U.S. agency proposes rule to eliminate medical debt from most credit reports, saying it's an unreliable predictor of payment

Third Way graphic

Kentucky Health News

The federal Consumer Finance Protection Bureau is proposing to eliminate medical debt from most credit reports, stop companies from sharing debt information and bar lenders from making decisions based on medical data.

About 12 percent of Kentucky adults, more than 400,000 people, are estimated to have medical debt.

The proposed rule brought "immediate cheers from consumer advocacy groups that have long pushed for change," Amy Lotven reports for Inside Health Policy. "CFPB believes the rule . . .would remove as much as $49 billion in debt from 15 million Americans and increase credit scores by an average 20 points."

The agency's research has found that medical debt "is not a good predictor of loan repayments," so it thinks the regulation would "improve underwriting, stop denials of loans to consumers who would repay, and lead to about 22,000 additional safe mortgages a year," Lotven writes.

CFPB Director Rohit Chopra said the credit-reporting system is often inaccurate, yet is used "to coerce patients into paying medical bills that they do not owe."

In 2003, Congress restricted lenders from using medical information about debts, but "agencies created a regulatory loophole that let creditors use such information in their decisions," Lotven reports. The proposed rule "would close the regulatory loophole from 2003 by establishing guardrails for credit-reporting companies and banning lenders from taking medical devices as collateral for a loan as well as from repossessing a device if the loan is not repaid."

Vice President Kamala Harris and Lisa Lacasse, president of the American Cancer Society Cancer Action Network, said states should take similar action. David Kendall, senior fellow for health policy at Third Way, a centrist group that has produced several reports on debt, said the proposed regulation is the latest in a series of federal and state actions “to fight the scourge of medical debt. They have been preventing medical debt by expanding coverage, funding medical debt abolishment, and ending junk insurance that can lead to medical debt.”

UPDATE, June 12: "Tuesday's announcement builds on a 2022 effort by the big credit bureaus TransUnion, Equifax and Experian to keep debt off consumers' reports until it's at least a year old," Axios reports. "The two major credit scoring companies, FICO and VantageScore, have also reduced how much medical debts can factor into consumers' scores at that time."

Consumers complain about high deductibles on Obamacare plans; advocates note mitigating factors and say to keep shopping

By Melissa Patrick
Kentucky Health News

Many consumers of health insurance under the Patient Protection and Affordable Care Act are finding that it's not as affordable as the name implies -- not because of the premiums, but due to the "sky-high" deductibles that leave many feeling like they don't have health insurance at all, Robert Pear writes for The New York Times.

“The deductible, $3,000 a year, makes it impossible to actually go to the doctor,” David Reines, a former New Jersey hardware salesman with chronic knee pain, told Pear. “We have insurance, but can’t afford to use it.”

Pear reports, "In many states, more than half the plans offered for sale through HealthCare.gov, the federal online marketplace, have a deductible of $3,000 or more, a New York Times review has found." The lower the premiums, the higher the deductibles.

Kentuckians also struggle with high deductibles, based on a look at plans offered on Kynect, Kentucky's health insurance marketplace. Kentucky Health News examined what it would cost a one-parent, one-child family in Scott County.

The least expensive premium for this family on Kynect is the CareSource "bronze" plan at $254 per month, but this plan also has the highest deductibles at $6,650 per person and $13,300 per group.

The lowest deductible for this family is the Humana "platinum" plan at $500 per person and $1,000 per group, but this plan's premium was also one of the most expensive at $532.98 per month.

Two steps below the platinum plan are the "silver" plans, which are the most popular by far on the Obamacare exchanges. Deductibles for the silver plans available to our sample family ranged from $2,000 to $3,700 per person and $4,000 to $7,500 per group.

Deductibles for the bronze plans, which have the lowest premiums, ranged from $4,400 to $6,650 per person and $8.800 to $13,300 per group.

Other costs to consider when looking at the affordability of a plan are its co-payments, co-insurance and out-of-pocket maximums.

"Those deductibles are causing concern among Democrats — and some Republican detractors of the health law, who once pushed high-deductible health plans in the belief that consumers would be more cost-conscious if they had more of a financial stake or skin in the game," Pear writes.

While the shift to cost-sharing through higher deductibles has become the norm, an analysis by the Kaiser Family Foundation found that fewer than half of all households above the poverty level have enough assets to cover an out-of-pocket maximum of $3,000 to $6,000, which is considered mid-range. The highest out-of-pocket maximum for 2016, as set by the health-reform law, is $6,850, according to Kaiser Health News.

While the report from HHS said, "Eight out of 10 returning consumers will be able to buy a plan with premiums less than $100 a month after tax credits, and about seven out of 10 will have a plan available for less than $75 a month," several consumers complained to Pear that the high deductibles make the plans unaffordable.

“Our deductible is so high, we practically pay for all of our medical expenses out of pocket,” said Wendy Kaplan, 50, of Evanston, Ill., whose family of four pays premiums of $1,200 a month, with an annual deductible of $12,700, “So our policy is really there for emergencies only, and basic wellness appointments.”

There are mitigating factors, Pear reports, health officials and insurance counselors cite several. All plans must cover preventive services without a deductible or co-payment; some plans help pay for some items before patients meet their deductible; there is an overall limit on out-of-pocket costs; and there are discounts available for those with particularly low incomes.

And for those who say their deductibles are too high, Dave Chandra, a policy analyst at the liberal-leaning Center on Budget and Policy Priorities, told Pear, “Everyone should come back to the marketplace and shop. You may get a better deal.”

But Pear writes that the deductibles are so high they may be scaring away some consumers, especially the young, healthy consumers that would help bring the premiums down for everyone.

Alexis C. Phillips, 29, of Houston, is one of those who told Pear, “The deductibles are ridiculously high. I will never be able to go over the deductible unless something catastrophic happened to me. I’m better off not purchasing that insurance and saving the money in case something bad happens.”

The penalty for not having health insurance in 2016 is $695 or 2.5 percent of household income, whichever is greater.

Cost of an MRI in America? $1,080. France? $280. Why? providers 'largely charge what they can get away with'

Why does getting an MRI in the United States cost $1,080 when it only costs $280 in France? The answer comes down to how the prices are set, reports Ezra Klein for The Washington Post.

"That may sound obvious," he writes. "But it is, in fact, key to understanding one of the most pressing problems facing our economy. In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978."

The difference in expenditures isn't linked to the idea that Americans just use more health-care services (the opposite is actually true) or that we are sicker. A 2003 study on international heath-care costs and a survey released Friday by the International Federal of Health Plans both concluded it comes down to pricing. The latest survey showed that in 22 of 23 medical services, whether that was a routine doctor visit or coronary bypass surgery, Americans paid more than other developed countries.

The difference is based on the way the pricing is set. "Other countries negotiate very aggressively with the providers and set rates that are much lower than we do," said Gerard Anderson, who was involved in the 2003 study. In Canada and Britain, prices are set by the government. In Germany and Japan, the prices are "set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail," Klein reports.

Outside of Medicare and Medicaid, which are cheaper than the commercial average, "it's a free-for-all" in the U.S., Klein wriotes. "Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured."

Because the customer often doesn't have choice in whether or not he or she will purchase health care — one could be unconscious or very ill — "sellers of health-care services in America have considerable power to set prices, and so they set them quite high," Klein reports.

Fixing the problem is fraught with complication, Klein writes, because "centralized bargaining cuts across the grain of America's skepticism of government solutions." The prices are also set by very powerful industries. The federal health care reform law is not expected to fix the issue, Klein writes, though might spread awareness since there are provisions to expand transparency; hospitals will have to publish their prices, for example. "But this is, for the most part, a fight the bill ducked, which is part of the reason that even its most committed defenders don't think we'll be paying anything like what they're paying in other countries anytime soon," Klein write. (Read more)

UK Extension Service launches online challenge to improve physical and financial wellness

The University of Kentucky Cooperative Extension Service has created an online challenge designed to help people improve their health and financial status. The Kentucky Fall 2011 Small Steps to Health and Wealth challenge starts Sept. 4 and runs to Oct. 2.

The free program asks participants to track daily choices they make about nutrition, physical activity and saving money. As they enter data into 10 categories, participants will earn points and see a comparison of their progress to other participants. Top finishers will receive prize packs. The first 150 people to complete the challenge will get a UK water bottle.

"As individuals work toward improving both their health and personal finances, it is important to realize that small changes do make a difference," said Jennifer Hunter, UK assistant extension professor for family financial management in the UK College of Agriculture. "Adopting only one of the 10 recommended daily practices is a step in the right direction."

To register, click here or call a local extension office.