One of the primary causes of financial strain, insolvency and eventual bankruptcy is the burden of medical debt on families and individuals. There is researched evidence showing this by such notables as Professor Elizabeth Warren (now senator) while she taught law and researched at Harvard. Statistics have the number of filers due to medical indebtedness as high as 50%. Much of the problem it turns out is among those who in fact have medical insurance–as high as 75% of those who file.
It is common knowledge that there is an epidemic of illness in the United States and the US ranks low among industrialized countries in healthcare. According to Forbes,
It’s fairly well accepted that the U.S. is the most expensive healthcare system in the world, but many continue to falsely assume that we pay more for healthcare because we get better health (or better health outcomes). The evidence, however, clearly doesn’t support that view.
For example in the same Forbes report of the ten countries reviewed the US ranked dead last, as follows:
1. United Kingdom
2. Switzerland
3. Sweden
4. Australia
5. Germany & Netherlands (tied)
7. New Zealand & Norway (tied)
9. France
10. Canada
11. United States
Many other studies and reports support the finding–the US has not only poor health and shorter lives but by far the most costly healthcare system in the world. There is a huge disparity between what we pay for and what we get, insofar as real health outcomes.
A major reason for this plight is the massive administrative costs of the healthcare system. Across the US, hospitals and doctors need to spend inordinate amounts of their time and overheard on paperwork and the ensuing battles caused by private insurance companies’ machinations behind closed doors.
Because we have no single-payer system, because we have 1,300 different insurance companies that all require different forms to be filled out and have different methods for judging claims, the great bulk of nonmedical personnel at hospitals and clinics are assigned to chasing claims.
Taibbi, Matt (2010-11-02). Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America (p. 178).
In many hospitals more than half of the staff is devoted to collecting money from the insurance companies. Taibbi continues,
American health care, to employ a seriously overused term, is a Kafkaesque parody of corporate inefficiency, with urgently necessary procedures approved at split-second speed by doctors standing over living patients at one end, balanced out on the other end by a huge Space Mountain of corporate denials that must later on be negotiated in the dark by helpless underpaid clerks in order to extract payment for those same procedures.
Taibbi, Matt (2010-11-02). Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America (pp. 178-179).
In sum, the enormous paperwork is a huge excessive cost in the health care system with the patient eventually bearing the brunt of the bill. Healthcare is over 22% of our GDP according to the 2015 government forecast. On the average we spend more than twice as much on healthcare than countries with market economies that make up the Organization for Economic Cooperation and Development (OECD),
and for that greatly increased outlay we get higher infant mortality, higher obesity rates, lower longevity, fewer doctors per 1,000 people (just 2.4 per 1,000 in the United States, compared with 3.1 in OECD states), and fewer acute care hospital beds (2.7 per 1,000, compared to 3.8 per 1,000 in the OECD countries).
Taibbi, Matt (2010-11-02). Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America (p. 179).
The bottom line is that the cost of health care is increased by about 31% due to huge non-health related administrative expenses according to the New England Journal of Medicine.
One result is there have been many hospitals that have gone bankrupt. While sad in itself, this procedure is often cloaked in a Chapter 11 Reorginization plan which may slip by unnoticed by the general population and the patients because the daily functioning of the institution does continue. But the inevitable response is that the insurance companies, having created the problem, do not reduce the administrative costs. Rather in most cases they increase the paperwork demand, particularly with added and absurd denials. For example, after its bankruptcy one NJ hospital was denied a claim because the patient who received IV antibiotics had been a nurse twenty years earlier and should have been able to administer that care for herself, to herself, at home. Taibbi quotes one hospital administrator trying to cope with the very problem: “I guess if your father’s a surgeon and your mother’s an anesthesiologist, lie down on the kitchen table and get your heart fixed there.”
These insurance companies make endless requests for more proof, more copies, more this and that, saying we will get back to you. And the cost and the company’s income skyrockets. This is against a backdrop of no meaningful federal regulation of the system and of state regulators being the servants of these corporate masters. Of course, on the other end, the CEO’s and high level managers of these insurance companies make massive salaries.
In the end, the patient and the patient’s family–the customers– are asked to pay the bill which does not get covered. There is a grand scheme to build up costs in the dark and the patient who had to or is still dealing with the illness is the victim. Insurance without any assurance…
Personal bankruptcy is one solution to this debt problem but a careful informed look behind the scenes shows that this should have been avoided if the system was structured to actually be concerned about health care and not only money.
Robert Liptak
Iowa Bankruptcy Attorney