Despite half of Americans taking money out of their paychecks each month to pay for their health insurance, many still find themselves facing
In April, the Biden-Harris administration announced several reforms to address the nearly $200 billion worth of medical debt in the U.S. These actions included holding medical providers and debt collectors accountable for harmful practices, reducing the role medical debt plays in accessing credit, helping veterans get their debt forgiven and informing all Americans of their rights as consumers in the healthcare market.
However, these reforms still fail to confront why healthcare remains unaffordable for a majority of Americans, says Ashok Subramanian, the CEO of Centivo, a health plan resource for employers.
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“The reality is people can't afford healthcare, even if they have insurance in many cases,” says Subramanian. “That insurance is supposed to protect us against unexpected expenses in a time of need, but healthcare insurance increasingly comes with a big fat asterisk.”
Approximately 16 million Americans owe over $1,000 in medical debt — that is 6% of the U.S. population, according to the Survey of Income and Program Participation. And yet, the National Health Interview Survey estimates over 90% of Americans have some form of health insurance. Notably, Biden’s reforms fall short of addressing what drives medical debt, and instead focuses on minimizing the impact of medical debt.
Namely, Biden’s reforms want to ensure that medical debt does not stop people from buying a home or getting a small business loan due to the damage it did to their credit. For instance, the Federal Housing Administration, which backs mortgages for 12% of home purchases in the U.S., eliminated medical debt from its consideration criteria. The Biden administration is even instructing the Department of Health and Human Services to evaluate hospital billing practices and use that data for grantmaking decisions and policy recommendations for the public.
But these solutions are about damage control, not why Americans find themselves in debt to begin with, Subramanian says.
“There are two big drivers of medical debt: Number one, healthcare is too expensive,” he says. “Number two, the health plans that most people have available to them have a high burden of cost on the employee itself. Unless we fundamentally address why healthcare is so expensive, everybody is going to keep spending more and getting less.”
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A primary care visit without insurance can be between $150 and $300, with a physical exam costing patients $200, according to health benefits company Mira. For those with high-deductible health plans, a patient has to pay out of pocket for baseline services like primary care, tests and screenings, acting as if they are uninsured until they meet their deductible.
Subramanian believes one root of the problem lies with big insurance companies, which have been unable to manage the cost variation between providers in their own network, as well as control how much providers can charge.
“We have an assumption that larger companies are able to control costs because they have the scale, and they can negotiate better deals,” he says. “But they're not able to effectively curtail the pricing of these providers' systems, because they need those providers for all of the different lines of business they're in. Those providers could be at the core of their most profitable products.”
In other words, it does not benefit big insurance companies to fight with providers for the most cost-effective care. Meanwhile, five insurance companies control 46% of the market, according to ValuePenguin, a digital resource for consumer spending.
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So, what reforms would address healthcare affordability? Subramanian underlines the need for a realignment of values in the U.S. healthcare system. For example, Centivo builds health plans around providers who have proven to provide care at lower costs but with positive outcomes. This limits cost variation and inflation for consumers.
“We basically weaponize the fact that if we build contracts and networks around the more cost-effective providers who are also high quality, there's a 20-30% savings opportunity,” says Subramanian. “And we pass those savings on to employers and employees.”
Beyond health plans, medical school students should have more incentive to become more widely needed care providers, such as primary care physicians, physician’s assistants, nurse practitioners and licensed social workers, explains Subramanian. A shortage of these professionals will translate to more unmet demand and higher costs.
“Every med student comes out of med school with a quarter-million dollars worth of debt, so they are incentivized to be an orthopedist, an ophthalmologist or a dermatologist,” says Subramanian. “We can forgive debt and reward those who are the frontline to drive a healthier society, as opposed to those who are treating illness in many cases when it's already too late and too expensive.”
For Subramanian, these changes would at least begin to change what providers, insurers and consumers must financially prioritize, but it will take far more national reform.
“Bottom line is anything that helps remove the burden of healthcare-related financial strain is a welcome step in the right direction,” he says. “That's just going to require a fundamental rewiring in what we value as a country and how we pay for it.”
