Medicare Exchange for beneficiaries to choose among private plans or traditional Medicare.  Premium support payments would be adjusted for health status, geography, and income.

Part B and Part D premiums:  In 2019 and thereafter, higher income beneficiaries would receive lower federal contributions and pay higher premiums, and lower income beneficiaries would receive higher federal contributions and pay lower premiums.

Medicare cost sharing: Private plans offered in the Medicare exchange would be required to protect beneficiaries from catastrophic health care costs.

Dual-eligible beneficiaries: Medicaid would continue to provide premium and cost-sharing assistance for dual-eligible beneficiaries, subject to a limit on federal dollars spent on each Medicaid beneficiary (block grant).

Physician payments/sustainable growth rate (SGR) formula:  Would create a deficit-neutral reserve fund that could be used to introduce legislation to reform or replace the SGR formula.

Other Medicare provisions:  Would address Medicare waste, fraud, and abuse; details not specified.

Source: Republican Study Committee, “Back to Basics: A Budget for Fiscal Year 2014,” March 18, 2013; and Amdt. 4 to H.Con.Res. 25 in the 113^th Congress, introduced March 20, 2013.

 

.

APPENDIX B:  Timeline of Medicare’s Role in Recent Federal Budget and Deficit Reduction Activities, January 2010 – December 2013

February 18, 2010.  President Obama established the National Commission on Fiscal Responsibility and Reform by Executive Order, chaired by Erskine Bowles and Alan Simpson.

March 23, 2010.  The Affordable Care Act was signed into law, with Medicare savings totaling $716 billion over a ten year period (2013-2022), according to CBO.⁵   This law was not primarily focused on reducing the federal deficit and debt, but, in addition to other measures, included provisions to slow the growth in Medicare spending, including reductions in payments to plans and providers, increases in Medicare premiums for higher-income beneficiaries, increases in the Medicare payroll tax for high earners, and a variety of delivery system and payment reforms.

December 1, 2010.  The National Commission on Fiscal Responsibility and Reform released a plan with both spending reductions for Medicare and other programs, along with tax increases.  No action was taken on these recommendations by the Congress.

Summer 2011.  President Obama and Speaker Boehner engaged in negotiations, but were unable to reach a “grand bargain” on a package of savings and/or revenue provisions.

August 2011.  President Obama signed the Budget Control Act (BCA) of 2011 into law, raising the debt ceiling by $2.1 trillion and setting forth a process of lowering the federal deficit, with multiple actions required, including: sequential increases in the debt ceiling, the establishment of the Congressional Joint Select Committee on Deficit Reduction, a vote by the House and Senate on a Balanced Budget Amendment to the Constitution,⁶  and sequestration of federal spending, including Medicare.⁷  The BCA requires reductions in discretionary appropriations and mandatory spending totaling $1.2 trillion to be divided equally across FY2013 through FY2021, with half of the sequestered spending each year drawn from defense functions, and the other half drawn from non-defense functions, including Medicare, cost-sharing subsidies in the health reform exchanges beginning in 2014, and other health programs.  Medicaid is exempt from sequestration, as are some other low-income programs and Social Security. 

The BCA limits the amount of Medicare (non-administrative) savings that can be achieved by sequestration, capping reductions at 2 percent of Medicare payments to hospitals, physicians and other health care providers and plans, including Medicare Advantage and Part D (prescription drug) plans. It also includes protections for beneficiaries, by prohibiting the sequestration from affecting Medicare beneficiary premiums under Parts B and D, cost sharing for Medicare-covered services, Medicare premium and cost-sharing subsidies under Part D, and revenues to the Medicare Part A trust fund.  The Office of Management and Budget estimated that Medicare payments to plans and providers will be reduced by $11.3 billion for FY2013; these payment reductions took effect April 1, 2013.⁸ 

September through November 2011.  The Joint Select Committee on Deficit Reduction, known informally as the “Super Committee,” was tasked with decreasing projected deficits by $1.5 trillion between FY2012 and FY2021, and given broad authority to propose changes to meets its target, including changes to Medicare, Social Security, Medicaid, defense, taxes, and any other element of the federal budget.

November 21, 2011.  The Super Committee announced that it was not able to reach a bipartisan agreement, and the President and Congress did not subsequently enact legislation by the January 15, 2012 deadline to reduce deficits by $1.5 trillion over ten years.  As a result, automatic, across-the-board reductions in federal spending, known as “sequestration,” were slated to occur January 2, 2013.

January 2, 2013.  The President signed the American Taxpayer Relief Act of 2012, which postponed sequestration until March 1, 2013.  The Act also provided a zero percent update for Medicare payments to physicians under the Sustainable Growth Rate (SGR) formula for calendar year 2013 (preventing a scheduled 27 percent reduction in payments), with costs partly offset by various Medicare savings provisions.  It also extended current-law tax rates for higher-income individuals, among other provisions.

March 1, 2013.  President Obama issued a sequestration order, requiring federal spending to be reduced by $85 billion for Fiscal Year (FY) 2013; the reductions were slated to occur within 30 to 60 days.  

March 21, 2013.  The House of Representatives passed a budget resolution to reduce federal spending by $4.6 trillion over 10 years; the bill was defeated in the Senate.

March 23, 2013.  The Senate passed a budget resolution to reduce federal spending by $1.85 trillion over 10 years.

April 1, 2013.  Sequestration of Medicare payments to providers and plans took effect.

April 10, 2013.  President Obama released his budget for FY2014, which would reduce health care spending by $401 billion over 10 years.

December 10, 2013.  Chairmen of the House and Senate Budget Committees reached an agreement and introduced the Bipartisan Budget Act of 2013.

December 26, 2013. President Obama signed into law the Continuing Appropriations Resolution, 2014 (H.J. Res. 59), which included the Bipartisan Budget Act of 2013 and the Pathway for SGR Reform Act of 2013.  The bill was projected to reduce federal spending by approximately $23 billion over ten years, including increases in Medicare spending of approximately $3.5 billion between 2014 and 2023.⁹ 

1. Congressional Budget Office, “The 2013 Long-Term Budget Outlook,” September 2013. ↩︎
2. Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2013 to 2023,” February 2013. ↩︎
3. Congressional Budget Office, “Bipartisan Budget Act of 2013,” December 11, 2013. ↩︎
4. Congressional Budget Office, “Estimate of Amendment to H.J. Res. 59, Pathway to SGR Reform Act of 2013,” December 11, 2013 ↩︎
5. Congressional Budget Office, “Letter to the Honorable John Boehner Providing an Estimate for H.R. 6079, the Repeal of Obamacare Act,” July 24, 2012. ↩︎
6. The House of Representatives voted on the balanced budget amendment on November 18, 2011; the measure did not receive the two-thirds majority needed to advance a constitutional amendment. On December 14, 2011, two balanced budget amendments failed in the Senate. ↩︎
7. Kaiser Family Foundation, “The Budget Control Act of 2011: Implications for Medicare,” November 2012. ↩︎
8. Office of Management and Budget, “OMB Report to the Congress on the Joint Committee Sequestration for Fiscal Year 2013,” March 1, 2013. ↩︎
9. Congressional Budget Office, “Bipartisan Budget Act of 2013,” December 11, 2013, and the Congressional Budget Office, “Estimate of Amendment to H.J. Res. 59, Pathway to SGR Reform Act of 2013,” December 11, 2013. ↩︎

The Centers for Medicare & Medicaid Services (CMS) recently established 12 new Medicaid and CHIP eligibility and enrollment performance indicators for states to report beginning in October 2013. These indicators provide insight into the performance of new eligibility and enrollment policies established under the Affordable Care Act (ACA). In December 2013, CMS released initial reports for a subset of the indicators. This brief provides an overview of the new performance indicators; the initial data; and the opportunities and challenges associated with reporting, analyzing, and interpreting the data. In sum it finds:

• Reporting of the new eligibility and enrollment performance indicators marks a significant improvement in timely and actionable data reporting for Medicaid and CHIP.
• The initial reported data suggest that enrollment in Medicaid and CHIP was off to a strong start since the beginning of open enrollment for the new Health Insurance Marketplaces.
• States are in varying stages of readiness to report the indicators, and data gaps and limitations constrain analysis of early data.
• CMS will update the performance indicators monthly and, over time, plans to report the full set of measures, which will offer a broader view of Medicaid and CHIP eligibility and enrollment performance.
• As the quality and completeness of the performance data improve, they will provide more insight into program operations and allow for greater analysis both within and across states over time

BACKGROUND

The ACA makes key changes to Medicaid eligibility and enrollment. One key way the ACA seeks to reduce the number of uninsured is through an expansion of Medicaid eligibility to nearly all low income adults with incomes at or below 138% FPL. As enacted in the law, this expansion would occur nationwide, but the Supreme Court ruling on the ACA effectively made the expansion a state option. As of December 2013, 25 states and DC are moving forward with the expansion in 2014. The ACA also establishes new streamlined Medicaid eligibility and enrollment policies and a single application for Medicaid, CHIP, and subsidized Marketplace coverage.  All states must implement these simplifications, which are designed to connect people to coverage regardless of where or through what means a person applies for coverage, regardless of whether they implement the expansion.¹  Performance data will be important for understanding the impact of these policies.

To implement the new eligibility and enrollment policies, most states needed to make major upgrades to their Medicaid eligibility and enrollment systems, providing an opportunity to improve data collection and reporting capacity. To support this work, CMS made available a substantially enhanced 90 percent federal matching rate for systems development. CMS also set a data reporting standard for the new systems to meet in order for states to qualify for the enhanced funding. Through a series of subsequent regulations and policy guidance, CMS indicated an intention to establish performance measures and, in August 2013, released 12 eligibility and enrollment performance indicators for states to begin reporting as of October (Box 1). However, by the time the indicators were released in August, many states had completed the bulk of their system builds, while others were still working with legacy systems, making it difficult for some states to accommodate the reporting requirements. Some states indicated that it will take time before they will be able to report the data as requested and that they will need to re-program their systems or manually extract data to do so.² 

KEY FINDINGS

Reporting of the new eligibility and enrollment performance indicators marks a significant improvement in timely and actionable data reporting for Medicaid and CHIP. States and the federal government have used performance data for many years for reporting, management, and evaluation, but reporting of timely and high-quality data has historically been inconsistent. Many states have been limited in their ability to utilize performance data because they have been relying on outdated or fragmented systems that do not provide for the collection and reporting of data.⁴  At the federal level, state-reported data are aggregated and used for national reporting on enrollment, spending, use of services, and quality. However, to date, there have been limitations in the timeliness, consistency, quality, and scope of these national data.⁵  Since 2009, CMS has undertaken cross-cutting efforts to improve the strength of Medicaid and CHIP data reporting and increase the use of these data in measuring program performance and informing decision-making.⁶  The new eligibility and enrollment performance indicators are the first major product of this effort and will provide some of timeliest data on Medicaid eligibility that have ever been reported.

Preliminary reported data suggest that enrollment in Medicaid and CHIP was off to a strong start since the beginning of open enrollment for the new Health Insurance Marketplaces. In December 2013, CMS reported on a subset of the performance indicators, focused on the number of applications received and the number of eligibility determinations made in October and November 2013 (Table 1). All 50 states and DC reported one or more of the measures, which is significant given the first-time nature of this data reporting. The data show that during October and November 2013:

• More than 4.2 million applications were submitted directly to Medicaid and CHIP agencies. These reflect applications for states’ existing Medicaid and CHIP programs as well as for adults who became newly eligible for coverage in states that are implementing the Medicaid expansion effective January 2014.⁷  In addition, State-Based Marketplaces (SBMs) received some 549,373 applications for Medicaid, CHIP, or advance premium tax credits for Marketplace coverage.
• Together, state Medicaid agencies and SBMs made nearly 3.9 million total new determinations for Medicaid and CHIP.  These reflect determinations for all Medicaid eligibility groups, not just for adults made newly eligible for Medicaid by the ACA’s Medicaid expansion. The bulk of the determinations were for Medicaid, reflecting the program’s broader size and scope.  The number of Medicaid and CHIP applications received and determinations made were lower in November than in October, which CMS attributed to the preliminary nature of the November data and fewer work days.
• The data do not reflect Medicaid and CHIP applications initiated through the Federally-Facilitated Marketplace (FFM), which is determining or assessing Medicaid eligibility in 36 states. In separate data, HHS reported that as of the end of November 2013, the FFM and SBMs had determined or assessed just over 803,000 individuals as eligible for Medicaid or CHIP, with most (534,000) performed by SBMs.⁸  However, the Marketplace data aggregates Medicaid and CHIP determinations and assessments and it is not directly comparable to the determination data released by CMS. When CMS begins reporting the full set of performance indicators, they will provide more comprehensive information on Medicaid enrollment.

States are in varying stages of readiness to report the indicators, and data gaps and limitations constrain analysis of early data. Because states are continuing to develop their reporting capabilities, some were not able to report all of the indicators and some reported preliminary data. Moreover, the reported data are not consistent across states. For example, some states include data for CHIP or renewals in their application data, while others do not.  In addition, there are some issues that arise from how the data are reported. For example, some types of applications that were counted as submissions to Medicaid and CHIP agencies in the baseline data are counted as submissions to SBMs in October and November, and the number of submitted applications does not equal the number of individuals applying for coverage, because more than one person may be included on an application. Many of these limitations reflect the first-time nature of the data collection, challenges in collecting consistent data across states, and operational and reporting differences across different entities (Medicaid and the SBMs). These limitations restrict the ability to draw significant conclusions and to make cross-state comparisons. Reporting will improve over time as states and CMS gain experience and retool the systems with which they collect data.

CMS will update the performance indicators monthly and, over time, plans to report the full set of measures, which will offer a broader view of Medicaid and CHIP eligibility and enrollment performance. The initial data released in December are a subset of the full new set of 12 eligibility and enrollment performance indicators that CMS has asked states to report (Box 2)⁹ . Appendix A provides a more detailed overview of the information each measure will provide and Appendix B provides measure definitions and reporting specifications. Together, the measures will provide insight into call center operations, overall demand for Medicaid and CHIP coverage, how applications are flowing through the system, Medicaid/CHIP agency workloads, the efficiency of eligibility and enrollment systems, and enrollment changes. This information can identify trends and potential areas of efficiency and inefficiency and will provide early information on the impact of the ACA’s new eligibility and enrollment policies.

As the quality and completeness of the performance data improve, they will provide more insight into program operations and allow for greater analysis both within and across states. The data’s greatest analytic value may be in measuring progress over time, identifying for example, changes in application volume or improved efficiency in application processing. As more consistent data are reported over a period of time, it will become possible to develop standards or benchmarks, which do not currently exist. However, when examining the data across states, it will still be important to recognize differences in state policies, operations, and demographics that may contribute to substantial variation in the performance measures.¹⁰   States have made different policy choices and have achieved varied progress to date in implementing the Medicaid eligibility and enrollment changes under the ACA, which challenge data interpretation.¹¹ 

CONCLUSION

The new collection and reporting of eligibility and enrollment performance indicators are a significant step forward in the ability to use timely data to drive program improvement and assess performance in Medicaid and CHIP. With the new Marketplace enrollment metrics, the data will help provide an understanding of enrollment performance across coverage programs. Ultimately, states and the federal government will be able to employ these data as a management tool to guide decision-making, strengthen processes and inform policy changes and resource allocation. Over time, the measures can begin to provide insight into program performance by examining changes within a state, by examining measures across states or to develop national standards or goals. However, analysis of early performance data remains limited due to gaps and variations across states in reported data.

Looking forward, as the completeness, consistency, and quality of the data improve, it will allow for greater analysis and interpretation. Even then, the new performance measures alone will not provide a holistic assessment of whether Medicaid and CHIP are meeting ACA coverage goals. Fully assessing the impact of ACA will require broader outcome measures such as the reduction in the number of the uninsured, the rate at which eligible people enroll in coverage, and continuity of coverage for people over time. These measures generally are obtained through survey data and often can take years to establish.

Appendix A: Overview of Medicaid and CHIP Eligibility and Enrollment Performance Indicators

Call center operations. CMS established three measures for call center operations: call volume, average wait times for a call to be answered, and the rate at which calls are abandoned. These measures will provide insight into consumers’ level of demand for call center assistance.¹²  Average wait times and call abandonment rates will also inform high-level assessments of the extent to which the call centers manage call volume efficiently and effectively. These measures do not provide information on the types of assistance consumers seek through the call centers or their levels of satisfaction with the assistance they receive.  States may define “call center” as any call center, hotline, or combination of hotlines that take a significant number of calls regarding applying for or enrolling in Medicaid or CHIP, so the data may not be comparable across states. The measures will not reflect calls related to Medicaid and CHIP that are received by call centers overseen or operated by the Marketplaces.

Numbers of applications, transfers, and renewals. The total number of Medicaid and CHIP applications received and accounts up for renewal will indicate the overall volume of traffic to Medicaid and CHIP eligibility and enrollment systems, informing assessments of overall Medicaid/CHIP agency workload and the demand for coverage. This demand may fluctuate for a variety of reasons, including due to responses to outreach campaigns, changing economic conditions, or state policy choices. States will also report the total number of Medicaid and CHIP cases transferred from Marketplaces. This measure will provide an indication of what share of total Medicaid and CHIP applications are initiated through the Marketplaces as well as of the volume of coordination occurring between the Medicaid/CHIP agency and the Marketplace. The measure will not provide significant insight into how well or seamlessly that coordination is occurring, since there are no measures to indicate whether any transfers are unsuccessful or whether individuals experience any gaps or disruptions in coverage. Additionally, states will report the number of applications consumers submit online, by mail, in person, or by phone, providing insight into consumers’ preferred mode of application submission. The share of initiated applications that are completed and overall consumer experiences with the application process are not being measured.

Eligibility determinations. The total number of individuals determined eligible or ineligible for Medicaid or CHIP during the reporting period will provide information into the outcome of submitted applications. ¹³  In reporting the number of individuals determined ineligible for Medicaid and CHIP, CMS has requested that states separately report the number determined ineligible and those denied due to lack of necessary information. This will enable analysis of how many and what proportion of negative determinations that are made due to difficulties obtaining necessary information.¹⁴  States will also separately report administrative eligibility determinations that states make using data from other programs like SNAP. As of December 2013, five states are enrolling eligible individuals in Medicaid based on data available through SNAP and three are enrolling eligible parents based on existing Medicaid and CHIP enrollment data for their children ¹⁵ 

Application processing times and pending applications. Beginning in 2014, states will also report application processing times and the number of applications still pending as of the last date of the reporting period. These indicators will provide information on the efficiency of application processing through the system, and can help states and CMS identify potential delays or problems with processing. ¹⁶ 

Total enrollment. States will report total enrollment of all individuals in Medicaid and CHIP as of the last day of the reporting period.  Enrollment will be reported separately for children and adults and for individuals determined eligible based on Modified Adjusted Gross Income (MAGI) as well as those determined eligible under other standards. This measure will provide insight into overall trends in enrollment over time and allow for comparisons between these groups. The data will not separately identify enrollment among individuals made newly eligible by the Medicaid expansion for low-income adults, making it difficult to draw conclusions about the impact of the Medicaid expansion using this data.

Appendix B: Definitions of Medicaid and CHIP Eligibility and Enrollment Performance Indicators

1. S. Artiga and R. Rudowitz, “The Many Roads to Medicaid: An Overview of How People are Connecting to the Program Today,” Kaiser Commission on Medicaid and the Uninsured (December 2013). ↩︎
2. National Association of Medicaid Directors, “NAMD ACA Snapshot –Open Enrollment, Week 3;” (October 21, 2013);  “NAMD ACA Snapshot—Open Enrollment,  Week 4,”  (October 28, 2013) “NAMD ACA Snapshot – Open Enrollment, Week 5” (November 4, 2013);  “NAMD Open Enrollment Snapshot –Open Enrollment, Week 7” (November 25, 2013);   “NAMD ACA Snapshot – Open Enrollment, Week 10” (December 16, 2013) http://medicaiddirectors.org/. ↩︎
3. These systems would otherwise have been matched at the 50 percent Medicaid administrative matching rate. CMS is matching the costs of developing and building systems at 90 percent; the cost of operating the systems will be matched at 75 percent. ↩︎
4.   “Performance Measurement Under Health Reform, Proposed Measures for Eligibility and Enrollment Systems and Key Issues and Trade-offs to Consider, Kaiser Commission on Medicaid and the Uninsured, (December 2011); “C. Trenholm et al.,“Using Data to Drive State Improvement in Enrollment and Retention Performance,” Maximizing Enrollment for Robert Wood Johnson Foundation (November 2011). . ↩︎
5. P. Thompson, “CMS Initiatives to Improve Data for Medicaid Program Operations and Evaluation,” presentation to the Medicaid and CHIP Payment and Access Commission (October 28-29, 2010), available at: https://docs.google.com/viewer?pid=sites&srcid=bWFjcGFjLmdvdnxtYWNwYWN8Z3g6NDlmNTk3YzJlYzZkZDAzMg ↩︎
6. P. Thompson presentation. ↩︎
7. 23 states were implementing the Medicaid expansion at the start of October 2013. Ohio and Michigan are also implementing the expansion, but had not yet begin processing applications for newly eligible adults as of October. ↩︎
8. ASPE Issue Brief, “Health Insurance Marketplace: December Enrollment Report For the Period: October 1-November 30,” December 11,2013’ ASPE Issue Brief, “Health Insurance Marketplace:  November Enrollment Report,”  November 13,2013. ↩︎
9. CMS notes that data released for the first three months of open enrollment through the Marketplace (October 2013-December 2013) will remain focused on applications and eligibility determinations. The agency anticipates reporting on additional indicators, including total enrollment, after Medicaid coverage for newly eligible individuals begins in January 2014. ↩︎
10. National Association of Medicaid Directors,  “NAMD Open Enrollment Snapshot –Open Enrollment, Week 7” (November 25, 2013) http://medicaiddirectors.org/. ↩︎
11. M. Heberlein et al., “Getting into Gear for 2014: Shifting New Medicaid Eligibility and Enrollment Policies into Drive.” Kaiser Commission on Medicaid and the Uninsured (November 2013). ↩︎
12. Because of the definition of ‘call center’ used by CMS, data from different states may not be comparable. The measures may be subject to overcount, as helplines may receive calls about other benefits such as TANF and SNAP. Conversely, a state may experience undercount, due to calls about Medicaid that are directed to a FFM exchange or if a call center is excluded from the report because it lacks the capability to report on call volume. ↩︎
13. This data will not inform observations about the accuracy of eligibility determinations.  CMS is developing approaches to measuring the accuracy of determinations of eligibility and ineligibility that align with Affordable Care Act eligibility rules. Guidance in letter to states from D. Taylor and C. Mann, Centers for Medicare and Medicaid Services, “ Payment Error Rate Measurement (PERM) eligibility reviews, Medicaid Eligibility Quality Control (MEQC) Program, and development of an interim approach for assessing payment error for eligibility,” SHO 13-005 (August 2013), available at: http://www.medicaid.gov/Federal-Policy-Guidance/downloads/SHO-13-005.pdf ↩︎
14. CMS is not as part of this measurement effort collecting disenrollment and denial reason codes, which would provide data that CMS and states could use to identify, for example, whether individuals are denied because of an increase in income, a move out of state, or because they were missing information or verification. M. Harrington, C. Trenholm, A. Snyder, “New Denial and Disenrollment Coding Strategies to Drive State Enrollment Performance,” Maximizing Enrollment Issue Brief, published by the Robert Wood Johnson Foundation and National Academy for State Health Policy (October 2012). ↩︎
15. Table published online, “Targeted Enrollment Strategies.” Centers for Medicare and Medicaid Services (October 2013), available at: http://medicaid.gov/AffordableCareAct/Medicaid-Moving-Forward-2014/Targeted-Enrollment-Strategies/targeted-enrollment-strategies.html ↩︎
16. CMS has long set timeframes for the time required to make eligibility determinations of 45 days for most Medicaid populations and 90 days for beneficiaries whose eligibility is based on being disabled.   CMS has recently reiterated those outer limits, but also stated an expectation that eligibility determinations can be carried out significantly more quickly, and in most cases in “real time,” due to simplified rules and improved technology. Center for Medicaid and CHIP Services, “Request for Information:  Performance Indicators for Medicaid and Children’s Health Insurance Program Business Functions: Solicitation of Public Input” and final regulation 77 CFR 17144, “Eligibility Changes under the Affordable Care Act of 2010,” (March 23, 2012). ↩︎

The Affordable Care Act (ACA), signed into law in 2010, is expected to expand insurance coverage for millions of people in the United States, including people with HIV infection.  While several provisions of the ACA have implications for people with HIV, two are expected to have the most far reaching effects on coverage – the expansion of Medicaid eligibility and the creation of new Health Insurance Marketplaces where individuals can purchase private coverage. This issue brief, based on analysis of nationally representative data from the Centers for Disease Control and Prevention’s (CDC’s) Medical Monitoring Project (MMP), provides the first national estimates of how many people with HIV who are receiving medical care may gain new insurance coverage due to the ACA through both Medicaid expansion and the state Marketplaces.  It finds that of the approximately 407,000 people with HIV between the ages of 19-64 in care, most (87%) have incomes below 400% FPL. While Medicaid is their single largest source of coverage (covering about 4 in 10), close to 70,000 (17%) are currently uninsured. Of these, almost 23,000 would gain coverage through the Marketplace (most of whom would be eligible for financial assistance), and approximately 46,910 would be eligible for Medicaid, if all states were to expand Medicaid. However, only 26 states plan to expand their Medicaid programs as of October 2013, which could reduce the number gaining coverage through Medicaid expansion by more than 40%. For individuals left out of coverage expansions, the Ryan White HIV/AIDS Program will continue to be critical; it will also likely continue to remain critical in filling the gaps in insurance coverage for HIV care for many insured people with HIV, as it does today. Lastly, while this analysis focuses on the approximately 407,000 people with HIV between the ages of 19-64 who are already in care, more than 700,000 people with HIV are not yet in care.  Based on the findings presented here, an additional 124,000 could gain new coverage due to the ACA, removing one obstacle to care seeking and bringing the total estimated number of people with HIV who could gain new coverage close to 200,000.

INTRODUCTION

The Affordable Care Act (ACA), signed into law in 2010, is expected to expand insurance coverage for millions of people in the United States, including people with HIV.  While several provisions of the ACA have implications for people with HIV,¹  two are expected the have the most far reaching effects on coverage – the expansion of Medicaid eligibility to include most Americans with incomes up to 138% of the federal poverty level (FPL) (although the Supreme Court’s 2012 ruling effectively made the Medicaid expansion optional for states) and the creation of new Health Insurance Marketplaces where individuals can purchase private coverage, including subsidized coverage for those with lower incomes.

Despite the importance of these provisions for people with HIV, there are currently no national estimates of the number of people with HIV likely to gain new insurance coverage due to the ACA.²   This issue brief, based on analysis of nationally representative data from the Centers for Disease Control and Prevention’s (CDC’s) Medical Monitoring Project (MMP), provides the first such estimates, looking at how many uninsured people with HIV in care could gain new Medicaid coverage, as well as how many could be eligible for subsidized coverage in state Marketplaces. We estimate the impact of state decisions about expanding Medicaid on the reach of the ACA for people with HIV. We also discuss the current and estimated future role of the Ryan White HIV/AIDS Program, which provides care to people with HIV who are uninsured or underinsured. Finally, while our analysis focuses on those who are already in regular care (an estimated 37% of all people living with HIV in the United States, or 45% of those who have been diagnosed with HIV), we also discuss the implications of the ACA for the more than 700,000 people with HIV who remain either undiagnosed or not in regular HIV care.³   A detailed description of our methods can be found in Appendix A.

BACKGROUND ON KEY ACA INSURANCE EXPANSION PROVISIONS FOR PEOPLE WITH HIV

This issue brief analyzes the potential impact of two key ACA-related provisions for people with HIV – the expansion of Medicaid eligibility and the creation of new Health Insurance Marketplaces in each state.1

Medicaid Expansion

One of the most important components of the ACA for people with HIV is the expansion of Medicaid eligibility.  Medicaid is the largest payer of HIV care in the United States and a critical source of care and services, including antiretroviral therapy (ART), for people with HIV.⁴  However, under current Medicaid eligibility rules, to qualify for the program, one has to meet financial eligibility criteria and belong to a group that is “categorically eligible” for Medicaid (such as children, parents with dependent children, pregnant women, and individuals with disabilities).  Federal law categorically excludes non-disabled adults without dependent children, unless a state has obtained a waiver or uses state-only dollars to cover them. Medicaid eligibility rules have presented a “catch-22” for many low-income people with HIV who cannot qualify for Medicaid until they are already quite sick and disabled (usually having progressed to an AIDS diagnosis), despite the fact that early access to ART could help stave off disability and progression of HIV disease as well as prevent further HIV transmission. Because of the benefits of treatment, current national HIV treatment guidelines recommend initiation of ART as soon as one is diagnosed with HIV.⁵ 

Yet current Medicaid eligibility for low income childless adults is quite limited. Only nine states, which account for 22% of people diagnosed with HIV, provide Medicaid benefits to this population. An additional 16 states, accounting for 30% of people diagnosed with HIV, provide coverage that is more limited than Medicaid (e.g., more limited benefits). Almost half (48%) of people with HIV live in the twenty-six states that provide no coverage at all for low-income childless adults.^6 ,7 

The ACA established a new minimum Medicaid income eligibility level of 138% FPL (about $16,000 for an individual in 2013) for most citizens and legal residents and removed the categorical eligibility requirement.  The law requires all states to expand eligibility as of 2014. However, a Supreme Court ruling in June 2012, while upholding the ACA, effectively made Medicaid expansion a state option, and it is uncertain how many states will expand.  As of October 22, 2013, 26 states have indicated they will expand Medicaid (57% of people with HIV live in these states), while 25 are not planning to expand Medicaid at this time (43% of people with HIV live in these states).⁸  (See Figure 1).

Health Insurance Marketplaces (Exchanges)

The ACA requires most U.S. citizens and legal residents to have qualifying health insurance as of 2014.  To help people access affordable coverage, the ACA creates new Health Insurance Marketplaces (also called “exchanges”) in every state as of 2014. Health Insurance Marketplaces are intended to create a more competitive market for individuals and small businesses buying health insurance. They offer a choice of different health plans, certifying plans that participate and providing information to help consumers better understand their options by making it easier to compare benefits across plans. Importantly, the ACA provides financial assistance for people with low incomes to purchase insurance in the Marketplace. These include tax credits to offset premium costs for those with incomes between 100% FPL and 400% FPL and subsidies to reduce cost-sharing expenses for those with incomes between 100% and 250% FPL.

Other Key Provisions for People with HIV

The ACA also includes insurance protections to help individuals obtain coverage in the Marketplace and elsewhere, including: an end to pre-existing condition exclusions (which had allowed insurers to deny coverage for those with health conditions such as HIV), a ban on premium rate setting based on health status, and an end to annual and lifetime caps on coverage. These provisions address issues that have presented particular barriers to people with HIV (and others with pre-existing health conditions and/or high care costs).

FINDINGS

The findings below are based on analysis of data from CDC’s MMP, focusing on non-elderly adults (ages 19-64) with HIV who were in regular care in 2009 (see methodology for more detail).  As mentioned above, MMP collects data representative of the 37% of all people with HIV in the United States (or 45% of those who have been diagnosed) who are in care. (See Figure 2).

Insurance Coverage and Income of Nonelderly Adults with HIV in Care

There were an estimated 406,970 non-elderly adults (ages 19-64) with HIV in care in January to April 2009.  Medicaid was the largest source of insurance coverage (41%, including those dually covered by Medicare), followed by private insurance (30%).  A much smaller share were covered by Medicare alone (6%), and 17% were uninsured. The remaining 5% were covered by other public sources. (See Figure 3).

The Ryan White HIV/AIDS Program plays a significant role for people with HIV in care, including both those who have insurance and those who are uninsured. In 2009, 40% of all people with HIV in care received medical services, medications, or other services through the Ryan White HIV/AIDS Program.  The program played a bigger role for those who were uninsured than those who were insured. Among the uninsured, 81% relied on the Ryan White HIV/AIDS Program. Almost a third (31%), however, of the insured also relied on the Ryan White Program, suggesting that a significant proportion of insured persons needed services that were not covered by their insurance. In fact, of those receiving services through the Ryan White HIV/AIDS Program, two thirds (65%) were insured  (See Figure 4).  Overall, it is likely that the Ryan White HIV/AIDS Program played an even bigger role for people with HIV than estimated here, since this analysis only included those who were aware of and self-reported receiving medical services, medications or other services through the program.  As the Ryan White HIV/AIDS Program provides funds directly to service organizations, some persons might not have known that the services they received were paid for by the Ryan White HIV/AIDS Program.

Six in 10 (61%) nonelderly adults with HIV in care were low income, with incomes at or below 138% FPL; more than four in ten (44%) had incomes below 100% FPL ($10,830 for single person in 2009 and $11,490 in 2013). About a quarter (26%) had incomes between 139% FPL and 400% FPL.  (See Table 1).

Looking at the distribution of people with HIV in care by both coverage type and income, those who were uninsured or covered by Medicaid had lower incomes than those with Medicare, private or other public coverage: more than half of those who were uninsured or covered by Medicaid had incomes less than 100% FPL.  A higher proportion of the privately insured had incomes at or greater than 400% FPL (See Table 2).

Estimates of the Effects of ACA Insurance Expansions in 2014

Nearly 70,000 adults with HIV in care were uninsured. Given the income profile of the uninsured population with HIV in care, the vast majority (96%) would likely be eligible for free or subsidized coverage under the ACA’s Medicaid or Marketplace provisions if all states expanded Medicaid. If not all states expand, fewer will be eligible for Medicaid, and a small number of those who are ineligible because their state does not expand could obtain subsidized coverage in the Marketplace.

Medicaid Expansion

If all states were to expand Medicaid, almost 47,000 uninsured adults with HIV in care could gain Medicaid coverage.  If this entire group enrolled, the share of people with HIV in care who are covered by Medicaid would increase from 41% to 53%.  However, if only the 26 states currently planning to expand Medicaid do so, then fewer uninsured adults with HIV would be newly eligible for the program. As described above, 43% of people with HIV live in states that are currently not planning to expand Medicaid. Because data on the income and insurance distribution of people living with HIV at the state level were unavailable, we applied the national income and insurance distribution to states that are not planning to expand Medicaid. Assuming that the HIV population in states not planning to expand Medicaid has the same income and insurance distribution as people with HIV in care nationally, state decisions not to expand Medicaid could decrease the number of eligible uninsured with HIV by more than 20,000 people, to 26,560.  An estimated 20,350 of those who could gain new Medicaid eligibility if their state expanded Medicaid live in states not planning to expand, with Texas and Florida alone accounting for about half.  (See Table 3).

Health Insurance Marketplaces

As of 2014, almost 20,300 currently uninsured people with HIV in care could be newly eligible for subsidized coverage in Health Insurance Marketplaces, meaning their incomes are between 139% FPL and 400% FPL. Just over 2,500 uninsured adults with HIV in care who have incomes above 400% may also gain coverage under the ACA through Health Insurance Marketplaces, although they would not be eligible for financial assistance. It is possible that many people in this group cannot currently afford coverage due to their illness. While subsidies are not available for people in this income range, these individuals may benefit from new rules that cap annual and lifetime dollar limits on coverage, ban premium rate setting based on health status, and end pre-existing condition exclusions.

However, the number of people who would be eligible for and seek subsidized coverage through Marketplaces is dependent on whether or not states decide to expand Medicaid.  In states that do not expand Medicaid, uninsured individuals with incomes between 100% FPL and 138% FPL may be eligible for subsidized coverage in Marketplaces. Thus, a small share of low-income people with HIV who would be left out of the Medicaid expansion due to their state’s decision not to expand could gain subsidized Marketplace coverage. We estimate that approximately 4,890 people with HIV in care have incomes between 100 and 138% FPL and live in states that are not expanding Medicaid.  People with incomes below 100% FPL in states that do not expand Medicaid may be left without an ACA coverage option as they are neither eligible for Medicaid nor subsidized coverage. While they could purchase coverage through the Marketplaces, they are not eligible for subsidized coverage, and coverage is likely to be unaffordable.  We estimate that approximately 15,460 people with HIV in care fall into this category. (See Figure 5). For these individuals, the Ryan White HIV/AIDS Program could play a significant role in helping them to purchase private coverage in the Marketplace.

Overall Impact

Taken together, the combination of Medicaid expansion and the ACA’s Health Insurance Marketplace could provide new coverage to the close to 70,000 people with HIV in care who are currently uninsured. If all states expanded Medicaid, 46,910 of these people would be eligible for Medicaid and 20,290 would be eligible for subsidized coverage in the Marketplace.  If only the 26 states planning to expand Medicaid as of October 2013 do so, 26,560 would be eligible for Medicaid and more (25,190) would qualify for subsidized coverage in the Marketplace. However, 17,980 would remain ineligible for Medicaid and would not be eligible for financial assistance in the Marketplace. (See Table 4 and Figure 5). For these individuals, the Ryan White HIV/AIDS Program will be an important source of care and other HIV services.

In addition, while most people with HIV who already have insurance will not experience a change in their coverage after ACA implementation, it is possible that some may choose to change their coverage type. For example, some of those who currently have private coverage may purchase that coverage on their own directly from an insurer, rather than receiving it as a fringe benefit through a job. These individuals could choose to take advantage of the Marketplaces, as well as the subsidies available, where they may have lower premiums and broader benefits packages.  We do not have estimates of the number or share of people with HIV in care who purchase coverage on their own (versus receive group coverage through an employer). However, the share of the general population with nongroup coverage is quite low (5%),⁹  and it is unlikely that a much higher share of people with HIV obtain nongroup coverage (particularly given the pre-existing condition exclusions that have been in place and did not end until January 1, 2014).

Further, some people with HIV in care who have private coverage may become newly-eligible for Medicaid (although research on the general population indicates that a very small share overall switches from private coverage to Medicaid when Medicaid is newly-available to them.)¹⁰ 

DISCUSSION

Key insurance expansion provisions of the Affordable Care Act will provide new health coverage for the approximately 70,000 uninsured individuals living with HIV in care today and may also provide new options to some who already have coverage. As this analysis finds, close to 47,000 people with HIV who are currently uninsured could be eligible for Medicaid if all states choose to expand Medicaid eligibility to 138% FPL; an additional 20,290 could be eligible for subsidized coverage in the new Health Insurance Marketplaces, and about 2,500 have incomes too high to be eligible for financial assistance but could purchase coverage in the Marketplace. However, if not all states expand Medicaid – and only 26 have indicated that they will as of October 2013– many fewer will be eligible for Medicaid. While some of these individuals will be able to obtain subsidized coverage in the Marketplace, the majority of uninsured people with HIV have incomes below 100% FPL, making them ineligible for subsidized coverage. For this subset, the Ryan White HIV/AIDS Program would remain a critical source of support. The Ryan White HIV/AIDS Program will also likely continue to be important for many who gain new coverage, given that two-thirds of current Ryan White HIV/AIDS Program clients already have insurance.

While this analysis focuses on people with HIV who are already in the care system, there are more than 700,000 who currently are not in care, either because they remain undiagnosed or are not receiving regular medical care. (See Figure 1). Many of these individuals are also likely to be eligible for new coverage.  While little is known about their current health insurance and income status, to the extent that it matches that of people with HIV in care, an additional 124,000 people with HIV not receiving regular medical care could be newly eligible for coverage either through Medicaid or in the Marketplace. This would bring the total estimated number of people with HIV who could gain new coverage to close to 200,000.

It is important to note that although the ACA will significantly expand coverage for people with HIV, this newly insured population represents only a fraction (<1%) of the 25 million people expected to gain coverage overall and is therefore unlikely to substantially affect the risk pool of people gaining new coverage;¹¹  currently, people with HIV on Medicaid represent less than 2% of total Medicaid costs and less than 1% of enrollees.¹²   The ACA represents an important opportunity to draw this high-need population into broader coverage and to address ongoing unmet needs for coverage and care. At the same time, the Ryan White HIV/AIDS Program will continue to be an important source of care and other HIV-related services for those who do not gain new coverage or need additional financial assistance to pay for their HIV care going forward.

APPENDIX A: METHODS

Data source:

This analysis relies on data from the Medical Monitoring Project (MMP), as recommended by the Institute of Medicine in a report commissioned by the White House to help identify data sources for monitoring the effects of the Affordable Care Act (ACA) on HIV care and coverage in the United States.¹³  MMP is a supplemental HIV surveillance system designed to produce nationally representative estimates of behavioral and clinical characteristics of HIV-infected adults receiving medical care in the United States.^14 ,15  MMP is a complex-sample, cross-sectional survey. For the 2009 data collection cycle, first, U.S. states and territories were sampled, then, facilities providing HIV care, and finally adult persons aged 18 years or older receiving at least one medical care visit in participating facilities between January and April 2009. Data were collected via face-to-face interviews and medical record abstractions from June 2009 to May 2010. All sampled states and territories participated in MMP (California, Delaware, Florida, Georgia, Illinois, Indiana, Michigan, Mississippi, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Puerto Rico, Texas, Virginia, and Washington). Of 603 sampled facilities within these states or territories, 461 participated in MMP (facility response rate 76%), and of 9,338 sampled persons, 4,217 completed both an interview and a linked medical record abstraction (adjusted patient-level response rate 51%) for a combined response rate of 39%. Data were weighted based on known probabilities of selection at state or territory, facility, and patient levels. In addition, data were weighted to adjust for non-response using predictors of patient-level response including facility size, race/ethnicity, time since HIV diagnosis, and age group. This analysis includes information on 4,067 participants, who, after weighting for probability of selection and non-response, are estimated to represent a population of 406,970 HIV-infected adults aged 19-64 years receiving medical care in the United States between January and April 2009.

Data for this analysis were collected in 2009 – prior to the passage of the ACA.  They do not, therefore take into account increases in in the number of people living with HIV (estimated to increase by about 3% annually),¹⁶  and as such likely underestimate the number who may be newly eligible for coverage as of 2014. They also assume that the income and insurance profile of people with HIV remains the same between 2009 and 2013, just before the implementation of the major ACA coverage expansions examined here.

Analysis:

This analysis focuses on individuals between age 19 and 64, the age group targeted for coverage expansions by the ACA.¹⁷   For all respondents in MMP, we examined self-reported insurance coverage as well as payment source for antiretroviral medicines using responses to the following questions “During the past 12 months, what were all the kinds of health insurance or health coverage you had?” and “During the past 12 months, what were the ways your antiretroviral medicines were paid for?”  Response options included insurance programs (Medicaid, Medicare, private insurance, Veteran’s Administration, Tricare or CHAMPUS coverage, other public insurance, and other unspecified insurance) as well as medical care, medications and other services paid for by the Ryan White HIV/AIDS Program (Ryan White or the AIDS Drug Assistance Program). It is important to note that HIV patients may not be aware of all the services they receive that are paid for by the Ryan White HIV/AIDS Program (the program provides funding directly to service organizations in many cases) and therefore, the estimates of the number of individuals who receive Ryan White HIV/AIDS Program services is likely an underestimate. Because respondents in MMP may indicate more than one type of coverage, we relied on a hierarchy to group people into mutually-exclusive coverage categories. Specifically, the hierarchy groups people into coverage types in the following order:

1. Medicaid coverage, except for those dually eligible for Medicare
2. Dually eligible for Medicaid and Medicare coverage
3. Private coverage
4. Medicare coverage only
5. Other public coverage, including Tricare/CHAMPUS, Veteran’s Administration, or city/county coverage

In most cases, this hierarchy classifies individuals according to the coverage source that serves as their primary payer. The exception is Medicaid, which captures anyone with Medicaid coverage (even if Medicaid is not the primary payer) in order to account for the undercount of Medicaid coverage in population-based surveys.¹⁸   People who do not report any of the sources of insurance coverage above are classified as uninsured.  As noted above, we separately assess whether each respondent received assistance through the Ryan White HIV/AIDS Program.

Lastly, we examine income for each respondent as a share of the federal poverty level (FPL). MMP captures income in terms of either monthly or annual dollar income, and it also measures how many people are supported by that income. We use these two variables to translate dollar income to corresponding share of FPL, using 2008 HHS Federal Poverty Guidelines for persons interviewed in 2009 and 2009 HHS Federal Poverty Guidelines for persons interviewed in 2010. Because the income measure in MMP is categorical, rather than continuous, we assign each respondent the mid-point of the category for their income. We conducted a sensitivity analysis (explained below) to assess to what extent using the mid-point could lead us to over or under-estimate the number gaining coverage under the ACA. We group individuals into income categories that correspond with income eligibility for coverage under the ACA: less than 100% FPL, between 100 and 138% FPL, between 139 and 399% FPL, and greater than or equal to 400% FPL.

Respondents for whom income or insurance coverage information were missing (3.2% and 0.2% of the unweighted sample, respectively) were excluded. However, in reporting total number of people with HIV in care in each group, we assumed that the insurance and income profile of those with missing data was the same as for those with complete data. In reporting estimates, we exclude point estimates where the relative standard error is greater than 30% or where the unweighted cell size was less than 5. These restrictions affected some of the estimates for the population at or above 400% FPL.

Limitations:

MMP is nationally representative only of those with HIV who are in care.  The survey does not include those who are diagnosed but not in care, nor does it capture people with HIV who are not diagnosed (see Figure 2).  People with HIV who are not in care or who have not been diagnosed also will be affected by ACA coverage provisions and are likely to come into care as a result of outreach efforts. However, we have limited information on the basis of which to extrapolate MMP findings to this population. Although we do not attempt to estimate coverage changes for people with HIV not in care, we do discuss the potential impact of the ACA on the population of all people infected with HIV regardless of diagnosis or care status, using CDC estimates of that population.

MMP also only allows for analysis at the national level.  Because not all states are moving forward with the Medicaid expansion, our national estimates of the impact of ACA coverage provisions will over-estimate the number affected. We conducted a secondary analysis to account for states not expanding Medicaid by scaling the national findings to the share of people in treatment for HIV who live in states that are expanding Medicaid. Specifically, using the NCHHSTP Atlas and the Kaiser Family Foundation’s health reform resources, we calculated the shares of people living with diagnosed HIV in the states expanding and in the states not expanding Medicaid.  We then multiplied these shares by the MMP findings to estimate the number of people in care for HIV who will be eligible for Medicaid coverage and Marketplace subsidies, given the current state decisions regarding Medicaid expansion.  In doing this, we make the assumption that the national income and insurance distribution is equal to the income and insurance distribution in the expansion states as well as the non-expansion states.  Since actual coverage patterns and income distributions are likely to vary across states, the state-level analysis should be interpreted with caution. While imprecise, the state-level analysis still provides a better approximation of the current landscape than using only the national data, given that all states are not expanding Medicaid. Although Puerto Rico is included in our national estimates, we do not account for it when conducting this secondary analysis.  However, the effect is minimal, as Puerto Rico accounts for only 2% of people living with diagnosed HIV in the United States, according to the NCHHSTP Atlas data.

As described above, MMP does not collect data on the actual income amount for each individual but rather categorizes the respondent’s annual income into categories at intervals of $5,000.  We assigned the middle point of the income category to the individual in calculating where they fall with respect to the FPL, which could incorrectly estimate their potential eligibility for Medicaid or Marketplace subsidies. For example, an individual who is just above 138% of the poverty level ($14,945 in 2009) would be classified as at or below 138% FPL using the mid-point of income ($12,250) for their category ($10,000 to $14,999). We conducted sensitivity analysis of our approach by assigning both the minimums and maximums of the income categories in calculating income with respect to the FPL; we then compared how the population redistributed itself using both the minimum and maximum levels. We found that if we had used the lower bound of the income category, we would have estimated the share of the population falling into the Medicaid eligibility group to be 2 percentage points higher than we estimated using the midpoint. Had we used the upper bound, the share of the population falling into the Medicaid eligibility group would be 11 percentage points lower than what we estimated using the midpoint. Thus, while we are likely capturing most people who would fall into the Medicaid eligibility group, we may be capturing some people whose income would in fact be above Medicaid eligibility.  These individuals would still be eligible for new coverage under the ACA via Marketplace subsidies.

We are also unable to identify which individuals are undocumented residents in the US and consequently ineligible for Medicaid or enrollment in the Health Insurance Marketplaces in 2014. In 2009, 12.3 percent of respondents in MMP were not born in the US, though many of these individuals are likely lawfully present (or subsequently gained citizenship) and would be eligible for coverage. Lawfully present noncitizens who have been in the country for less than five years are also barred from Medicaid coverage.  Of the foreign born in MMP, only 5 percent have been in the country for less than five years, and these individuals account for less than one percent of the total sample. Thus, inclusion of foreign-born individuals is unlikely to substantially affect our estimates of eligibility for Medicaid coverage.

Our estimates do not account for participation rates in coverage. Not everyone who is newly-eligible for Medicaid or Marketplace subsidies will enroll in coverage, and some people who are currently uninsured may already be eligible for Medicaid or other coverage.  Uptake is dependent on several factors, including ease of applying, knowledge of coverage options, other coverage options available, personal utility of insurance coverage, and a host of other factors.  Other analyses that have used micro-simulation models to predict coverage changes under the ACA estimate that approximately 60% of newly-eligible individuals will enroll in Medicaid;¹⁰ given the high need for medical services among the population with HIV, it is likely that uptake among this group would be much higher.

1. For a comprehensive overview of the provisions of the ACA that are of particular importance to people with HIV, see: Crowley J, Kates J (2012), The Affordable Care Act, the Supreme Court, and HIV: What Are the Implications?  Washington, DC: Kaiser Family Foundation. Available at: https://modern.kff.org/health-reform/report/the-affordable-care-act-the-supreme-court-and-hiv-what-are-the-implications/. ↩︎
2. An analysis conducted by the Center for Health Law and Policy Innovation at Harvard Law School and the Treatment Access Expansion Project used data from the Ryan White AIDS Drug Assistance Program to estimate the number of ADAP clients who might be newly eligible for coverage by state.  See: Estimating the Transition of People Living with HIV/AIDS to Medicaid or Subsidized Private Health Insurance through the Patient Protection and Affordable Care Act, 2012. ↩︎
3. Hall H, Frazier EL, Rhodes P, et al. (2013). “Differences in Human Immunodeficiency Virus Care and Treatment Among Subpopulations in the United States.” JAMA Intern Med. 173(14):1337-1344. ↩︎
4. Kates J (2011), Medicaid and HIV: A National Analysis. Washington, DC: Kaiser Family Foundation. Available at: https://modern.kff.org/hivaids/report/medicaid-and-hiv-a-national-analysis/. ↩︎
5. Department of Health and Human Services, Panel on Antiretroviral Guidelines for Adults and Adolescents (2013). Guidelines for the use of antiretroviral agents in HIV-1-infected adults and adolescents, February 12, 2013. Available at: http://aidsinfo.nih.gov/guidelines/html/1/adult-and-adolescent-treatment-guidelines/0/. ↩︎
6. For a list of these states and their eligibility requirements, see Kaiser Family Foundation, State Health Facts, “Adult Income Eligibility Limits at Application as a Percent of the Federal Poverty Level (FPL), January 2013”. Available at: https://modern.kff.org/medicaid/state-indicator/income-eligibility-low-income-adults/. ↩︎
7. KFF analysis of data from the CDC NCHHSTP Atlas on the number of people living with an HIV diagnosis by state. See: http://gis.cdc.gov/GRASP/NCHHSTPAtlas/main.html. ↩︎
8. For a list of the current status of state Medicaid expansion decisions, see Kaiser Family Foundation, State Health Facts, “Status of State Action on the Medicaid Expansion Decision, as of September 16, 2013”. Available at: https://modern.kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/ ↩︎
9. Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on the Census Bureau’s March 2012 Current Population Survey (CPS: Annual Social and Economic Supplements). ↩︎
10. Holahan J, Buettgens M, Carroll C, Dorn S. The Cost and Coverage Implications of the ACA Medicaid Expansion: National and State-by-State Analysis. (Washington, DC: The Kaiser Commission on Medicaid and the Uninsured), November 2012. Available at: http://modern.kff.org/health-reform/report/the-cost-and-coverage-implications-of-the/. ↩︎
11. Congressional Budget Office. Effects on Health Insurance and the Federal Budget for the Insurance Coverage Provisions in the Affordable Care Act—May 2013 Baseline. Available at: http://www.cbo.gov/publication/44190. ↩︎
12. KCMU and Urban Institute estimates based on data from FY 2010 MSIS and CMS-64 reports, available at http://modern.kff.org/hivaids/state-indicator/enrollment-spending-on-hiv/. ↩︎
13. IOM (Institute of Medicine). 2012. Monitoring HIV care in the United States: A strategy for generating national estimates of HIV care and coverage. Washington, DC: The National Academies Press. ↩︎
14. CDC Medical Monitoring Project (MMP): http://www.cdc.gov/hiv/prevention/ongoing/mmp/index.html. ↩︎
15. McNaghten, Wolfe et al. 2007; Blair, McNaghten et al. 2011; Frankel, McNaghten et al. 2012. ↩︎
16. Analysis of data from Centers for Disease Control and Prevention, HIV Surveillance Report, 2011; vol. 23. http://www.cdc.gov/hiv/topics/surveillance/resources/reports/. Published February 2013.. ↩︎
17. Current Medicaid eligibility extends through age 18 (and in some states, through age 20), and Medicare covers most people starting at age 65; thus, in examining new coverage options available to adults, we focus on the population age 19 through 64. ↩︎
18. For more information on the Medicaid undercount, see: http://www.census.gov/did/www/snacc/. ↩︎

An estimated 1 in 3 Americans report having difficulty paying their medical bills – that is, they have had problems affording medical bills within the past year, or they are gradually paying past bills over time, or they have bills they can’t afford to pay at all.¹   Medical debt – and a host of related problems – can result when people can’t afford to pay their medical bills. While the chances of falling into medical debt are greater for people who are uninsured, most people who experience difficulty paying medical bills have health insurance.   Medical debt can arise when people must pay out-of-pocket for care not covered by health insurance or to which cost-sharing (such as deductibles) applies.  Medical debt might also result from health insurance premiums that individuals find difficult to afford.²   The consequences of medical debt can be severe.  People with unaffordable medical bills report higher rates of other problems – including difficulty affording housing and other basic necessities, credit card debt, bankruptcy, and barriers accessing health care.

This report examines medical debt through case studies of nearly two dozen people who recently experienced such problems, and reviews their experiences in light of other studies and surveys about medical debt. It focuses primarily on problems of medical debt among insured individuals and families.  Most of the case studies feature people who struggled with medical debt while covered under health plans that would be considered typical and mainstream today.   The report concludes with a discussion of how provisions of the Affordable Care Act (ACA) may influence the factors that contribute to medical debt.

Study Approach

In order to gain more detailed insights into the problems and causes of medical debt, we collaborated with a national, non-profit credit counseling agency to identify individuals struggling with medical bills and study their experiences.  We partnered with ClearPoint Credit Counseling Services (ClearPoint),³  a non-profit consumer credit counseling agency based in Atlanta, Georgia, that provided counseling and debt management services to over 200,000 people nationwide in 2011.  Most ClearPoint clients self-refer when they are in financial distress, for example, when they can no longer make minimum payments on loans and debts or when they’re contacted by debt collectors.  Others are referred for recommended or required counseling, for example, when they apply for mortgage foreclosure relief or file for bankruptcy. In 2011, roughly 12 percent of ClearPoint clients identified medical bills as the first or second leading cause of their financial difficulties.

We developed an online screening survey to send to clients who had recent difficulty paying medical bills and for whom email addresses were available. The survey requested information not already collected by ClearPoint, such as insurance status and coverage changes, the total amount and types of medical bills, and whether illness triggered other problems, such as job loss or missed rent or mortgage payments. It was also used to identify individuals with medical debt who were willing to participate in in-depth interviews.  Of the 129 respondents to the screener survey, 23 completed hour-long interviews providing detailed information about their medical bills, insurance coverage and financial status.  While neither ClearPoint clients – nor survey respondents or interview subjects – can be considered representative of the broader population, their circumstances are consistent with findings of other studies of medical debt.  This report examines the case studies in light of these other, broader studies.

A brief overview of each case study is displayed in Table 1.  Stories of the 23 people interviewed appear in the Appendix.  Several key characteristics of these individuals and their circumstances are summarized in Table 2.

Key Interview Themes

Together, these cases reveal cross cutting themes and insights into the problem of medical debt, its causes and potential solutions.

Medical debt can affect almost anyone. People we interviewed ranged in age from 20s to 60s and lived in various states.  Some were single, others headed families.  Their annual incomes ranged from less than $10,000 to more than $100,000.  Most were insured continuously in job-based group plans; a few were covered in non-group policies.  Two others were insured at the outset of illness, and then lost coverage. Three were uninsured the entire time.  For most in our study, this instance of medical debt was the first time they had experienced serious financial or credit problems. The onset of an illness, accident, or pregnancy generated expenses that they did not anticipate and which they were unprepared to pay.   Some faced tens of thousands of dollars in medical debt.  For others, just a few thousand dollars of bills proved unaffordable, particularly when a chronic illness meant bills would continue year after year.

Among insured individuals, unaffordable medical debts resulted primarily from cost-sharing for care covered by their insurance.  Some insured people faced exceedingly high levels of health plan cost-sharing (e.g., $10,000 or more per person per year).  For most, though, much smaller amounts proved unaffordable.   Some with limited incomes and/or cash savings had trouble paying even a few thousand dollars.   Others might have been able to handle a single year of cost-sharing liability for one person, but when treatment spanned two plan years or when more than one family member made significant claims, cost-sharing expenses multiplied and became unaffordable.

Out-of-network charges also proved burdensome. Typically health plan coverage is less for care rendered by non-network providers.  Many people inadvertently received non-network care while hospitalized.  Though they had selected a network facility, other hospital-based professionals whom they did not and could not select – such as anesthesiologists and emergency physicians – were not in network.  As a result, patients owed much more out-of-pocket than expected.

Coverage limits and exclusions and unaffordable premiums also caused problems. In some cases, patients were left to pay bills for care their policy simply didn’t cover.  Some also fell into debt trying to pay health insurance premiums they couldn’t afford.

Related problems can often exacerbate medical debt. Often significant health events triggered loss of income, rendering unaffordable bills that might otherwise have been manageable.  For the vast majority of those interviewed, the medical event associated with the debt also left the patient unable to work or prompted a working family member to quit or reduce hours in order to become a caregiver.   Significant health events can also compromise a person’s ability to manage the paperwork of medical bills.  Nearly all those interviewed emphasized how the sheer volume of bills during a major health event was overwhelming.  They had trouble tracking what had been paid, what was owed, and what had been transferred to collections.  Their task was made more difficult by confusing provider bills and insurance company statements that lacked key information.  Most didn’t know where to seek help, and the burdens of illness made it harder to resolve problems on their own.

Once it starts, medical debt can be hard to stop. Most of those interviewed struggled for years to climb out of medical debt, and for some, new debts arose even after prior ones had been resolved.  This was the case for people with chronic health conditions as well as for people with high medical bills from a single health event.   Fifteen of those interviewed used credit cards to pay at least some of their outstanding medical bills, and resulting finance charges increased their debt.

Medical debt can trigger other severe consequences. The economic and personal impact of medical debt can be devastating.  Most of those interviewed ended up declaring bankruptcy as a direct result of high medical bills.  Others depleted retirement or college savings, lost homes to foreclosure, or did without basics such as home heat.  Almost all suffered damage to their credit rating.  Some eventually bounced back from medical debt problems while others permanently reduced their standard of living.  Some people experienced barriers to care.  Nearly all expressed a strong ethic to pay their bills and deep regret, even shame, to be in medical debt.

Our analysis of 2012 National Health Interview Survey (NHIS) data, presented below as context for our case studies, finds the problem of medical debt is widespread.  This survey finds that 20 percent of non-elderly adults reported difficulty paying medical bills in the previous year.  When the question is broadened to include problems paying medical bills over a longer period of time, or inability to pay some medical bills at all, nearly one in three non-elderly adults (32 percent) report having medical bill problems.

In our survey of ClearPoint clients, we identified people who had faced unaffordable medical bills during the prior year.  Many who answered yes, however, had incurred medical bills much longer ago and were still struggling to pay them, or had only recently paid them or discharged old debts through bankruptcy.

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, not medical debt.  Similarly, when a person skips a mortgage payment in order to pay a medical bill, the resulting bank debt typically would not be counted as medical debt.

Characteristics of people interviewed for our case studies fall within the range of what broader survey data tell us about medical debt.  Our analysis of NHIS data finds that individuals and families across a range of household incomes, ages, employment, family, and insurance statuses report difficulty paying medical bills.

Income – Difficulties with medical bills are more pronounced among the poor and near poor – approximately 4 in 10 nonelderly adults with incomes below 200% of the federal poverty level reported problems affording medical bills – but people with incomes at or above 400% of the federal poverty level also struggle with medical debt.⁴   People we interviewed had incomes ranging from 75% to over 560% of the federal poverty level.

Employment– People who are unemployed report somewhat higher rates of medical bill problems (35%) compared to people who work full time (30%).  Twenty of the people we interviewed worked full time or their spouse worked full time.

Age and Family Size – Medical bill problems affect people regardless of age.  Among the non-elderly, medical bill problems are more likely as family size increases; 37 percent of households with 4 or more members experienced medical bill problems in 2012, compared to 25 percent of single person households.  People we interviewed ranged in age from their 20s to their 60s.  Nine were non-married adults; four were in two-person households; ten were in households of three or more.

Health Insurance Status – Among non-elderly adults, nearly half (45%) of the uninsured report problems paying medical bills, compared to roughly one-in-four privately insured individuals.  The vast majority of people with medical debt (70%) are insured. People with employer-sponsored coverage make up the bulk (54%) of medical debt cases.  Of the people we interviewed, 16 were covered under job-based group health plans.   Two were covered by individual policies.  Five were uninsured for most or all of the time they were incurring unaffordable medical bills (including one who became uninsured when her individual policy was rescinded.)

Similar to the overall population, most of those we interviewed were insured as they incurred medical debt – most of them under job-based group health plans.  All expected that health insurance would protect them from financial ruin if they would ever face a serious illness or injury, but that turned out not to be the case.  Various features of their coverage contributed to medical debt problems, and are examined in more detail below.

In-Network Cost-Sharing

By far, the leading contributor to medical debt among people interviewed was cost-sharing for covered services received by in-network providers and facilities. Of the 23 people interviewed 17 reported high cost-sharing burdens.  To some extent, “high” can be measured objectively, but affordability also depended on an individual’s income and other characteristics.

Case studies illustrated that cost-sharing need not be extremely high to be unaffordable.  However, other research confirms that medical debt problems among the insured increase with higher levels of cost-sharing.  For example, NHIS data show people in higher-deductible health plans are more likely (34%) to have difficulty paying medical bills compared to people in lower-deductible health plans (24%).

The amount of cost-sharing required under health insurance plans has risen steadily for years.  As recently as 2006, only 10 percent of covered workers in group health plans faced an annual deductible $1,000 per person or more; today it 38 percent.⁵   For nine of our interviewees, the health plan annual deductible was $1,000 per person or less.

This trend in rising cost-sharing reflects a tradeoff in affordability of premiums and level of protection provided by a plan.  However premium savings to an individual or family can be more than offset if they must satisfy the annual deductible or out-of-pocket limit on cost-sharing.   Studies find that among people reporting problems paying medical bills, the average medical debt for the family was $6,500 in 2010.⁶   While many of the people we interviewed had medical bills in excess of that amount, six had unaffordable medical bills that totaled $5,200 or less.  From their experiences, we observed several reasons why even a few thousand dollars in annual, in-network cost-sharing proved problematic:

Medical bills high relative to income and savings

Studies of medical bill burdens often use as a benchmark bills that exceed 10 percent of household income, though this level was selected somewhat arbitrarily.⁷   Twenty of the people we interviewed had medical bills exceeding this threshold.  For those with limited incomes, even modest amounts of cost-sharing were unaffordable.  Prescription drug copays were a struggle for Dorothy, for example.  She earned $34,000 annually.  The copays for her drugs totaled $150 each month, or more than five percent of her annual income.  Then, when she was unexpectedly hospitalized and had to pay a $2,000 deductible in addition, the bills were simply more than she could manage.

None of the individuals interviewed had sufficient savings to pay their portion of covered, in-network medical bills.  In this respect, they were similar to most Americans. According to the 2010 Survey of Consumer Finances, most U.S. households have very limited liquid assets (checking, savings, and money market account balances).  See Table 3.  The amount of liquid assets declines sharply as income declines.  For those with incomes below 400% of the federal poverty level (two-thirds of the U.S. population), most have far less than $3,000 cash on hand.  Taking into account other unsecured consumer debt (e.g., credit card and medical debt, but not mortgage or auto loans), most households with incomes below 400% of FPL have net negative financial assets.  That is, their consumer debt exceeds their cash on hand.  As a result, even modest deductibles and copays could pose affordability problems, particularly if cost-sharing expenses recur, as for chronic health conditions.

Among households with higher incomes – greater than 400% FPL – liquid assets are higher.  The median amount of cash on hand for this income group is $12,000.  Taking into account other unsecured consumer debt, however, most have net liquid assets of $5,200 or less.

Typical group health plan cost-sharing levels today exceed the amount of liquid cash balances most households have on hand.  In group health plans, the average annual deductible in 2013 is $1,135 for single coverage; then additional cost-sharing expenses applied until the annual OOP maximum is reached.  In 56% of group health plans today, the annual OOP maximum is less than $3,000 for a single person.⁸    Thus cost-sharing resulting from a single surgery could rapidly deplete liquid cash assets for most people.  As high-deductible health plans become more prevalent, potential problems compound.  In 2013 38% of workers have annual deductibles in excess of $1000 (single) and 43% have annual OOP maximums greater than $3,000.  For many people covered under these plans, even with income above 400% FPL, an extended illness or chronic condition could easily result in unaffordable medical bills.

Cost-sharing “multipliers”

Many health plans are identified by the level of their annual deductible – for example, the “PPO 500.”  The number signifies a single person’s potential deductible expense for a single plan year.   In evaluating the protection offered by a policy, people may tend to focus on a single number – the annual deductible or annual limit on out-of-pocket cost-sharing (the OOP limit) – without realizing that this does not necessarily represent the extent of possible cost-sharing liability.  In fact, individuals and families can incur multiples of these expense amounts, as several people we interviewed experienced.

Some examples of cost-sharing “multipliers” are listed below.

Treatments spanning two plan years – Several people interviewed had treatment that began toward the end of one plan year and continued into the next, effectively doubling their cost-sharing liability for a single treatment episode.  George, for example, had surgery scheduled for the last month of a plan year; the following month he experienced post-operative complications, necessitating a second surgery.  As a result he satisfied two annual deductibles and one and one-half annual OOP limits within a period of 4 months.  Some health plans (though not George’s) include a carry-over feature that credits care received in the final months of a plan year toward the next plan year’s annual deductible.⁹ 

Family-level cost-sharing – Under family policies, cost-sharing expenses can also double if more than one person makes significant claims in a year.  Elsie, for example, was covered by a health plan with $1,000 deductible per person.  Once her son was born, his expenses were subject to a separate $1,000 deductible.  Beyond the deductible, both mother and son were liable for additional cost-sharing expenses, up to an annual OOP limit.  The year after giving birth, Elsie required surgery and her son was hospitalized twice before he turned three.  By then, the family cost-sharing bills reached $20,000.

Cost-sharing for chronic conditions – Finally, it was common for cost-sharing bills to accumulate year after year when people had chronic conditions.  While some could manage bills for a while, over time financial burdens compounded and became too great.  Sonya, for example, struggled with repeated deductibles and copays over 16 years as she sought treatment for her child’s autism.  Seventy-two million working age Americans have at least one chronic health condition.¹⁰   People with chronic conditions are much more likely to have high financial burdens for two consecutive years (29% to 56%, depending on the chronic condition) compared to those with no conditions or acute conditions (14% to 15%).¹¹ 

Extremely high cost-sharing

Some people were covered by health plans that required very high cost-sharing for covered services, beyond what is required under typical health plans or what would be allowed under private plans starting in 2014 under the Affordable Care Act.  For example, three of the people interviewed were covered by health plans with an annual out-of-pocket (OOP) limit on cost-sharing liability in network of $10,000 per person.  One of these was a non-group plan; the other two were job-based group plans. 

The health plan OOP maximum generally limits the amount of cost-sharing a person is responsible for in a year for in-network care.  However, in at least two cases, the OOP limit was not, in fact, the maximum amount of cost-sharing that could apply.  Under Gwen’s plan, for example, the OOP limit was in addition to her $3,000 annual deductible, not inclusive of that amount.  Under Richard’s plan, the OOP limit did not apply to outpatient copays.  His $40-per-visit-copay for physical therapy (three times per week for an extended period) added almost another $500 per month ($6,000 per year) to his medical bills.

According to the Kaiser Family Foundation 2013 Employer Health Benefits Survey, most employer sponsored health plans have an annual OOP maximum on cost-sharing.  For most plans, the annual OOP maximum is less than $3,000 per person; only 4 percent of covered workers are in plans with an OOP maximum of $6,000 or more.  Under job-based plans today, however, most OOP limits are not all-inclusive.  For about one-in-three workers enrolled in PPO plans with an OOP limit, the annual deductible does not count toward the OOP limit.  And for most workers in plans with OOP limits today, cost-sharing for prescription drugs does not count toward the OOP limit.¹² 

Out-of-Network Care

Another common problem observed in the case studies involved medical bills arising from care received out-of-network.  Seven of those interviewed had unaffordable medical bills for out-of-network care.  These bills proved particularly problematic for several reasons:

Fewer cost-sharing protections

Some health plans – usually HMOs – require all care to be received by network providers in order to be covered.  Most others will cover out-of-network care, but at a lower level.  Gwen and George’s case offered an example:  Under their plan, a $3,000 annual deductible and $10,000 OOP maximum (in addition to the deductible) applied for in-network care; but amounts doubled for out-of-network care.   With these high limits, George incurred $26,000 in out-of-network cost-sharing in less than one year.

“Inadvertent” out-of-network care

Often people received out-of-network medical bills from providers whom they never met or did not choose.  This happened frequently among those who were hospitalized.  Ben, for example, incurred unexpectedly high medical bills from a surgery, and almost one-third of what he owed was to the anesthesiologist, whom he met for the first time the day of the operation.   Ben had been careful to select a surgeon and a hospital in his plan network; it didn’t occur to him that other doctors practicing within the hospital might not also be in network.  “I found out one thing.  Anesthesiologists are not part of the medical group.  They’re not with anybody’s network.  I guess they figured out if you need surgery, hey, you’re stuck with us! That was a surprising thing to me.  It was only later I realized they’re not in any network.”  Kris was another person who chose an in-network facility, but was billed by doctors working in the hospital who weren’t in the same network.  “Most of what I owe is to doctors who treated me while I was hospitalized and I never saw them again out of the hospital.  One allergist’s bill was close to $1,200 – that was my portion.  I wish I knew why he was so expensive.  He just came in the room twice and gave me a sheet saying what I should and shouldn’t do – he didn’t even write me a prescription.  The doctor who was treating me in the hospital wanted to consult with this allergist.  I didn’t contact him directly or select him.”

Gwen and George faced a somewhat different situation.  Following surgery, George was so frail his doctor recommended recovery in the inpatient rehabilitation unit of the hospital.  However, that unit was independently owned and operated by a separate company that did not participate in the plan network.  Gwen was told the unit was out-of-network, but in light of her husband’s frail condition (and in light of substandard care they believed he had received previously from another in-network rehab facility) she felt she had no other choice.  George’s share of the inpatient rehab bill alone was $23,000.

In general, hospitals do not require physicians to participate in the same plan networks as a condition of receiving hospital privileges, and health plans do not require hospitals to have such agreements with hospital-based physicians, though most plans acknowledge these specialties are critical to an adequate network precisely because patients have no choice in selecting them.¹³   Health plans report difficulty negotiating network agreements with hospital-based physicians (such as anesthesiologists, radiologists, and emergency physicians) and note these specialties are the most aggressive in seeking higher fees and typically have exclusive agreements with one or more hospitals in an area.¹⁴ 

Balance billing

In addition to Ben and Kris, Kieran had difficulty paying unexpected high medical bills that included balance billing.  His wife, Jenna, experienced complications during her pregnancy and was hospitalized several times.  Several doctors who treated her and the baby were out-of-network and billed the family more than insurance determined was reasonable.  Out-of-network providers are not required to limit charges to the amount allowed by a health plan.  When they don’t, patients can be liable for the balance of the charge above what their health plan allows in addition to higher cost-sharing.  U.S. consumers pay an estimated $1 billion annually in balance billing charges.¹⁵   A study of Californians covered under job-based group plans found 11 percent experienced balance billing; among those who were hospitalized, 17% received at least some out-of-network care.¹⁶ 

Interestingly, though George owed thousands of dollars for his non-network care, he incurred very few balance billing charges.  The couple’s health plan participated in a “Multiplan” agreement – essentially an independently organized provider network that supplemented the regular plan network.  Nearly all of the non-network providers who cared for George participated in the Multiplan network.  As a result, George’s health plan agreed to reimburse based on that network’s fee schedule and the providers agreed to refrain from billing above that amount.¹⁷ 

Another interviewee, Morgan, also escaped balance billing from non-participating providers.  Morgan also chose an in-network hospital for his surgery, and then inadvertently received out-of-network care from doctors who practiced in that hospital.  However, Morgan’s insurance policy included a feature that protected him from balance billing from non-network providers while in a network hospital.  His insurance simply paid the entire billed charge of the non-network doctors.  Morgan didn’t realize his policy included this feature until the bills arrived, though was thankful for it.  Health insurers generally are not required to include such coverage of non-network balance billing.

Health Plan Coverage Limits or Exclusions

For several people interviewed, medical debt arose when health insurance simply did not cover the care they needed.  Dillon, for example, was hit by an uninsured motorist in 2003.  The accident totaled his truck and left him with chronic back pain and depression.  His insurance, through a large employer health plan, didn’t cover the extensive physical therapy he needed; nor did it cover dental care needs – which, although unrelated to the accident, were also extensive.  Dillon estimates his unpaid medical bills over several years reached $10,000-$20,000.

Maisy’s medical debt related to her husband’s mental health conditions.  He suffered from panic attacks, depression and addiction, requiring extensive inpatient treatment and rehab over a period of six years starting in 2002.  Claims following a suicide attempt weren’t covered by her large employer health plan, which excluded treatment for self-inflicted injuries.  Maisy also expressed concern that under her policy, other inpatient stays were subject to strict utilization review and her husband was rarely allowed to remain inpatient for more than a few days.  She worried this limited the effectiveness of treatment, prolonging his illnesses.  By 2010 his medical bills reached nearly $30,000 and Maisy had to declare bankruptcy.  Mental health parity regulations issued in 2010 prohibited separate day and visit limits on mental health care different from those applied to other covered benefits.  Final regulations issued in 2013 also prohibit exclusions for treatment related to mental illness, such as attempted suicide.¹⁸ 

Safiya’s medical debt resulted when she reached the annual limit of coverage under her job-based health plan.  Her employer, a fast food chain, provided a so-called “mini med” plan that limited coverage to just a few thousand dollars per year.  When she found a breast lump and needed a biopsy, she quickly reached her plan limits and was left to pay $5,200 out-of-pocket.  Another woman, Katherine, reached the lifetime limit on her policy in 2006 after she had been in extensive treatment for breast cancer.  She spent several years trying to pay the non-covered medical bills, which totaled $35,000, but ultimately had to file for bankruptcy.

Sonya’s child was diagnosed with autism at age four.  She said her family has “lived medical bills ever since.”  She sought care from various specialists, speech therapists, and alternative medicine practitioners.  In a number of cases treatments were simply not covered by her health plan provided through her husband’s large employer.  Her medical bills for the autism treatment, in addition to those incurred by other family members, reached $60,000 over 16 years, leading her to file for bankruptcy.

Unaffordable Premiums

Two people we interviewed amassed substantial medical debt as a result of their non-group health insurance premiums.

One was Morgan, 51, a self-employed artist in Tennessee.  Since 2005, he has been covered by a non-group policy he purchased for himself and his family.  Initially he found both the premiums and cost-sharing affordable.  But over the years, premiums increased steeply and Morgan tried to offset increases by raising the annual deductible.  By 2009 his monthly premium for family coverage had reached $1,200 and his annual deductible was up to $5,000 per person.  That year Morgan learned he had prostate cancer.  Surgery was scheduled late in the year, so he had to satisfy two annual deductibles within a few months. He used credit card cash advances to pay the insurance premiums, but finance charges quickly inflated what he owed.  They used nearly all of his retirement savings (about $10,000) to catch up, and then fell behind again.  In mid-2010, he made the difficult decision to drop his wife from the policy, which cut the premium in half.   By that time, though, their debts had reached $35,000.  A few months later, the family filed for bankruptcy. Morgan describes his situation this way,

“Some people just drop coverage and go to the ER and pay nothing.  But I was trying to do the right thing and stay insured. It’s so frustrating that I came close to ruining myself financially to do that.  I spent thousands keeping my family insured. I have friends in Canada. They’re shocked to hear I pay more for health insurance than for my mortgage.  It’s unnerving at times to look at the numbers.  When I do my taxes and enter my health insurance costs, my tax software says ‘Are you sure? This seems high.’  Like a slap in the face. One year my health expenses were over $20,000 and my adjusted gross income was $25,000.”

Other Factors Unrelated to Insurance

Case studies revealed other factors that contributed significantly to medical debt.  Serious illness can often be associated with a decline in income, making it harder for people to afford medical bills. In addition, people faced with serious illness were hampered in their ability to track medical expenses, challenge denials and correct mistakes, adding to what they owed.  Finally, provider collections practices, as well as patients’ personal desire to pay their providers, led many people to rely on credit card financing or other drastic financial measures that had the effect of compounding their debt problems.

Income loss due to illness

In 18 of the 23 case studies, a significant reduction in household income resulted when the patient was too sick to work or a working family member had to quit or reduce hours to care for the patient.  This frequently happens when a serious illness or injury occurs.  For example, research finds that between 40 and 85 percent of cancer patients stop work during initial treatment, with absences ranging from 45 days to six months.¹⁹   Another study found that breast cancer survivors’ income fell on average by $3,600 five years after diagnosis; by contrast, a typical worker’s earnings increase over a five-year period, on average by $1,800.²⁰   People interviewed for this report cited income loss as a key factor making it harder to afford the sudden onset of medical bills.

Kieran and Jenna’s struggled to pay more than $20,000 in medical bills from her illness and complicated pregnancy, and struggled even more when she had to quit her job due to illness.  That cut the income for this family of six from $90,000 to $70,000 annually.  Kieran emphasized what the loss of that second income meant.  “With four kids, there’s always something – lunch money, something – and we couldn’t make it without her pay. Then when the medical bills started, things got out of control.”  He took a part time job at CarMax and he and his son mowed lawns on weekends, but they had to cut back on a lot.  “When my son broke his glasses, he had to wait a year before we could afford to get new ones.  None of us went to the dentist for two years. We let one of the cars go.”  Eventually Kieran and Jenna had to declare bankruptcy.

For Richard and his family, the income drop wasn’t as great, but the end result was similar.  Richard suffered a traumatic leg fracture during a sporting event in 2007.  At the time his $130,000 annual income provided a comfortable living for his family of four.  But the leg injury required repeated surgeries, some with complications, and extensive physical therapy over the next four years.  During extended treatments Richard had to go on short term disability, reducing his income to just $500 per week.  He estimates he lost $12,000 in earnings in 2007, $6,000 in 2010, and almost $5,000 in 2012.  Over those years, his medical bills reached $30,000, and he had to file for Chapter 13 bankruptcy.  Under the court order, Richard must pay $1,000 per month to his creditors for five years.

Challenges to effective self-advocacy

Nearly all of those interviewed commented on the difficulty of managing medical bills.  Most described the sheer number and frequency of bills and statements they received as “overwhelming.”  Most also found bills and insurance statements were confusing or failed to provide sufficient information to describe a claim, what had been paid, what was still owed, and why.  Several commented on how difficult it was to distinguish between new bills and repeated invoices for older, unpaid bills.  Others observed that while the initial provider invoice would list and describe each billed service, subsequent invoices for unpaid balances usually didn’t itemize, instead just showing the total dollar amount owed.

Of those we interviewed, Stuart was one of the most meticulous in managing medical bills.  His wife required several specialized surgeries over two years that had to be performed at a university hospital, 60 miles from their home.  Between worrying about his wife and money and driving 120 miles per day, Stuart said managing the bills was a struggle.  He described receiving multiple bills from the same provider.  One bill, from a radiologist for a scan, appeared to be a duplicate of one Stuart had already paid so he set it aside.  Only when he heard from a collections agent several months later did he realize the bill was for a separate scan.  During that period, Stuart also needed a screening colonoscopy for himself.  The ACA requires this screening service to be covered in full, but when the insurance statement came, the deductible had been incorrectly applied.²¹   When he called the insurer he was told it was his responsibility to work with his doctor to resubmit the claim with additional documentation in order for cost-sharing to be waived.  Eventually Stuart got this sorted out, too, but with everything else going on it took effort.  As he put it, “I’m a pretty easy going person, but I can understand how some people go postal over this stuff.”  Stuart’s state operates a Consumer Assistance Program that will help residents resolve disputes and appeal denied claims, but he was not aware of this program.

Most others interviewed were not able to effectively track bills and resolve mistakes, including Gwen, who works in the health care industry and considers herself knowledgeable about health claims.  But between caring for her frail husband and working full time as the sole breadwinner, she simply couldn’t manage.  According to records Gwen provided, she received 125 different bills over a four-month period.  Two claims were for ambulance transportation, one of which was denied.  Gwen doesn’t know why.  The insurance statement says non-emergency ambulance services are not covered, though an earlier ambulance claim was covered; it would appear the second claim was coded differently, but the statement doesn’t provide sufficient information to know for sure.  Gwen could have appealed this denial, but didn’t pursue the matter.  She also could have appealed her health plan’s decision to cover George’s inpatient rehab care out-of-network on the grounds that no other in-network facility was able to provide the level of care George needed, but she simply lacked the time and energy.

Studies show that consumers often don’t – or can’t – effectively resolve disputes with health plans or other payment errors.  A Kaiser Family Foundation national survey of consumer experiences with health plans found a majority (51%) of insured, non-elderly adults reported some type of problem with their health plan, such as claims denials or difficulty obtaining referrals.  Most consumers experiencing a problem had to try for a month or longer to fix it or they couldn’t satisfactorily resolve it at all.²²  Especially when people are sick, managing insurance problems can be a challenge and many give up.  Another study found that even when problems generated out-of-pocket costs to the patient of more than $1,000 or led to a serious decline in health, fewer than 40 percent of individuals complained to their health plan, and only rarely (3%) did they file complaints with state regulators.²³   Consumers report they want and need help, but many don’t know where to turn.  In the Kaiser survey, 89% of consumers didn’t know the agency that regulates health insurance in their state; 84% wanted an independent entity where they could seek help.

Medical debt collections

Most of the people we interviewed ended up in debt collections.  Typically hospitals and other health care providers expected to be paid within 90 days of invoice.  After that, it is common for unpaid bills to be referred to collections.²⁴   Of the 23 people interviewed, 21 reported that at least some providers referred their debt to collections.  Medical bills account for the majority of debts that are referred to third-party collection agents²⁵  and for 17 percent of debts that are re-sold in the debt buying industry.²⁶ 

Some bills may be referred to collections mistakenly.  One study estimates that in 2010, 9.2 million Americans were contacted by a collections agency due to a billing mistake.²⁷  Stuart was amazed at how quickly and automatically providers sent debts to collections.  Though he had negotiated a payment plan with the hospital and had paid every installment on time, after 90 days the balance due was nonetheless referred to a collections agency.  When he called the hospital to ask why, he was told it was an automatic practice and advised to ignore the collections notices and continue making payments directly to the hospital.  Another bill that Stuart had paid in full was mistakenly sent to collections.  It was up to Stuart to document the mistake in order to clear up this dispute.

For most we interviewed, being contacted by a debt collector was a new and unpleasant experience.  A few people reported aggressive and harassing practices, such as late-night calls.  Collections actions prompted many to take drastic steps to pay; sometimes these actions compounded their problems.

Credit card financing of medical debt

Most of those interviewed used credit cards to finance at least a portion of their medical debt.  A 2007 study indicates that among low- and middle-income households with credit card debt, 29% report that medical expenses contribute to that debt.  These so-called “medically indebted” individuals generally have much higher levels of credit card debt compared to consumers who have no medical bills on their credit card balances (“non-medically indebted.”)  They are also twice as likely to have been called by bill collectors.

Charlene’s family became uninsured in 2009 when her husband lost his vision, job, and health benefits.  The following year, their teenage daughter was hospitalized after an accident and in 2011, Charlene needed surgery.  Hospital bills totaled $23,000.  Though the hospital’s web site notes a charity care program, the only relief offered Charlene was a two-year payment plan with $800 monthly installments. When she said she couldn’t afford payments, the billing office urged her to pay with a credit card.  She put several thousand dollars on the card, but then stopped when she saw how finance charges were adding to the total.  Finally, Charlene took most of her retirement savings and emptied her daughter’s college fund to pay some of her debts.

Several others were encouraged to use special medical credit cards that can be used to pay bills for participating providers and that waive finance charges if bills are paid off within a specified period, such as 6-18 months.²⁸   Other people elected to use credit cards on their own out of a sense of duty to pay providers who were caring for them.  Still others relied on credit cards to finance day-to-day household expenses in order to free up cash to pay medical bills.  In the end, however, most expressed regret over credit card financing because interest charges and late fees added significantly to what they owed.

Across the board, medical debt triggered other hardships and financial instability among every one of the individuals interviewed.  Studies of the broader population also find that medical debt can have devastating consequences. People who have difficulty paying medical bills are more likely to forego needed care, for example, by cancelling routine doctor’s appointments, delaying recommended follow-up care, or failing to fill prescriptions.²⁹   In addition, they are significantly more vulnerable to other financial hardship and are also more likely to deplete savings, borrow from relatives, suffer damaged credit, or file for bankruptcy.³⁰ 

Through case studies, we observed people experienced severe consequences when medical bills became unmanageable:

Damaged credit

Virtually everyone interviewed had experienced substantial damage to their credit rating as a result of medical debt.  Generally, when bills are referred for collections, this action can be reported to credit rating agencies.  According to industry experts, “If you have an account go into collections and reported on your credit, your credit score will drop by a substantial amount.”³¹ 

Most of those interviewed had not experienced credit problems before the medical bills.  Once damaged, though, they learned it can take years to restore one’s credit rating. With poor credit, people face difficulty qualifying for mortgages, auto loans, and other consumer credit, or faced higher interest rates.   Bad credit can also complicate transactions with new employers, utility companies, insurers, even cell phone companies, who commonly run credit checks on applicants.³² 

Emotional distress

Virtually everyone interviewed expressed feeling shame or embarrassment to be in medical debt.  Most had not had any serious financial difficulties or debt problems before medical bills began.  Most voiced a strong personal ethic to always pay their bills and were distressed to find themselves in debt.  Sonya talked about how juggling bills made her feel “way outside my comfort zone.” She described being in debt as a “nightmare” and filing for bankruptcy was a blow to her pride.  Retelling her experiences, she said, was like “opening up a wound.”  One person ended up divorced at the end of her ordeal, and said the stress of medical debt was a contributing factor.  Another couple stayed together, though debt problems strained their marriage for months.

Economic deprivation

Our analysis of the Survey of Income and Program Participation (SIPP) finds that privately insured people with out-of-pocket medical expenses that exceed five percent of their income are about twice as likely to have difficulties paying their rent and utilities, affording food, and to face barriers accessing medical care, compared to those with OOP costs less than five percent of their income.

Most people we interviewed drastically reined in household spending in the face of medical debt.  They did without heating oil, groceries, even glasses for their children.  A few sold their cars; others took on second part time jobs. Maisy noted, “I’m a pretty notorious penny pincher, and we haven’t bought anything that wasn’t from a thrift store in years, but those sorts of medical debts you just can’t penny-pinch your way out of.”   Several people we interviewed were able to consolidate their bills through debt management programs (DMPs) that ClearPoint helped arrange.  Stuart expects to pay off all the bills eventually – he’s been paying creditors $1,000 per month under his DMP for the past two years and has one more year to go.  Duncan is also paying $1,000 under his DMP to clear up bills from his wife’s cancer treatment that date back to 2010.  The DMP installment takes one-third of his take home pay, the mortgage takes another $1000, leaving the family of three just $1,000 per month for everything else.  For some, austerity measures were temporary, for others it became their new way of life.  As Dorothy put it, “once I thought I was headed toward being middle class, but not now.”

Depleted long term assets

Eight people we interviewed severely depleted long term assets to pay medical bills.  Gwen, 57, took $10,000 out of her 401(k) – one-fifth of the balance – to pay some of the medical bills she owes.  She doesn’t expect to retire anytime soon.  Charlene, 52, took $23,000 out of retirement savings – it had taken her 14 years to put away that amount – and also cashed out her daughter’s $5,000 college fund to pay medical bills.  Stuart didn’t have to tap retirement savings, but, during the period when he incurred large medical bills, he had to reduce what he was paying toward his two sons’ college expenses by several hundred dollars per month.  The boys made up the difference by taking out student loans.   Kris took out a home equity line of credit to pay about $5,000 in medical bills.  His medical bills are paid, but now his mortgage payment is much higher.

Medical bills often trigger such difficult decisions.  According to one study, 11 percent of Americans have taken money out of retirement savings to pay medical bills.  Described as a “retirement derailer,” such action can significantly delay retirement plans or lead to financial insecurity during retirement.³³  Derailers can be particularly problematic for people over age 40, who won’t have as many years to make up for early withdrawals and lost contributions.  Another study found that among medically indebted individuals, one fifth used retirement funds and nearly one-quarter withdrew equity from their homes to pay debts.³⁴ 

Housing instability

Medical debt has also been shown to contribute to housing instability, including missed mortgage or rent payments, property tax liens, difficulty qualifying for loans, eviction, disruptive moves to less expensive housing, rental applications denied and in extreme circumstances, homelessness.  According to one study, 27 percent of people with medical debt also experienced such housing-related problems.³⁵ 

Several whom we interviewed found their homes threatened by medical bills. Some fell behind on rent or mortgage payments for a few months, then were able to get caught up; others never recovered and lost their homes.  Gwen was determined to pay the $40,000 in her husband’s medical bills that insurance wouldn’t cover.  When she asked her mortgage company if they would revise her loan and lower the monthly payment, she was told such programs were only for clients who were in arrears, so she skipped a few payments.  The bank still refused to modify her loan, however, and a few months later started foreclosure proceedings.  Gwen decided she would be better able to pay past debts, as well as new bills for her husband’s ongoing care, if she didn’t pay the mortgage so, as she put it, “I let them take the house.”  A friend found a less expensive, smaller place that Gwen and George now rent.   Connie and her family of four lost their home to foreclosure, as well.  Her husband was injured in an auto accident and for several years she tried to juggle bills, including the mortgage, to keep pace with medical bills.  The bank foreclosed in 2010, and Connie and her family moved back to Oklahoma to live in a relative’s home.

Bankruptcy

Medical bills are a leading cause of personal bankruptcy in the U.S., contributing to 62 percent of personal bankruptcies in 2007.  Most who filed for medical bankruptcy that year were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance.³⁶ 

Of the 23 persons interviewed for this report, 15 had filed for bankruptcy.  Most filed under Chapter 7 – meaning their debts were discharged.  A few filed under Chapter 13, and so agreed to pay most or all of their unsecured debts over a period of time, typically three to five years, under a court-ordered payment plan.  While these individuals expressed some relief at the protection afforded them; most did not want to resort to bankruptcy and many resisted filing as long as they could.  Seven filed only after tapping retirement or college savings to pay medical bills or losing their home to foreclosure – assets that would have been protected under a bankruptcy filing.  Two others either lost their home or borrowed against their home in lieu of filing for bankruptcy.   And, though bankruptcy is considered a last-resort solution, nine of those who filed for bankruptcy have since incurred significant new medical bills and worry what will happen if they can’t pay those since they won’t be allowed to file for bankruptcy protection again for many years.

Difficulty accessing care

Finally, many studies have documented that that people with unaffordable medical bills also tend to experience difficulties accessing care.³⁷   In some cases, providers may refuse to treat patients who cannot pay their bills.  Kieran, for example, reported that one hospital to which he owed money refused to pre-register his wife for a hospitalization until overdue bills were paid.  More often, people we interviewed decided to forego care in order to avoid incurring even more bills they could not afford.  Dillon, for example, put off needed dental care because he already was struggling to pay thousands of dollars in medical debts to other providers.  Jeanne, a cancer survivor, delayed recommended follow up visits until she could assemble the cash to pay for them.

People rely on health insurance to protect against catastrophic medical expenses.  When insurance protection falls short, medical debt can result.  The high prevalence of medical debt is an indication that health insurance does not always shield people from an unaffordable level of expenses.  Most insured people have cost-sharing liability that puts them at risk for medical debt.  The median household income in the U.S. in 2012 was $51,017.³⁸   When medical bills exceed five percent of income (roughly $2,500 or less for most households), people are twice as likely to have trouble making ends meet.  Cost-sharing liability under most private health insurance plans today exceeds this level.  Most Americans don’t have sufficient cash on hand to pay bills of this level and are just one hospitalization away from the bill collector.

The Affordable Care Act will bring about significant improvements in the health coverage system that may prevent or lessen some of the medical debt problems experienced by our interviewees and others:

Subsidies and Market Reforms for Non-group Coverage – The ACA changes market rules for non-group coverage, prohibiting insurers from turning people down or charging them more based on health status.  The ACA also limits premium age adjustments to 3:1.  And, importantly, under the ACA, sliding scale tax credit subsidies will be available to individuals with incomes between 100% and 400% of FPL.  For people who buy non-group coverage today, on average, tax credit subsidies will finance about one-third of the premium.³⁹   As a result, people like Morgan won’t be stranded in policies whose premiums spiral once they get sick and can no longer pass medical underwriting. In addition, under the ACA, Morgan (whose income is only about 220% of the FPL for a family of four) and his family will be eligible for both premium and cost-sharing subsidies.  His premium contribution will likely be less than $300 per month for a family policy – one-quarter of what he had been paying.  At this income level, Morgan would also qualify for modest cost-sharing subsidies, which will be offered to people with incomes between 100% and 250% FPL.⁴⁰ 

Cost-Sharing Limits under Private Health Plans – Starting in 2014, the ACA requires that a $6,350 annual limit per person will apply to all types of cost-sharing for in-network care under all non-grandfathered private health plans – both group and non-group.  This change could prove beneficial to people like Gwen and Richard whose deductibles and copays did not count toward their annual OOP limits.

End of Annual Dollar Limits – Starting in 2014, the ACA requires that all health plans remove annual dollar limits on covered benefits.  As a result, people like Safiya will not encounter dollar limits under so-called “mini-med” policies that leave them effectively uninsured when coverage runs out.

Essential Health Benefit Standards – Starting in 2014, health insurance policies sold in the small group and non-group markets must cover ten categories of essential health benefits (EHB) – including hospitalization, ambulatory care, rehabilitative and habilitative services, mental health care, and prescription drugs.  Mental health parity rules will apply to these and large group health plans as well, so higher cost-sharing or stricter visit limits will not be permitted for these services and exclusions based on self-inflicted injury, as happened to Maisy’s husband, will not be allowed.

Consumer Assistance – Under the ACA, Consumer Assistance Programs (CAP) can be established in states to help all residents – regardless of the source of coverage – answer questions, resolve disputes and appeal claims denials.  In the first year of operation, 35 state programs were established.  In that year CAPs provided assistance to more than 200,000 consumers, and helped more than 25,000 consumers appeal insurer denials and recover $18 million in reimbursements.⁴¹ 

>

These changes notwithstanding, the ACA will not address all of the underlying causes of medical debt.  For example:

High Cost-Sharing will Persist under Many Plans – The ACA establishes an affordability standard for health insurance premiums, but not for out-of-pocket medical expenses.⁴²   Even with limits on cost-sharing established under the ACA, deductibles and other cost-sharing will continue at a level above what many people could afford if a significant illness or injury strikes.  In the Exchanges, people with incomes between 250% and 400% FPL will likely face deductibles of up to $2,000 or more in silver plans – much higher levels under bronze plans – and OOP limits of $6,350, so would be at risk for having cost-sharing expenses in excess of 10 percent of gross income.  People will have the option of enrolling in Gold plans with lower cost-sharing, but with higher premiums.

Some people in large group plans may face cost-sharing in excess of $6,350 next year.  The federal government announced it will delay enforcement of the maximum OOP limit for group health plans until 2015.  As a result next year, group health plans may require people to satisfy more than one $6,350 OOP limit if the plan uses multiple claims administrators – for example, a pharmacy benefit manager that just administers the prescription drug benefit, separate from other covered medical benefits.⁴³ 

Limited Protections for Out-of-Network Care – When patients do receive non-emergency care out-of-network, the ACA does not limit the cost-sharing that plans can apply.  Nor does the ACA limit balance billing that non-network providers can charge.  When people inadvertently receive out-of-network care, such as from an anesthesiologist who doesn’t participate in the same plan network as the hospital and surgeon, some health plans voluntarily undertake measures to limit the consumer’s cost exposure – by covering the non-network service at the in-network level, and/or by basing reimbursement levels on the provider’s billed charge to limit balance billing.  The ACA does not require plans to adopt such measures, however.

The ACA does require all health plans to cover emergency services as though they were provided in network, even when patients can’t get to an in-network facility for such care.   The ACA also requires health plans to offer an adequate provider network.  Another provision of the ACA gives the Secretary authority to require plans to report data on out-of-network cost-sharing so this requirement can be monitored. This data reporting provision has not yet been implemented.

Limits on Essential Health Benefit Standards – The ACA requirement to cover essential health benefits applies only to non-group health plans and fully-insured small group health plans.  As a result, Dillon’s large group health plan may continue to not cover the physical therapy that he needs.  In plans that are subject to the EHB, federal standards do not precisely define EHB services and leave some flexibility for insurers to substitute services within categories.  As a result, for example, autism treatments like those that Sonya’s child received might continue to be uncovered under qualified health plans in many states. In addition, federal standards rely on existing “benchmark” plans that may, today, include non-dollar limits on covered services.  Many state benchmark plans, for example, limit the number of covered inpatient days or outpatient visits for rehabilitative care, such as the extended physical therapy that Richard needed.   Such benefit limits can continue after 2014.

Lack of Resources for Consumer Assistance – Consumer assistance programs authorized under the ACA have struggled with limited resources.  The law authorizes “such sums as may be necessary” to support CAPs, but only appropriated $30 million.  The last funding opportunity for CAPs took place in 2012, and no further funding has been announced since then.  CAPs are the only entities required, by federal law, to help privately insured people resolve health plan complaints and claims disputes and file appeals.   Absent this help, as case studies illustrate, some people may continue to be overwhelmed by insurance paperwork they cannot understand and even incur debt for bills insurance should have paid.

The ACA will provide health insurance to millions of Americans who are currently uninsured, which may also improve access to health care and lower their out-of-pocket expenses and exposure to medical debt.  People who are insured will also see improvements in the protection that health coverage offers. However, in light of the limited assets many people have, the problem of medical debt is likely to persist and lead to continued debate over the tradeoffs inherent in providing more comprehensive coverage and limiting federal costs for premium and cost-sharing subsidies.

Summary of Medical Debt Case Studies

Ben, 59, Trucker

Income: $68,000 (590% FPL)Medical bills: $5,000Bills incurred by: SelfTiming of bills: 2012 (2^nd time in medical debt)Insurance status during bills: Employer Sponsored Insurance (ESI)

Ben has good health insurance through his job with a trucking firm.  The policy has a $250 deductible, with 20% coinsurance to an OOP limit of $3,000 annually per person.  He and his wife are covered under the plan.  She takes medications and requires regular physician visits for a chronic condition.  He has diabetes and suffers chronic back pain following a fall.  Last year he needed surgery, with a brief readmission following a complication.  His share of expenses came to more than $5,000 – mostly from in-network cost-sharing, but a significant amount of balance billing.

Ben was surprised at the “truckload” of bills, not only from the hospital and surgeon, but anesthesiologist, radiologist, labs, imaging facilities, and other providers, many of whom he did not select and were not in his plan’s network.  “I found out one thing.  Anesthesiologists aren’t with anyone’s network.  That was a surprising thing to me.  I only learned this after the bills came.”  Ben’s share of the anesthesia bill alone came to $900.    This was Ben’s second bout with medical debt.  Ten years ago, his wife was seriously ill and needed surgery.  Bills from that event were much higher, eventually causing the couple to file for bankruptcy.

Charlene, 51, Teller

Income: $38,000 (195% FPL)Medical bills:  $23,000Bills incurred by: Self and daughterTiming of bills:  2010-2011Insurance status during bills:  Uninsured

Charlene, her husband Craig, and their teenage daughter had health insurance until 2009, when Craig lost his sight, job, and health benefits.  Before they lost coverage, the family had accumulated about $8,000 in unpaid medical bills from Craig’s treatments, mostly due to cost-sharing.  Then after losing coverage, Charlene’s daughter was hospitalized in 2010 after an accident, and Charlene needed surgery in 2011.

The hospital bills, alone, totaled $23,000.  Though the hospital web site notes a charity care program, the only relief offered to Charlene was a payment plan with monthly installments of $800, which she could not afford.  The billing office recommended she take out a loan or use credit cards.  Charlene charged about $5,000 in bills to a credit card, and then stopped when she realized how finance charges increased the debt.

The debt was turned over to collections; Charlene described the calls as harassing, often early morning or late at night.  She took $20,000 out of retirement savings to pay some of the bills, as well as living expenses – it had taken her 14 years to save that much – and also cashed in her daughter’s college savings of $5,000.  With more bills to pay, she finally filed for bankruptcy, and all remaining debts were discharged in 2012.  Charlene has a new job with health insurance and her daughter is in college on a scholarship.  For now the family feels okay.

Dorothy, 59, Teacher

Income: $34,000 (300% FPL)Medical bills: $4,500Bills incurred by: SelfTiming of bills:  2011-12, and ongoingInsurance status during bills:  ESI

Dorothy has worked for the public schools for 20 years and has been covered under her job-based plan.  Her premium contribution of $190 is deducted from her monthly paycheck.  Originally, she was offered an HMO plan with very comprehensive coverage; in 2000, she was diagnosed with cancer and recalls paying almost nothing out-of-pocket for her care.  Since then, the school district changed to a PPO plan with a $2,000 deductible with 20% coinsurance to an OOP limit and tiered copays for prescription drugs that range from $17 to $100 for the drugs Dorothy takes for several chronic conditions.   Her monthly drug copays come to $150 each month and on her income and crowd out other expenses.  She needs to replace her furnace but can’t afford it, so uses a space heater during the winter instead.  She used to work a second part time job at a department store, earning an additional $600-700 per month, but had to quit when her condition worsened.

In 2011 she was hospitalized for a few days with an infection.  Her share of the bills came to $4,500 of which she still owes $3,000.  The hospital offered a $250 monthly payment plan, which Dorothy couldn’t afford, then reduced the monthly payment to $50.  Dorothy also owes money to the doctors who treated her while in the hospital.  She was surprised to receive so many doctor bills from that brief stay.  Initially she tried to pay them with credit cards, but realized this just increased what she owed.  The doctors turned unpaid bills over to collections.  Dorothy says those calls (though polite) are overwhelming, as are the bills.  She’s determined to pay and avoid bankruptcy at all costs, but the best she can do is “stack up the bills and just pay what I can when I can.”

Recently Dorothy went for her annual mammogram; the deductible applied so she owes another $208 for that.  She wasn’t aware that preventive mammograms are supposed to be covered 100% or that she could appeal the plan’s decision to apply the deductible.  She did not know her state has a Consumer Assistance Program that would help her file an appeal.

Dorothy is stunned to be in this position, even though she works full time and has health insurance.  She assumed her coverage would keep care affordable.  Now she’s worried to owe so much in medical bills that she just can’t afford to pay.  “Once I thought I was headed toward being middle class,” she said, but not now.  She gets up at 5:00 each morning to get to school by 7:00 and most days works another three hours after the kids are dismissed to prepare for the following day.  She said that’s just what’s expected of teachers, and she doesn’t really mind, but notes “when I call the bank or the hospital and tell them I’m a teacher, I still have to pay just like anybody else.”

Gwen, 57, Medical Transcriptionist

Income: $22,000 (140% FPL)Medical bills: $40,000Bills incurred by: HusbandTiming of bills:  2011Insurance status during bills:  ESI

Gwen and her husband, George (64) have health coverage through her full time job.  It’s a high cost-sharing plan with a $3,000 deductible per person, then 30% coinsurance to an annual OOP limit of $10,000, not including the deductible.  For out-of-network coverage the deductible and OOP limit are twice as high.  Their plan year begins in June.  George suffers from diabetes and other chronic conditions, and was laid off a few years ago.  In May 2011, he had a cardiac emergency requiring surgery.  He lost eligibility for his unemployment benefits while sick because he was no longer actively working.

Because his hospitalization occurred at the end of the plan year, he had to satisfy two in-network deductibles and one in-network OOP within just a few months.  In addition, there were extensive non-network claims from hospital based physicians, none of whom George chose.  Even worse, George received poor care in an in-network rehab facility following his initial surgery.  Complications led to re-hospitalization and second surgery.  Following that his doctor recommended rehab within the hospital.  The rehab unit was independently owned and not in plan network, but Gwen agreed because George was too fragile to move.  George’s share of the cost of his 3-week stay was $23,000.  By August 2011, they owed $40,000 in medical bills. Interestingly, almost no balance billing charges arose from the nonparticipating providers.  Most were party to a “MultiPlan agreement” with an independently established fee schedule.  Gwen’s insurance paid based on that fee schedule amount and providers agreed to not bill in excess of that amount.

Another ambulance claim for $1,000 was denied. Gwen wasn’t sure why; an earlier ambulance claim had been covered.  The “explanation of benefits” did not provide a clear reason, though an earlier ambulance claim had been covered.  It did not occur to Gwen to appeal the denial or out-of-network charges, and in any case, she doesn’t know where she would have found the time.  As the sole breadwinner, she must continue to work full time to maintain income and insurance, plus she must care for her sick husband.

Gwen said as the bills streamed in, she just “set them aside” because she had no money to pay them.  The nonprofit hospital offered to cut what they owed by 40% as part of the charity care program, but other providers, including the independent rehab unit within the hospital, just turned them over to collections.  Gwen took $10k out of retirement to pay some of the bills.  Without George’s income, she also fell behind on the mortgage.  The bank would not agree to modify the loan, and Gwen needed to keep up with George’s ongoing care needs as well as basics like groceries, so “I let them take the house.”

Once the house went into foreclosure, Gwen was able to pay down more of the medical debt, though she still owes about $9,000.  Fortunately a friend helped them find a less expensive house to rent.  This year George turns 65 and will enroll in Medicare, further reducing the couple’s insurance premiums and cost-sharing expenses.

Kieran, 43, Car Dealer

Income: $75,000 (240% FPL)Medical bills: $20,000Bills incurred by: Spouse, childrenTiming of bills:  2007-2011Insurance status during bills:  ESI

Kieran has health insurance through his job with a large employer that also covers his wife and their four kids.  They contribute $137 bi-weekly toward the premium.  The PPO plan has a $1,000 deductible per person ($3,000 for family), then 20% coinsurance for most inpatient care, though a $300 per admission copay applies for hospitalization.  The ER copay is $150; doctor visits have a $25 copay.  Under a tiered drug benefit, Kieran pays $200 monthly for one drug.  An annual OOP limit of $3,000 per person doesn’t cover all copays. Kieran’s wife, Jenna worked part time until a few years ago, earning about $18,000.

Jenna has had a series of health problems that generate significant medical bills, but were manageable until 2007.   She developed blood clots in her leg and had to start taking clot thinning medications and stop taking birth control pills.  Not long after she got pregnant with complications (preeclampsia) which led to a series of short hospitalizations (10-11 for mom and baby, combined) and medical bills from dozens of providers.  The following year Jenna developed diverticulitis, requiring more ongoing. care.  The family also incurred significant expenses from copays for routine care for the kids, such as doctor visits for minor illnesses and trips to the ER for football injuries.  Kieran estimates his unpaid medical bills reached $20,000 over five years.  About half of his bills were for hospital stays, a quarter for physician visits, and a quarter for prescription drugs. Several doctors who treated his wife and daughter in the hospital were out-of-network, though Kieran didn’t know that ahead of time.  That meant he owed higher, 30% coinsurance, plus balance billing. He recalls his share of one anesthesia bill alone was $500.

He emphasized what the second income meant to his family finances.  “With four kids, there’s always something – lunch money, something – and we couldn’t make it without her pay. Then when the medical bills started, things got out of control.”  He took a second, part time job and he and his son mowed lawns on weekends, but they had to cut back on a lot.  “When my son broke his glasses, he had to wait a year before we could afford to get new ones.  None of us went to the dentist for two years. We let one of the cars go.”

Some of his wife’s insurance claims were denied by the insurer and he did a lot of research to try to have these decisions overturned. He wrote to his congressman and others for help. In some cases he was able to have the charges covered and in other cases not. He wasn’t aware his state had a Consumer Assistance Program that could have helped him with the appeals.

Kieran negotiated with providers to reduce what he owed.  One hospital did reduce his bill by about 30 percent if he agreed to pay the balance immediately – he put the $6,000 payment on a credit card.  Others said Kieran earned too much to qualify for their charity care programs.  One hospital refused to pre-register his wife for a hospitalization until past bills were paid.  Fortunately, about then Kieran received his annual bonus of $1,600 and gave that to the hospital so his wife could be admitted.

Kieran managed the bills himself using a spread sheet, but the sheer number was overwhelming. “There were so many coming in, I didn’t even want to check my mail,” he said.  The payment plans he’d negotiated mounted up; during 2010-2011 he was paying $200 per month across six different payment plans.  When he couldn’t afford the entire monthly payment he always paid something, though the more he paid to providers the less he could pay toward credit card debt (which included thousands in medical expenses) where finance charges were compounding. Some providers accepted partial payment, but three turned him over to collections.   He pulled about $13,000 out of his 401(k) to pay some bills. The financial burdens started to strain their marriage.   Kieran emphasized how important it was to him to pay what he owed, he prayed over what to do.  Finally his pastor referred him to an attorney who advised filing for bankruptcy.

In 2011 the family filed for Chapter 7 bankruptcy, discharging their medical and credit card debts.  Kieran says he’s in much better financial shape now.  His wife’s feeling better, though she hasn’t yet returned to work so the family continues to economize on everything from groceries to the water bill.  They still get by on one car.  He has one small credit card for emergencies and his credit score is improving – at the height of the medical bill problems it fell below 500 but is up in the 600s.

Kris, 56, Construction Worker

Income: $38,000 (330% FPL)Medical bills: $6,000Bills incurred by: SelfTiming of bills:  2011Insurance status during bills:  ESI

Kris works full time for large employer and has health insurance through his job.  The plan has a $500 deductible, then 80/20 coinsurance and $35 copays for outpatient visits.  He’s not sure what the OOP limit is.  His premium contribution for the plan is $48 per month.  Kris was sick for most of 2011 with complications from a severe allergic reaction and hospitalized three times that year.  His out-of-pocket expenses that year reached almost $6,000.   He couldn’t work while he was sick.  He drew vacation pay the first three months, and then had to go on long term disability which paid just 60% of his salary.

Most of his debts are due to cost-sharing.  The hospital was in his plan network, but not all of the doctors who treated him were, including one consulting allergist who billed Kris $1,200 for two bedside visits.  Kris never asked to see this doctor and said he didn’t even treat him – “just gave me a sheet of paper about what to do to avoid allergic reactions; he never even wrote me a prescription.  Kris got “nasty letters” from that doctor’s lawyer demanding payment.  “To be honest, I didn’t challenge or appeal this bill.  I was so exhausted at this point.  They were threatening to send to collections and not being nice at all, so I took an advance on my credit card and paid it.  It was the only source of cash I had available.”  Kris was unaware that a consumer assistance program in his state might have helped with appeals.  His church raised about $500 to help pay some other expenses.

Before he got sick, Kris had lived paycheck to paycheck; he didn’t earn enough to afford many extras.  With the income loss and medical bills combined, he had to rely on a home equity line of credit to make ends meet.  Eventually he paid the rest of the hospital and doctor bills with the home equity loan, so now that debt is much higher.  Still, it was important for Kris not to fall behind, not to declare bankruptcy, and to protect his good credit rating, which is over 700.    He lives with his father, who’s only income is Social Security.

Maisy, 51, Librarian

Income: $66,000 (280% FPL)Medical bills: $30,000Bills incurred by: HusbandTiming of bills:  2004-2011Insurance status during bills:  ESI

Maisy and her family have had coverage through her job at a public university.  The plan had a $1,900 deductible, then 80/20 coinsurance to an OOP limit, which Maisy can’t recall.  Her medical bill problems related to her husband’s mental health care needs.  For years he suffered from anxiety attacks, addiction to alcohol and prescription drugs and other disorders including one suicide attempt.  He was hospitalized several times from 2004-2010.  He also lost his job in 2003, significantly reducing the family’s income.

Maisy recalls most of his treatments were covered by insurance but some expenses were excluded, including some claims following the suicide attempt, denied because the injury was self-inflicted.  Maisy also worried that time limits on coverage for inpatient care, including detox/rehab, may have made these interventions less effective than longer term treatment might have been.  Over the years, her husband’s share of the medical bills mounted to nearly $30,000.

Maisy tried to pay these debts by economizing.  “I’m a pretty notorious penny pincher, and we haven’t bought anything that wasn’t from a thrift store in years, but those sorts of medical debts you just can’t penny-pinch your way out of.”  She found the collections process overwhelming – their debts were transferred to collections agencies, some of whom later re-sold the debt to different agencies Maisy described as a “maze of credit industry players.”  Ultimately, Maisy and her husband divorced in 2011 and she filed for bankruptcy that year.  Last year, she was laid off from her job.  Today, she struggles to maintain her own insurance coverage through COBRA at a premium of $582/month. 

Morgan, 51, Entertainer

Income: $51,000 (220% FPL)Medical bills: $35,000Bills incurred by: SelfTiming of bills:  2008-2012Insurance status during bills:  Non-group policy

Morgan is self-employed and since 2005, has purchased an individual market policy to cover himself, his wife, and their two kids.  Initially he found the premium and cost-sharing affordable, but over the years rates increased steeply and he tried to offset increases by agreeing to a higher deductible.  By 2009 the monthly family premium was over $1,200 and the annual deductible $5,000 per person.

Morgan had a bout with gastritis in 2008, generating significant cost-sharing.  He had worked out payment plans with providers and was still paying those bills in late 2009, when he was diagnosed with prostate cancer.  Surgery was scheduled for January 2010, so he satisfied two annual deductibles within a few months.  After the surgery, Morgan had to stop working, cutting the family income, and making medical bills and high insurance premiums even harder to afford.  They took $10,000 out of his wife’s retirement fund, leaving just enough in it to keep it open, then, for a while they used cash advances on their credit card to keep up with premiums and the mortgage, but that wasn’t sustainable.  He and his wife made a difficult decision – she dropped off the family health insurance policy, cutting the premium by $600/month, even though she has health problems, including diabetes.  A few months after that, Morgan filed for bankruptcy, discharging $35,000 in debt, mostly due to medical bills and insurance premiums.

A few months after the bankruptcy, Morgan went to ER with chest pains.  More than a year later, he’s paying the hospital $75/month for that bill.  His wife self-monitors her diabetes, mostly without testing since the test strips are so expensive.  Morgan sums up his experience this way: “Some people just drop coverage and go to the ER and pay nothing.  But I was trying to do the right thing and stay insured. It’s so frustrating that I came close to ruining myself financially to do that.  I spent thousands keeping my family insured. I have friends in Canada. They’re shocked to hear I pay more for health insurance than for my mortgage.  It’s unnerving at times to look at the numbers.  When I do my taxes and enter my health insurance costs, my tax software says ‘Are you sure? This seems high.’  Like a slap in the face. One year my health expenses were over $20,000 and my AGI was $25,000.”

Richard, 36, Financial Adviser

Income: $130,000 (550% FPL)Medical bills: $30,000Bills incurred by: Self, daughterTiming of bills:  2007-2011Insurance status during bills:  ESI

Richard works full time for a large employer and gets health coverage for his family of four.  He contributes $250 each month toward the premium.  The policy has an annual deductible of $2,000 per person, with 20% coinsurance to an OOP limit of $4,000 per person.  Copays of $40 apply to most office visits, and tiered copays apply to prescriptions, up to $75 for specialty drugs. The copays don’t count toward the OOP limit.

Richard’s wife also works.  The family never had financial problems until the medical bills started. In 2007, Richard suffered a traumatic leg fracture at a sporting event.  He’s had 5 surgeries on his leg since then, plus extensive physical therapy and other treatments following complications from one of the surgeries.  In addition, in 2008 his daughter was born with respiratory problems and was in the NICU for two weeks. Following each surgery, Richard needed physical therapy three times per week for as long as 18 months at a time. That added another $500/month to his costs.  In 2010 alone, even with the OOP limit, Richard’s cost-sharing reached $12,000.

In addition, several times over the past five years, Richard has had to go on short term disability.  Benefits are about $1,500/week lower than his regular salary.  The couple had less than $5,000 in cash savings when the medical bills started.  They also had college accounts and retirement savings, which they did not disturb because “those are sacrosanct.”

The couple started charging medical bills and other living expenses to credit cards, then fell behind on payments and were referred to collections.  In 2011, Richard filed for Chapter 13 bankruptcy.  His credit card and medical debts, totaling $60,000, were consolidated and he agreed to pay creditors $905/month for five years.  In 2012, Richard had two more surgeries and so has new medical debts of $2,000, which he is also paying off gradually.  He hopes he won’t need any more costly care for a while; he’s not eligible to file for bankruptcy again for at least five years.

Safiya, 22, Restaurant Worker

Income: $10,000 (90% FPL)Medical bills: $5,000Bills incurred by: SelfTiming of bills:  2011Insurance status during bills:  ESI

Safiya is a high school graduate who works at a fast food restaurant.  In 2010 she signed up for health benefits through that job.  She didn’t really understand much about the coverage, though she knew it was expensive ($90 was withheld from her paycheck every two weeks for her share of the premium) and she assumed it would pay her medical bills.  In 2011 she had several costly health claims related to a biopsy for a breast lump and some other health care services.  She reports her insurance wouldn’t pay these claims – when she called to ask why she was told she had exceeded the limit on her coverage – which appears to have been $5,000 annually.

Her pay fluctuates during the year. She works nearly full time in the summer but fewer hours in the winder when business is slower. In the winter her payroll deduction consumed most of her take home pay.  Safiya decided she couldn’t afford to pay that much for insurance that wouldn’t pay claims so she dropped the coverage.  She was left with $5,200 in hospital bills which she is paying off gradually ($90 per month.)  She still owes about $2,000 and moved in with her boyfriend to save on rent.  She knows it’s important to have health insurance, but doesn’t really understand how it works.  Recently she learned she is pregnant, so for now she has Medicaid coverage.

Sonya, 49, Homemaker

Income: $85,000 (360% FPL)Medical bills: $60,000Bills incurred by: Child, selfTiming of bills:  1994-2019Insurance status during bills:  ESI

Sonya and her husband have two kids, age 22 and 18.  He is the sole breadwinner and the family is covered under his large employer health plan, for which they pay about $400/month.  Their policy has a $1,000 deductible per person, then 80/20 coinsurance to an OOP limit.  Sonya wasn’t sure exactly the amount.  Office visits are subject to a $50 copay.

Sonya used to work as a teacher but quit when their first child was diagnosed with autism at age four.  She says the family has “lived medical bills” ever since.  They’ve sought help from various pediatric specialists, speech therapists, and alternative medicine practitioners.  In addition, during three of those years, Sonya needed a hysterectomy, then treatment for an ulcerated colon, then foot surgery for bone spurs.  During the worst year their share of medical expenses reached $10,000.  Over 16 years they accumulated $60,000 in medical debt.

She describes the bills as overwhelming.  The year their out-of-pocket expenses reached $10,000, she didn’t realize it was that high until she did their taxes.  She said the bills and insurance statements were confusing – she knows some treatments for her son’s autism were simply not covered though she doesn’t know why. She never formally appealed any denials.  Some care was from out-of-network providers which generated balance billing expenses.  Even copays added up to significant amounts.  The local hospital agreed to a payment plan but Sonya says the doctors wanted payment up front.  The pediatric group recommended “Care Credits” a medical credit card.  It imposed no finance charge if the balance was paid within 18 months, but when she couldn’t manage that, 22 percent interest applied.  Another practitioner, not covered by the plan, offered Sonya a 20% discount if she would pay up front with a credit card.  So she started using other commercial credit cards to pay medical bills.  Her parents also helped to pay some of the bills.

Sonya said owing that much money was “way outside my comfort zone.”  She heard about ClearPoint on a talk show and called to see if they could arrange an affordable debt consolidation program.  They recommended she talk to an attorney who counseled bankruptcy.  They filed and their medical debts were discharged a year ago.  Sonya describes it as a nightmare and said talking about it was like “opening up a wound.”  She never imagined she’d file for bankruptcy.  Her oldest child continues to live at home and remains covered under the family policy.  Care needs are less intensive now and with the old debts cleared away, Sonya feels like she can manage.

Stuart, 48, Sales Manager

Income: $74,000 (315% FPL)Medical bills: $6,000Bills incurred by: WifeTiming of bills:  2010-2011Insurance status during bills:  ESI

Stuart and his wife and two kids have insurance through his job with a large employer.  The HMO plan covers all charges in network; out-of-network a $1000 deductible applies, then 80/20 coinsurance.  Stuart’s wife has Chron’s disease, a chronic condition that flares periodically.  About three years ago, her condition became so severe she had to stop working, cutting the couple’s income by about $30,000.  She required several specialized surgeries over three years.  Local surgeons were not experienced in the procedure, so they drove 60 miles each way to a university hospital for care.  In all, Stuart estimates their out-of-pocket medical bills reached $6,000 over two years.  In addition, he missed a lot of work driving back and forth when his wife was hospitalized.  Once her income was lost they put other living expenses on credit cards.

Stuart noted other stresses of the medical bills, dealing with insurance and collectors – the bills were so numerous that it was hard to keep track.  In one case he received what he thought was a duplicate bill from a radiologist for scans so set it aside.  Later he learned the bill was for a separate scan, and when it went unpaid for 90 days the radiologist turned it over to collections. He was amazed at how quickly bills would be referred to collections – he described it as “flipping” because it seemed automatic.  The hospital agreed to let Stuart pay his bill over time, but 90 days later, even though he’d missed no payments, the unpaid balance was referred to collections.  Stuart called to ask why and was told it was an automatic practice, just ignore the collections notices and continue making payments directly to the hospital.  Stuart said another time a provider referred to collections a bill that had been paid in full.  But it was up to Stuart to do the research to clear up this dispute.

Stuart also noted that, due to his family history of colon cancer, he went for his first colonoscopy before the age of 50. He expected it to be covered 100%, but cost-sharing applied.  When he called the plan, they said he would have to get the doctor to provide additional documentation in order for cost-sharing to be waived.  Eventually, Stuart got that done, too, but it was one more chore when he was already under stress.  “I’m a pretty easy going person,” he said, “but I can understand how some people go postal over this stuff.”  Stuart was not aware that his state has a consumer assistance program that can help consumers resolve claims problems.

ClearPoint helped Stuart set up a DMP and he has been paying down the medical and credit card debts at the rate of about $1,000 monthly. He expects to pay off all of his debts by the end of this year.  His next priority is to pay off the mortgage, which he also expects to do within a few years.   His family has had to cut back on just about every other expense.  Two of his kids are in college and, during the medical bills, Stuart had to reduce what he paid toward their tuition and books by several hundred dollars per month; the kids had to increase student loans to make up the difference.  Stuart is grateful he was able to work out all of the medical bills and other financial problems arising from his wife’s illness, but he wonders how well others might manage if they aren’t as vigilant as he was.

Claire, 44, Unemployed

Income: N/AMedical bills: $50,000Bills incurred by: SelfTiming of bills: 2008-2011Insurance status during bills: Uninsured

Claire had always been insured and never experienced financial problems until she was diagnosed with an auto-immune disorder in 2008.  She lost her job and health coverage when she became too sick to work.  Though offered COBRA, at $400 per month it was unaffordable.  Before she got sick, Claire earned a good income and had healthy savings.  She always elected the maximum retirement savings contribution, plus had compiled a savings nest egg sufficient to cover her living expenses for six months.  All of that was lost to medical bills once she lost coverage.  In the face of ongoing medical bills, she finally declared bankruptcy.  Today Claire collects disability income benefits and has coverage again under Medicare.

Connie, 47, Nurse

Income: $50,000 (210% FPL)Medical bills: $36,000Bills incurred by: Spouse, childrenTiming of bills:  1996 – presentInsurance status during bills:  ESI

Connie works as a nurse and her husband, Will, owns a small remodeling business.  Until recently, they and their two children were covered under a small group policy through Will’s job.  Their monthly premium for family coverage was $1,050.  The policy had a $5,400 annual deductible, and then paid 100% of covered expenses for the rest of the year.  Prescription drug coverage under the policy was limited.  An auto accident in 1996 left Will with chronic back pain requiring ongoing care.  In 2006 he had a heart attack and surgery, then, in 2010 he underwent surgery again.

For years the family struggled to pay the monthly premium and deductible, plus $600/month for prescription drugs that insurance didn’t cover.  The insurance company contested claims for Will’s second surgery.  Connie hired a lawyer and eventually the insurer agreed to pay, but in the interim the hospital pressed for payment, so Connie used her retirement savings, then a credit card to pay.

They also fell behind on their mortgage; the bank foreclosed in 2010.  The family moved to another home owned by Connie’s relatives.  They declared bankruptcy in 2011, discharging medical and credit card debts amassed to that time.  Connie has since qualified for health benefits through her job.  The premium is lower ($700/month) as the deductible ($1,400).  Will has had to stop working but his medical needs continue.  So medical debts are resuming; currently they are making monthly payments of $20 to one doctor and $150 to another.

Dillon, 48, Repairman

Income: $59,000 (529% FPL)Medical bills: $19,000Bills incurred by: SelfTiming of bills:  2003-2010Insurance status during bills:  ESI

Dillon’s medical bill problems date back to 2003, when an uninsured driver hit him, injuring is back and totaling his car.  Dillon has health coverage through his large employer.  The plan has a $3,000 annual deductible. It doesn’t cover chiropractic or physical therapy.  Tiered prescription copays apply and there are no dental benefits.  The accident left Dillon with chronic back pain and severe depression.  Last year he paid $2,000 out-of-pocket alone for dental care.  His drug copays are another $170 per month.  Before the accident he worked a second part time job, but he’s been unable to work extra hours so his income fell by about 30 percent.

As medical bills piled up, Dillon borrowed some money from friends and used “Care Credit” and other credit cards.  Later he concluded the credit cards were adding to his debts.  In 2010 Dillon filed for Chapter 13 bankruptcy.   His debts were consolidated and he’s required to make payments of $530 per month.  He says he “lives like a college student” now, very frugally, clipping coupons and doing without many purchases in order to make the bankruptcy payment.  On his budget there’s no room for surprises – his truck needs a $1000 repair and he’s not sure how he’ll afford that.  As for his ongoing medical needs, Dillon puts off all care he can’t afford to pay in full.  He needs 4 crowns replaced but is going without for now.  He can’t afford all of his prescriptions, so only refills those he needs most urgently for back pain and the rescue inhaler for his asthma.  He recently bartered with one of his doctors to provide free care in return for Dillon providing some office repairs.

Duncan, 45, Teacher

Income: $50,000 (255% FPL)Medical bills: $10,000Bills incurred by: SpouseTiming of bills:  2010-presentInsurance status during bills:  ESI

Duncan (a teacher), his wife Cara, and their child are covered under his plan at work.  Their monthly contribution for health coverage is $400.  The plan has an annual deductible of $1,000 per person, then 80/20 coinsurance to an OOP limit of $4,000 per person, which doesn’t include pharmacy cost-sharing.  It’s an HMO so all care must be received in network.  Late in 2010 Cara was diagnosed with breast cancer.  She had surgery in November, followed by chemotherapy and radiation therapy.  So she satisfied the annual deductible and OOP limit twice within a few months.  Her cost-sharing expenses came to just over $10,000.  Some providers were willing to set up payment plans, but others turned debt over to collections.  Cara also had to quit her part time job; she had been earning another 20,000 annually.  The couple had accumulated credit card debt even before Cara got sick.  Without her income they couldn’t keep up with the credit card payments or the new medical bills.  Duncan and Cara enroll in a debt management plan through ClearPoint.  All of their credit card debts and medical bills were rolled into a single payment plan.  They pay $1,000 each month (or one-third of Duncan’s take home pay) to the DMP; another $1,000 goes to the mortgage payment, leaving the family just $1,000 per month for all other expenses.  They are determined to pay their bills and so economize however they can, for example, using space heaters instead of filling the propane tank. Cara’s cancer treatment has concluded, though she continues to need periodic checkups and scans.  Each year as the annual deductible re-sets, this means more worrisome expenses. 

Elsie, 37, Writer

Income: $60,000 (310% FPL)Medical bills: $20,000Bills incurred by: Self, childTiming of bills:  2007-2009Insurance status during bills:  ESI

Elsie and her husband work for a small business and have health insurance through work.  Together they earn about $60,000 per year.  Until recently, their health plan the annual deductible was $1,000 per person, then 70/30 to an OOP limit of $10,000 per person.    They contribute about $325/month toward the family premium.  Last year their employer switched to a new plan that pays 100% after a $2,500 deductible per person.  Elsie vastly prefers this new plan.

Before their son was born in 2007, they never had any significant financial or medical bill problems.  But that year, their share of costs for the maternity care and delivery came to almost $8,000.  The following year Elsie developed severe mastitis requiring surgery and six weeks of nursing care.  Their son also suffered from chronic ear infections and was hospitalized twice before he was three.  All told the family’s share of bills reached $20,000.

Elsie was shocked that so many bills could result from a single hospitalization.  When her son was born she received bills from the hospital, obstetrician, pediatrician, anesthesiologist, radiologist, and others.  Generally each provider expected her to pay what was owed within 24 months, but she couldn’t afford those installment payments (some as high as $200.)  When she tried to pay smaller amounts, she was turned over to collections.  Elsie negotiated payment plans with some of the collectors, too.  But she owed dozens of creditors so monthly payments came to $800 per month, and sometimes she fell behind.  The stress of medical bills took its toll on Elsie and her husband; currently they are separated.  Elsie said it also ruined her credit rating.

At the end of 2009, Elsie entered a debt management program with ClearPoint that consolidated her bills and reduce monthly payments to $475.  She also took $2,000 out of retirement savings (one-third of all she’d saved.)  She’s on track to pay off her remaining debt this year.  Today her credit rating is getting better and Elsie’s proud she avoided bankruptcy.  Still she says something is really wrong with the system when such financial burdens can result for a young family who has always worked and always been insured.

Gillian, 59, Artist

Income: $10,000 (90% FPL)Medical bills: $10,000Bills incurred by: SelfTiming of bills:   2009-2010Insurance status during bills:  ESI/uninsured

Gillian lives with her domestic partner, Candace, who works for a large employer.  Gillian is a self-employed artist.  Initially, the couple had health coverage through Candace’s job.  It was a high-deductible health plan.  In 2009, Gillian suffered severe diverticulitis and was hospitalized.  Her share of medical bills approached $5,000.  While sick, Gillian also couldn’t work; she lost many of her clients so the income loss has been long-term.  About a year later, Candace was laid off from her job.  Gillian didn’t qualify for COBRA under federal law and couldn’t buy a policy on her own due to pre-existing conditions, so became uninsured.  By then, the medical bills had mounted to about $10,000.  The couple emptied retirement savings to pay medical bills and living expenses and then started using credit cards.  In 2010 they filed for bankruptcy and discharged the medical debt.  Since then they’ve fallen behind on their mortgage and are fighting foreclosure.  Recently Candace got a new job with health benefits.

Jeanne, 64, Retired

Income: $24,000 (220% FPL)Medical bills: $2,000Bills incurred by: SelfTiming of bills:  2010-2011Insurance status during bills:  ESI

A series of events caused Jeanne’s financial difficulties, only a small portion of which were due to medical bills.  As a retired state employee, Jeanne had good health benefits. The plan was comprehensive, requiring only $10 copays for most in-network treatment.  She also had a good income.  After retiring from government, Jeanne worked as a contract nurse, earning about $70,000 annually.   She is divorced and a cancer survivor.  She also has chronic back pain from an accident a few years ago and fibromyalgia.  In 2010, her daughter-in-law died suddenly, so Jeanne moved to California to help care for her son and grandson.  Jeanne closed her nursing practice and began collecting social security, reducing her income to $24,000/year.  When she submitted claims for follow up care for cancer and her other conditions from California providers, she learned her plan wouldn’t reimburse providers out of state.  She appealed but the denials were upheld, and Jeanne was left with $2,000 in medical bills that she couldn’t afford.  She started paying cash for ongoing care as often as she could, cut down on visits and sought some care from a local hospital.  She paid about $50/month toward the debt she’d accrued, even so, the hospital turned her bills over to collections.

In 2011 Jeanne learned that her ex-husband, who had been living in her house, failed to make mortgage payments and damaged the property.  Jeanne returned home to sort this out.  She ended up filing for bankruptcy to discharge all of her debts, including unpaid medical bills.

Katherine, 46, Customer Service Representative

Income: $19,200 (167% FPL)Medical bills: $35,000Bills incurred by: SelfTiming of bills:  2006-2009Insurance status during bills:  ESI

Katherine worked full time for a small employer who offered limited health benefits.  In late 2006, she was diagnosed with breast cancer.  Treatment and reconstruction continued into 2009, and costs exceeded the limits under her policy, leaving Katherine with $35,000 in bills to pay on her own.   She negotiated payment plans with the hospital and doctors, but the monthly installments were more than she could afford and when she fell behind, she was turned over to collections.  Katherine says the collections calls were aggressive and upsetting.  She applied to a charity to pay some of the bills, borrowed from friends and family, and used credit cards to pay others.  She also moved in with her mother to save on rent.  In 2012 Katherine filed for bankruptcy and her medical debts were discharged.  She’s changed jobs and has new, better health benefits.  She’s not proud of the bankruptcy, saying “I was raised that you pay your bills.”

Louise, 58, Accountant/Unemployed

Income: N/AMedical bills: $50,000Bills incurred by: SelfTiming of bills:  2005Insurance status during bills:  Individual policy (rescinded)

Louise is self-employed and had been covered under an individual policy.  In 2005, she was hospitalized with heart problems and shortly thereafter her insurer discovered an omission in her application and rescinded the policy.  Louise contacted her state insurance regulator, but ultimately the rescission was upheld.  The hospitalization therefore was not covered, leaving Louise with $50,000 in unpaid bills.   A few years later she filed for bankruptcy to discharge the debts.  Today she is unemployed and uninsured.

Millie, 52, Realtor

Income: $65,000 (340% FPL)Medical bills: $20,000Bills incurred by: SelfTiming of bills:  2007-presentInsurance status during bills:  Non-group policy

Millie’s health and medical debt problems coincided with the downturn in the economy.  She and her husband had both worked for a large employer, but decided to quit in 2007 to start their own real estate business, investing most of their personal savings in the new company.  They elected COBRA, and then converted to an individual policy.  The monthly premium was $1,200 and the annual OOP maximum under the plan was $10,000.  Shortly after they started the new business, Millie was diagnosed with melanoma.  Her treatment costs were extensive and she reached the OOP limit two years in a row.  In 2008, when the real estate market crashed, their income also plummeted.   They used up what was left of their retirement savings, then relied on credit cards to pay premiums and medical bills.  In 2011 they filed for bankruptcy, discharging the medical debts.  That year Millie’s husband got a new job with more affordable health benefits, though cost-sharing is still high ($4,000 annual OOP limit per person.)  She is still in treatment, and her unpaid medical bills are back to up $1,000 and still climbing.

Tanisha, 47, Unemployed

Income: N/AMedical bills: $9,000Bills incurred by: SelfTiming of bills:  2008Insurance status during bills: Uninsured

Tanisha is divorced and was out of work and uninsured in 2008 when she had to be hospitalized.   According to Tanisha the hospital social worker applied for Medicaid on her behalf and she was under the impression that would cover her expenses.  She never received a card, however, and was billed $7,000 in expenses.  Years later, she is still in dispute with the hospital and doctors over these debts and says the collections calls are unpleasant and rude.

1. Kaiser Family Foundation analysis of 2012 National Health Interview Survey (NHIS) data. ↩︎
2. Kaiser Family Foundation, “Health Security Watch,” June 2012, at https://modern.kff.org/wp-content/uploads/2013/05/8322_hsw-may2012-update.pdf ↩︎
3. The organization was called CredAbility when research began, but merged with ClearPoint Credit Counseling Services as of January 1, 2014. ↩︎
4. That is, they answered “yes” to any of the three survey questions about problems paying medical bills over the past 12 months, over time, or at all. ↩︎
5. Kaiser Family Foundation 2013 Employer Health Benefits Survey. Available at: http://modern.kff.org/private-insurance/report/2013-employer-health-benefits/ ↩︎
6. Anna Sommers and Peter J. Cunningham, “Medical Bill Problems Steady for U.S. Families, 2007-2010,”  Center for Studying Health Systems Change, December 2011. ↩︎
7. See for example, Schoen C, Doty MM, Robertson RH, Collins SR. 2011. “Affordable Care Act Reforms Could Reduce the Number of Underinsured US Adults by 70 Percent.” Health Affairs 30(9): 1762-1771; also Banthin JS, Cunningham P, Bernard D. 2008. “Financial Burden of Health Care, 2001-2004.” Health Affairs 27(1): 188-195. ↩︎
8. For PPO-type group health plans, the average annual deductible is $799 and the median annual OOP limit is between $2,000 and $2,900.    Cost-sharing levels under HMO-type group plans tend to be somewhat lower.   See Kaiser Family Foundation 2013 Employer Health Benefits Survey. ↩︎
9. See for example, http://www.ehealthinsurance.com/ehi/NewGlossaryHelp.ds?entry=faqId=HGLA;categoryId=HGL1-1-49;entryId=1  or  http://www.marylandhealthinsuranceplan.net/mhip/attachments/BOK5291_12_13.pdf ↩︎
10. Ha Tu, Genna Cohen, “Financial and Health Burdens of Chronic Conditions Grow,” Center for Studying Health Systems Change, April 2009, at  http://www.hschange.com/CONTENT/1049/ ↩︎
11. High financial burden is defined as spending more than 5% of income on premiums and out-of-pocket medical bills.  See Peter Cunningham, “Chronic Burdens: The Persistently High Out-of-Pocket Health Care Expenses Faced by Many Americans with Chronic Conditions, Commonwealth Fund, July 2009, at http://www.commonwealthfund.org ↩︎
12. Kaiser Family Foundation 2013 Employer Health Benefits Survey. ↩︎
13. Paul Ginsburg, “Wide Variation in Hospital and Physician Payment Rates Evidence of Provider Market Power,” Center for Studying Health System Change, November 2010, at http://www.hschange.com/CONTENT/1162/ ↩︎
14. Dyckman and Associates, Survey of Health Plans Concerning Physician Fees and Payment Methodology, August 2003, at http://www.medpac.gov/documents/Aug03_PhysPaySurvey(cont)Rpt.pdf ↩︎
15. Chad Terhune, Medical Bills You Shouldn’t Pay, Business Week, Aug. 28, 2008. ↩︎
16.   Jack Hoadley, Kevin Lucia, Sonya Schwartz, “Unexpected Charges: What States Are Doing About Balance Billing,” California Health Care Foundation, at http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/U/PDF%20UnexpectedChargesStatesAndBalanceBilling.pdf ↩︎
17. See www.multiplan.com.  This national, independent PPO contracts with about 800,000 providers, then with health insurers to complement their plan networks through national and regional PPO networks. ↩︎
18. 25 CFR Parts 146 and 147, at Federal Register, Vol. 78, No. 219, November 13, 2013. ↩︎
19. Scott Ramsey, et al, “Washington State Cancer Patients Found to be at Greater Risk for Bankruptcy then People Without a Cancer Diagnosis,” Health Affairs, 32, no. 6, (2013): 1143-1152. ↩︎
20. Thomas Chirikos, et al, “Indirect Economic Effects of Long-Term Breast Cancer Survival,” Cancer Practice, 2002; 10(5) 248-255. ↩︎
21. Kaiser Family Foundation, “Coverage of Colonoscopies Under the Affordable Care Act’s Prevention Benefit, August 31, 2012. ↩︎
22. Kaiser Family Foundation, “National Survey of Consumer Experiences with Health Plans,” June 2000. ↩︎
23. Brian Elbel and Mark Schlesinger, “Responsive Consumerism: Empowerment in Markets for Health Plans,” The Millbank Quarterly, Vol. 87, No. 3, 2009. ↩︎
24. See for example, Healthcare Financial Management Association, “Bad Debt Rising: When to Sell Your Accounts Receivable,” July 2004, available at http://www.healthleadersmedia.com/content/138293.pdf ↩︎
25. Ernst and Young, “The Impact of Third-Party Debt Collection on the National and State Economies,” February 2012. ↩︎
26. Federal Trade Commission, “The Structure and Practices of the Debt Buying Industry,” January 2013. ↩︎
27. Sara Collins et al, “Help on the Horizon” The Commonwealth Fund, March 2011, available at http://www.commonwealthfund.org ↩︎
28. See for example http://www.carecredit.com. The attorney general of New York recently settled a lawsuit with this medical credit card company for using high pressure sales tactics and other lending practices that resulted in low income patients being driven further into debt.  See “GE settles with N.Y. over high-rate healthcare credit card,” Thompson Reuters News and Insight, June 3, 2013, available at http://newsandinsight.thomsonreuters.com/Legal/News/2013/06_-_June/GE_settles_with_N_Y__over_high-rate_healthcare_credit_card/ ↩︎
29. David Grande, et al., “Life Disruptions for Midlife and Older Adults with High Out-of-Pocket Health Expenditures,” Annals of Family Medicine, Vol.11, No. 1, January/February 2013. ↩︎
30. Sommers and Cunningham, 2011.  See also, Kaiser Family Foundation Health Tracking Poll, February 2009, available at https://modern.kff.org/health-costs/poll-finding/kaiser-health-tracking-poll-february-2009/ ↩︎
31. How Debts in Collections Affect Your Credit, June 28, 2012, available at  https://www.creditkarma.com/article/accounts-in-collections ↩︎
32. LaToya Irby, “10 Side Effects of Bad Credit: How Bad Credit Affects Your Life”, available at:  http://credit.about.com/od/creditrepair/tp/bad-credit-side-effects.htm ↩︎
33. Ameriprise Financial, “Retirement Derailers Survey,” February 2013, available at http://newsroom.ameriprise.com/images/20018/RetirementDerailersResearchReport.pdf ↩︎
34. Jose Garcia and Mark Rukavina, “Sick and In the Red,” October 2010, available at http://www.accessproject.org/adobe/SickAndInTheRed.pdf ↩︎
35. Robert Seifert, “How Medical Debt Undermines Housing Security,” 2005, available at http://www.accessproject.org/adobe/home_sick.pdf. ↩︎
36. David Himmelstein, et al, “Medical Bankruptcy in the United States, 2007: Results of a National Study,” The American Journal of Medicine, Volume 122, Issue 8, August 2009. ↩︎
37. See for example, Cunningham, P and Felland, L, “Falling Behind: Americans’ Access to Medical Care Deteriorates, 2003-2007,” Center for Studying Health System Change, June 2008.  See also Doty, M et al., “Seeing Red: Americans Driven Into Debt by Medical Bills, Commonwealth Fund, August 2005. ↩︎
38. United States Census Bureau, “Income, Poverty and Health Insurance Coverage in the United States: 2012,” September, 2013. Available at: http://www.census.gov/prod/2013pubs/p60-245.pdf ↩︎
39. Kaiser Family Foundation, “Quantifying Tax Credits for People Now Buying Insurance on Their Own,” August 14, 2013. ↩︎
40. See Kaiser Family Foundation, Subsidy Calculator, at http://modern.kff.org/interactive/subsidy-calculator/. ↩︎
41. Center on Consumer Information and Insurance Oversight, “Summary of Consumer Assistance Program Grant Data from October 15, 2010 –October 14, 2011,” available at http://www.cms.gov/CCIIO/Resources/Files/Downloads/csg-cap-summary-white-paper.pdf ↩︎
42. Under the ACA, premiums that exceed 8% of income are defined as not affordable.  No such definition is established for cost-sharing, although the ACA does limit annual out-of-pocket cost-sharing under health plans generally and, in Exchange plans, provides for cost-sharing subsidies for low-income individuals. ↩︎
43.   See United States Department of Labor, FAQs about Affordable Care Act Implementation Part XII, February 20, 2013, at http://www.dol.gov/ebsa/faqs/faq-aca12.html.  Note that group plans may not impose an additional, separate OOP limit for mental health benefits, even if they employ a separate behavioral health benefit manager. ↩︎