How will the Affordable Care Act affect the amount of bad debt for hospitals and medical centers?

January 3rd, 2014

How will the Affordable Care Act affect hospitals' accounts receivable? Will it result in more bad debt?

These are just two key questions among the mass uncertainty about the Affordable Care Act. In the midst of the contentious debates, the grandstanding, name calling, finger pointing, and other tactics familiar to the world of politics, serious and pressing questions about this law have been looming.

With the new year upon us, many people have to adjust to account for the new healthcare law that is better known as Obamacare. This includes hospitals and medical centers as well as people who now have a decision to make about their own coverage.

One of the issues for hospitals and their A/R will be the increase in lower level or “bronze” plans. Many of the plans that will be made available to people have low premiums and sky-high deductibles. In December David Bruce of the Erie Times-News reported about this concern:

"Some of the plans available through the Affordable Care Act only cover 60 percent of medical costs until an annual deductible of $6,350 is met. The rest of the fees must come from the patient, said Michael Fraser, executive vice president of the Pennsylvania Medical Society.

'Physicians are worried about accumulating a lot of bad debt from these patients,' Fraser said during a Nov. 26 visit to Erie. 'If the patient comes in with bad insurance, like the bronze plans (through the exchange) that cover only 60 percent of the costs, the physicians are the ones who will have to collect the rest.'"

Timothy Magaw found similar concerns in his article for Crain’s Cleveland Business this past October:

"Northeast Ohio hospitals are worried that more of their customers are about to stick them with the bill.

"The concern among hospitals is that Ohioans buying coverage — or at least trying to — on the federally run health insurance exchange could opt for cheaper plans with high deductibles that would leave those individuals with hulking medical bills should they require care."

All the way back in July of 2013, Evan Albright wrote about the possibility of more bad debt from the “under-insured” in an article for Forbes:

"A growing percentage of bad debt is from individuals who have the means to purchase insurance, but the policies they purchase have large co-insurance or deductibles. One expensive medical procedure or hospitalization, and those individuals can find themselves on the hook for thousands of dollars. One hospital reported that more than 50 percent of individuals with insurance did not pay their responsibility for a medical debt."

It would seem that the best thing a medical facility can do is ask themselves if they are prepared for the impact Obamacare will have and then try to be proactive and plan ahead. In order to do so, most facilities will likely have to partner with a collection agency that has more resources and specific strategies to locate patients and pursue this increasing amount of debt.

There will still be challenges as everybody tries to deal with the fluidity of the Affordable Care Act, but partnering with a reputable and proven collection agency can be incredibly helpful as medical facilities navigate this new reality.

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