By Bill Rusteberg
Why do some plan sponsors settle balance bills for their members when they don’t have to in the first place? And when they do why do they often agree to pay significantly more than warranted in medical debt market rates?
Buying Medical Debt
The idea of buying medical debt is not new, it happens all the time. There are companies that do that for a living, buying medical debt for pennies on the dollar. Why can’t plan sponsors buy medical debt for pennies on the dollar too? The short answer is they can.
Hospitals have learned that chasing medical debt is really not that necessary anymore since they make up the difference in re-negotiated managed care (PPO) contracts. Inflated reimbursement rates cover the short-fall and then some. Chasing medical debt is no longer as important as it once was back in the day. Just ask Mary (Everyone Is Paying For Mary’s Deductible Because Mary Isn’t).
Those poor bastards still buying PPO plans for their employees haven’t figured it out yet.
The Process
So whats the process typical of most hospitals in chasing patient debt? A former TPA owner we know outlines the usual progression of events:
“Most hospitals have several levels of debt offset. First, they pursue the debt themselves (two or three letters)……….many hospitals stop there. For those that keep going, they pass the debt to a collection concern they own themselves…..they use the new identity to try and scare the member a bit more……many stop there. Finally, they sell the debt to the dredge legal firms that make the final dirty calls to the members. When those firms can’t collect, they typically report to the credit agencies………………”
Of course in Texas we now have the No Ding Credit Law prohibiting credit agencies from adjusting credit ratings due to qualified unpaid medical expenses. (It’s Xmas In Texas – State Passes “No Credit Ding Law”)
Settling for Pennies – Found Money
As a last resort hospitals often sell the debt for pennies on the dollar. For example, a total patient debt block for sale we found on the internet shows one offering of total debt of $220,577.90 on 415 accounts averaging $531.51 per account. The sale price is $5,183.58 (2.35% basis points). Another example is a total debt of $1,299,993.27 on 1,677 accounts with a sales price of $7,149.96, or 55 basis points.
Selling medical debt is found money.
Plan Sponsors Should Take Note
Plan sponsors, particularly those sponsoring Reference Based Pricing plans, should consider buying medical debt on behalf of their members instead of rolling over and negotiating outlandish settlements at multiples of Medicare allowable rates when they don’t have to pay anything at all in the first place. Hospitals know plan sponsors are not liable for any more than what the plan allows (the plan pays what it pays, no more. no less). They know their only recourse is to plan members who have no money and if they do they won’t willing part with it.
Plan Members Are Not Stupid People
Plan members know the game and how to play it. The medical industrial complex has spawned an environment at odds with traditional American business values of “pay what your owe and pay it on time” to a complete opposite approach of “never pay all of what you owe and if you do pay anything don’t pay on time.” (Owe Medical Bills? Don’t Pay Promptly, Pay Late & Join The 50% Club)
All that plan members really want from their employer is help in wrestling balance billing monsters and not so much help in paying balance bills for them. They want a strong advocate to represent them, not Daddy’s Credit Card. As long as they are assured of that they are good with it.
Resources
Companies like MedSave Management are positioned to assist plans in wrestling medical debt monsters lurking in communities throughout the country.
