I grew up in blue-collar Bedford, Pa., where the family that adopted me didn't earn a lot of money, and I was insured through the federal Children's Health Insurance Program. I saw first-hand how the
My Aunt Gwen worked at a Denny's off the Pennsylvania Turnpike, and like many Americans, her hourly wage wasn't enough to afford the out-of-pocket costs she incurred through a
Because I was the resident health insurance expert in our family, she called me and asked how she could possibly afford her treatment – not how she could beat the diagnosis. That's because by then the damage had already been done. I knew she was eligible for a federal charity care program that has been largely flying under the radar.
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Under Section 501(r) of the Internal Revenue Service Code, 501(c)(3) hospital organizations are required to offer patients who earn up to 400% of the federal poverty level substantially discounted or free care for emergency or other medically necessary care. Most of the hospitals in our community meet this requirement – much like the rest of the U.S. (5,129 of the nation's 6,120 hospitals are community hospitals, 58% of which are not-for-profit facilities).
Think about the impact this has on just one person, then multiply that by the hundreds of thousands who are eligible, and we can really start to change the perspective of healthcare in our country. This is the stark reality for many American families that cannot afford out-of-pocket costs related to a doctor's appointment or medication, or do not have enough savings to pay for a medical emergency. Medical debt is also mounting to a point where it is now the leading cause of personal bankruptcy in the U.S.
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There are any number of surprise-billing scenarios that can be horrifying for anyone who suddenly is sent to collections over tens of thousands of dollars. More than 153 million Americans rely on commercial health insurance for coverage that often comes with at least a $2,000 annual deductible, but many families have less than $1,000 in their checking account. Run the math, and you'll see how the results could be extremely catastrophic.
I've been speaking on this topic for a number of years now, and most of the audiences realize that charity care exists. But they've never heard of this regulation, even though it can be validated on the IRS website, and what has happened is that nonprofit hospitals have been turbocharging their tax write-offs without adequately making the public aware of 501(r).
One reason why I think this ACA provision has largely flown under the radar as long as it has is that wherever there's mystery, there's margin, and where effective oversight and consequences are lacking, there's simply no incentive for hospitals to change.
As benefit brokers and advisers, our shared goal is to do what we can to prevent any missed opportunities to seriously reduce or even eliminate out-of-pocket inpatient expenses for our clients' eligible populations, but also hold nonprofit hospitals accountable for discounting care as they're required to do under the law.
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The trouble with our nation's healthcare system is that it has been built upon extracting dollars without delivering much value. That issue isn't present in the 401(k) plan and pension space where registered investment advisers, co-fiduciaries and 3(21) investment advisers have long been forced to manage other people's money like it's their own.
Everyone will be better off the sooner we all get in line with 408(b)(2)(B) disclosure rules within the Consolidated Appropriations Act (CAA) through which plan sponsors must finally understand the direct, indirect and non-monetary compensation of their service providers. But benefit advisers also have to do their part, which means being fully transparent in serving plan sponsors and health plan members alike in the legal, ethical and accurate pricing of inpatient episodes of care.
There's a golden opportunity for producers to be aware of charity care, educate the employee populations we serve and assemble the right partners in place to help us champion that across the finish line. What we have to keep in mind is that it's generally an uphill battle for change in this business that usually occurs at a snail's pace, with powerful lobbies that create a David vs. Goliath mentality.
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About four years ago, I launched a business with a few other partners that acknowledged the need for better health plan member education, including how to secure charity care. Fast forward to today, and we have a dedicated team member who is actually helping patients evaluate their eligibility for discounts at not-for-profit hospitals that aren't doing nearly enough to administer these programs.
I have also been involved with a group called Patient Rights Advocate since 2017, which was instrumental in seeding the Hospital Transparency Rule that required detailed pricing information for at least 300 "shoppable" services that can be scheduled in advance. This novel concept is one of the few public policy issues that has garnered rare bipartisan support.
Two key U.S. senators who currently have their fingers on the pulse of meaningful reform are Indiana Republican Mike Braun and Vermont Independent Bernie Sanders. The landmark legislation they proposed earlier this year, known as the Health Care Price Transparency Act 2.0, would take the CAA a step further by addressing much of what needs to be codified and adding more substantial accountability measures for plan sponsors and service providers that have skirted the rules. It's a big deal, and we've made progress. But there's still work to be done, starting with better promotion of 501(r).
With so many Americans battling chronic diseases with comorbidity factors and being prescribed costly medications, it's not surprising that so many of us end up in the hospital. But since most of the country would be eligible for financial assistance under 501(r), it would be criminal not to make more people aware of this hugely important program.
