How Greedy Hospitals Fleece The Poor

The pundit class collapsed back in its chair last week, exhausted and spent, from a furious wonk-off session over Bernie Sanders’s rhetoric on medical bankruptcies. The Washington Post’s in-house political fact-checking apparatus assigned a devastating three Pinnocchios to Sanders for saying 500,000 people a year go bankrupt from medical bills. The Sanders camp complained, and the Post’s Grand Factmaster Glenn Kessler pushed back. Wonks stranded on the periphery of the action, like Megan McArdle, joined the fray, arguing that medical bankruptcies are actually much less common than Sanders asserts, because how can you tell whether medical debt was the precipitating event in a bankruptcy if sometimes people get unnecessary cosmetic dermatology? Checkmate.

The episode was a good reminder of the dangers of Wonk Brain, which leads sufferers to fight viciously over questionable methodology and imprecise rhetoric while ignoring the bleeding obvious and the obvious bleeding. Americans face rapidly ballooning health-care costs; get pursued into financial ruin for the crime of getting sick; and get sicker and die because the price of health care is too high to pursue it at all. The precise number of people who go bankrupt because of a medical bill matters far less than the fact that medical bankruptcy is a real danger in the United States in a way that it simply isn’t in other developed countries. You don’t have to have a degree in economics to figure that out; you just have to have ever looked at a hospital bill.

Or read the newspaper, because lately, they are filled with tales of chicanery from those same hospitals. On Monday, a Kaiser Health News report detailed the University of Virginia hospital system’s heartless pursuit of poor patients who owe them money. The hospital has sued its patients 36,000 times over six years, for as little as $13.91, with devastating consequences. The hospital has garnished wages and put liens on houses, levying high interest on delinquent patients. It sued its own employees for unpaid bills around 100 times a year.

It’s not just happening at UVA, though they are particularly aggressive. Last week, The New York Times reported on Carlsbad Medical Center in New Mexico, which has sued many more of its patients for unpaid medical bills than nearby hospitals; even the county judge who hears the cases was sued. In June, ProPublica published a story on Methodist Le Bonheur Healthcare Hospital in Memphis, which filed 8,300 lawsuits against patients in five years.

These hospitals are outliers in their communities, pursuing cases more aggressively than other hospitals do; some don’t file lawsuits against patients at all. These particularly aggressive hospitals are only known about because reporters have highlighted their practices. How many more of the 6,210 American hospitals are suing their patients? And, in turn, how many Americans have been sued by their hospitals? We don’t know, but it’s at least thousands. 

We are, however, learning some of the stomach-churning details about these hospitals’ practices. The primary case documented in the UVA article involved Heather Waldron, who was sued over a $164,000 bill she received for emergency intestinal surgery. The article notes that figure is “more than twice what a commercial insurer would have paid for her care.” What relationship, then, does that charge have to what it actually cost UVA to provide Waldron’s care? We don’t know. The hospital probably doesn’t even know. It doesn’t have to tell anyone anything about how they came to this dollar amount in order to pursue her to the point where she has to sell her house and go on food stamps. 

Last year, The Wall Street Journal reported on the case of a Wisconsin hospital that had actually attempted to determine the real cost of a knee surgery at its facility, for which the list price was more than $50,000. It turned out the answer was $10,500. The hospital had set the price nearly five times higher “using a combination of educated guesswork and a canny assessment of market opportunity,” according to the Journal.

Mere days after that report, Kaiser Health News reported on the case of Drew Calver, an Austin, Texas, man whose heart attack resulted in a bill of $164,941, which the billing experts at WellRithms told the reporter should have only cost around $26,985. No one is stopping this—except for Kaiser Health News reporters, whose efforts got Calver’s bill lowered to $332.

Though Medicare and Medicaid will only reimburse a set amount for each procedure, a hospital can charge private insurance—and patients—whatever it can get away with. The Congressional Budget Office found in 2017 that private insurance paid hospitals an average of 200 percent of what Medicare would pay, which is why the hospital lobby is so desperate to prevent any expansion of government-provided health insurance. 

The Affordable Care Act protected more patients from this desperate situation insofar as it increased the number of people with insurance, and mandated coverage for preexisting conditions. But people with insurance routinely end up with massive medical bills, most horribly through the practice of “surprise billing,” where a patient goes to an in-network facility but sees an out-of-network doctor. (The expectation that patients in the middle of medical emergencies are supposed to diligently look up whether the emergency room is in-network is absurd enough, but there is almost nothing a patient can do to prevent an out-of-network doctor from treating them when they arrive.) Hospital groups are currently fighting legislation that would end this practice.

Because of this system, where hospitals set a potentially bogus list price and then negotiate from there with each insurance provider they accept, uninsured patients or those who get surprise bills get screwed. Those without insurance are expected to pay a lot more than their insurance would if they were insured, or if their insurance covered it. Patients are mere pawns in the games that hospitals play with insurance. (UVA offers a 20 percent discount for uninsured patients, but clearly prices can be inflated by much more than that discount would provide.) If a hospital has to pretend that a knee surgery costs five times what it does to get insurance to pay twice what it actually does, who cares if the odd patient gets sued into financial oblivion? 

If you’re a poor patient who lied about having a preexisting condition when you signed up for your short-term health insurance plan—which, because short-term plans are not covered by the Affordable Care Act’s rules about what particular means of price-gouging insurance companies can engage in, is allowed to discriminate and charge more on the basis of preexisting conditions—you could be charged with fraud. Would UVA ever be charged with fraud for telling Heather Waldron she owed them $164,000 when the hospital would have accepted half that from insurance? Would anyone in the legal system that allowed them to garnish thousands of paychecks and seize people’s tax refunds ask them to prove that the charges themselves were not fraudulent? 

We can keep letting hospitals use the state to immiserate its own citizens. But it will not stop uninsured people from needing care; American livers and lungs will keep resolutely ignoring their owners’ financial shortcomings. And when you have uninsured people seeking care, you will have to spend a lot of time and money figuring out how to pay for it. 

A much simpler way would be to have the government pay for all health care—a “single payer” that covered everyone. That would help hospitals that don’t benefit from having large numbers of privately insured patients, like rural hospitals. But hospital CEOs who currently make a lot of money (even those at nonprofits; many large nonprofit hospital executives make multimillion dollar salaries) would not be helped. They would make a lot less money.

In America, corporations are warmly encouraged to put their foot in the state’s boot to stand on the neck of the poor, whenever that might be profitable. Landlords get judges to sign off on the civil arrest of tenants in pursuit of unpaid rent, plus that juicy lawyer’s fee and accumulated interest (for whatever reason interest must always accumulate). Stores like Walmart pursue shoppers who they have falsely accused of shoplifting for the value of the goods they didn’t steal. Debt collectors trick people into reviving their old debts that have fallen out of the statute of limitations, then sue them again.

There is a thread connecting stories like this with UVA’s outrageous pursuit of its indebted patients. Any arm of the state—the law, courts, Congress, the police—can act as a tool of any corporation organized and rich enough to use them. One patient in the UVA story, Zann Nelson, had entered the hospital “bleeding and in pain” with “newly diagnosed uterine cancer,” according to the story. She lost her court battle against UVA over its pursuit of her $23,849 bill, when a judge ruled that she had “the ability to decline the surgery.” What chance does the average person have against a system like this?