Everyone Is Paying For Mary’s Deductible Because Mary Isn’t

Lucky Mary. She has a $1,500 deductible through her employer’s health plan but everyone else is paying for it because she’s not.

By Bill Rusteberg

There are a lot of Mary’s out there. In fact almost everyone shares Mary’s good fortune these days. Who on earth can afford to pay these ever increasing deductibles? Most Americans live paycheck to paycheck. An unexpected deductible hit takes food off the table or puts their next mortgage payment at risk.

The truth of the matter is hospitals end up writing off a lot of bad debt. Some say their accounts receivables average 18-20% and growing. They attempt to collect but usually settle for 10 cents on the dollar by selling the debt to collection agencies

So how is everyone else paying for Mary’s deductible? It’s really very simple. Hospitals factor in bad debt when they negotiate managed care contracts. As a result, all of us are paying Mary’s deductible through additional premiums needed to alleviate the accounts receivable problem.

Yet actuaries give premium credit for deductibles. The higher the deductible the lower the premium. The lower the premium the less there is to pay for Mary’s deductible. So hospitals renegotiate their rates to higher levels to offset the premium loss. Thus the never ending cycle continues.

Mary keeps food on the table and pays her mortgage payment faithfully every month.

Lucky Mary is even more lucky now that her employer decided enough was enough. A direct agreement was negotiated with a local hospital system that alleviated the accounts receivables problem in return for fair, equitable and lower reimbursement levels.

Mary is a real person. Her employer is a real employer whose health plan we manage. The hospital system is real too, now accepting 100% of Medicare with no outliers, stop loss provision, escalator clause in return for the patient’s health plan waiving all patient financial responsibility.

The hospital wins, the employer wins and Lucky Mary wins again. And everyone else wins too because no one has to pay Mary’s deductible anymore.