As of early 2018, 30 percent of healthcare services has become patient financial responsibility. That makes them the third largest payer group in the U.S., trailing only Medicare and Medicaid. Unfortunately for providers, patients are also the least likely to make good on their financial responsibility. As the rising cost of healthcare continues to be transferred to the patient, healthcare providers must find a way to ensure that they are receiving compensation for their services.
Here are some of the reasons why patients are owing more – but paying fewer – of their bills than ever before.
Unaffordability and Increasing Patient Financial Responsibility
Patient out-of-pocket costs for healthcare rose by 14% in 2018 alone, a trend attributed largely to the rising utilization of high-deductible health plans. Consumers are struggling to find a way to afford the rising cost of healthcare and often opt for these higher deductible plans with a lower monthly premium. These deductibles are inching higher every year, along with the cost of care. A recent Kaiser Family Foundation 2019 Employer Health Benefits Survey revealed the average deductable falls around $1,655 for single coverage. Almost 40 percent of all healthcare visits cost between $500 and $1,000, a cost that proves to be unaffordable for many working families struggling to make ends meet.
“Increasing healthcare costs and patient [financial] responsibility is a continuing trend that does not seem to be slowing anytime in the near future… healthcare providers need processes and tools in place to help patients meet their financial obligations and to establish funding mechanisms that will benefit both the patient and provider.”
– Johnathan Wiik
TransUnion Healthcare Financial Strategy Principal
Changes and High Deductibles
Turbulent and uncertain continue to be popular terms in healthcare legislation. The Affordable Care Act saw a rocky disposition from healthcare stakeholders in 2017, and is currently facing another appeal attempt at the Supreme Court level. Multiple elements of the legislation have already been removed, and consumers are feeling the impact in their premiums. The elimination of the individual mandate and cost-sharing reductions have had a significant impact on the health insurance market. The cost of insurance premium increases in the coming years is estimated to be so substantial that federal subsidies wouldn’t be enough to cover them. Unfortunately, these costs will be passed on to the consumer in the form of higher premiums. Many state payers sponsoring individual health plans have already increased insurance premiums by as much as 30 percent, citing the loss of cost-sharing reduction subsidies.
High-deductible health plans made their appearance in the market back in 2003. President Bush made changes to the tax code, which encouraged employers to experiment with these high-deductible health plans. The idea was to have consumers shoulder more of the burden of their healthcare costs and encourage them to cut back on unnecessary spending, making it more affordable for employers.
However, the plan backfired when the economy stalled. Since then, premiums and deductibles have continued to skyrocket because of an unbalanced risk pool and questionable legislation. Consumers have been virtually crippled by the cost of medical care. Many have put off routine care and skipped medications to save money, another plan that will backfire.
Almost 75 percent of patients indicate that they do not know the cost of their medical services until they receive a bill. Consumers are opting for these high-deductible health plans to save money on lower premiums, but they do not have a full understanding of what their insurance policies cover. Ever exploding deductibles means that patients are financially responsible for a larger portion of their healthcare. Patients are demanding billing transparency, but providers are failing to make the connection.
A combination of several key factors is leading to a delay in payment that is so significant that many providers only expect to receive a portion of the payments that they are due. Patients are confused about the amount they owe, so they wait to receive a bill to confirm it. When they do receive the invoice, it is confusing and difficult to read. Patients often find they are being charged for services that they don’t agree with or they feel that insurance should have covered it. Couple this with the fact that many providers do not offer digital payment options and they are lucky to receive payment at all.
Patient Financial Responsibility Is Rising Faster Than Wages
The Kaiser Family Foundation and Federal Government research show that the cost of healthcare has risen faster than American wages. The premiums for an employer-provided single premium increased 4% and the average family premium increased 5% from 2018 to 2019. Workers’ wages increased 3.4% and inflation increased by 2%.
Employer-sponsored healthcare plans are the largest source of coverage in the American market. Climbing healthcare costs are crippling the American family budget and challenging the affordability of healthcare over the long term. Healthcare providers need to take the initiative in becoming more cost-transparent and initialize those important financial conversations with patients at the point of service.
What Can You Do About It?
Although there is no simple solution for the increasing patient financial responsibility issue, there are opportunities for medical systems to combat their revenue loss.
Simply offering digital statement and payment options helps to reduce confusion in the medical billing and collection process. Helping patients feel at ease with their medical charges encourages them to make the payment. Digital payment options like QR codes, credit-card on file enabled payment plans, or text-to-pay systems reduce confusion and effort needed to make the payment while allowing patients to pay at any time or place that is convenient to them.
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