May 29, 2024 | By Brian Marsella
Also published on FinTech Nexus News
Americans today are dealing with a healthcare affordability crisis. With inflation at its highest in 40 years, consumers face progressively unaffordable prices, higher-deductible health plans, and more copays, all putting a financial strain on the average U.S. household.
In the last five years, family coverage premiums have increased by 22% and deductibles have risen at an annual rate of 6.1% since 2008, averaging $3,811 per family as of 2022 and fueling a 6.6% increase in total out-of-pocket costs. Many feel forced to avoid care entirely because they can’t afford to use the benefit they’ve paid for. In fact, 43% of patients have said they’ve avoided or delayed care because of their inability to afford it.
It’s easy to blame employers, but their portion of healthcare coverage has also increased while the benefits have diminished. For instance, the average annual premium cost to employers for a family in 2023 was $17,393, a 46% increase since 2013. Coupled with an employee base that’s disengaging from the system, employers are literally paying a premium for benefits that get used less often.
Healthcare providers haven’t fared much better. Care avoidance has only created sicker patients and more costly expenditures down the line. This situation puts added strain on provider systems that are already stretched thin due to tight budgets and understaffing. Given patients can’t afford to pay directly, providers have essentially become banks, forced to allocate increased resources and staff to bill collection.
U.S. hospitals have provided roughly $745 billion in uncompensated patient care since 2000. They’re forced to chase down payments through multiple letters, texts, and calls. This barrage, combined with a flurry of explanations of benefit (EOBs), only causes more confusion for patients: in fact, 56% of Americans feel “completely lost” when it comes to understanding their health plans. We’re in a vicious cycle that’s generating worse outcomes for each stakeholder.
A myriad of point “solutions”
Some well-intended attempts have largely failed to address the growing pressure of healthcare payments.
For example, app-based payment portals help patients easily access their bills and health information, but they simply make the bill-presentment process more efficient, doing little to address overall unaffordability. Healthcare payment cards have also gained considerable traction but often come with a hefty interest rate for patients. Neither of these patient-forward solutions do much to help providers or employers.
Alternatively, providers are implementing policies designed to help mitigate unpaid bills, like demanding upfront payment prior to services rendered. This just further alienates patients who are already struggling to afford healthcare and doesn’t address a provider’s existing cost burden. So, we have new “solutions” adding more complexity and additional cost into an already complex system.
A payment approach that works for all
What’s needed is a more streamlined approach to address all sides of the payment equation and a shift in the financial relationship between patients and providers. One new idea is having a third party step in and pay providers immediately, then assume the financial burden of payments and collection. Patients are able to pay for their healthcare over time at zero interest, and providers just focus on healthcare.
How is this profitable for everyone? By analyzing patient payment data, such a model would be able to create individualized payment plans for each employee-patient. It would make collections more efficient by knowing whether a patient is able to pay or not, rather than waste time and budget tracking them down. Patients who can pay would be able to do so over time at no interest through a plan that works for them. This would remove the association between affordability and healthcare and enable every patient to seek care. In addition, it would allow providers to free up the resources currently allocated for bill collection and channel them into issues like understaffing and improving care technology.
As a side benefit, the third-party payment model can dramatically simplify the patient experience. Since there’s only one party to deal with, all of a patient’s in-network bills can be consolidated in a single unified explanation of benefits. A patient would only have to worry about their single payment, reducing the anxiety related to healthcare payments that exacerbates their medical condition. Both patients and providers would be dealing with a single point of contact.
The benefits for employers are also meaningful. Given that they already have to offer higher deductible plans, this new model, with its long-term, low-interest payment plans, would act as an additional buffer for their employees. Employees would now have a safety net against higher costs, enabling them to use the benefit they’ve paid for. Receiving care they would have otherwise put off would deliver healthier outcomes.
The path forward for healthcare payments
Fixing the broken healthcare payments system seems complex but the solution is here and ready to be implemented. By shifting the financial responsibility of bill collection away from providers and stripping away complexity for patients, costs are reduced, and better outcomes for everyone are the result. Employers have happier employees, and providers can sharpen their focus on care, creating better outcomes for the people behind the premiums.
