As hospitals and healthcare providers from major medical centers to the chiropractic office down the street struggle to collect on patient debts, a combination of complex issues conspire to keep healthcare costs high and the ability of patients to manage their medical expenses paradoxically low. This toxic combination has left healthcare providers scrambling to reevaluate their collections processes and many patients afraid to seek treatment for anything less than a life-and-death condition. Among the key points consistently cited among experts in the medical finance field are:

• Variance of pricing for identical procedures, even within the same state, city or hospital system
• A “defensible” pricing model versus a “rational” pricing model. The “defensible” pricing model is the one used by the majority of healthcare providers and insurance companies to calculate pricing and is based upon competition rather than actual cost of services.
• Lack of pricing transparency for everything from Tylenol to major trauma treatment
• Shrinkage of patient-based revolving credit to pay medical bills
• Availability of need-based medical credit because of consumers’ existing debt service
• Lobbyist action to keep prices artificially high and opaque to consumers
• Lack of medical pricing transparency laws
• Sluggish economic recovery in the United States
• Use of emergency department resources for nonemergency services

A study by TransUnion Healthcare showed that as direct costs to patients increased by roughly 13% from Q1 2014 to Q1 2016, their ability to effectively pay for their care through revolving credit fell by 26%. This increased shift in financial responsibility to patients not only fuels increased healthcare-related debt, but has also been a major driver of the spike in healthcare costs as providers and insurance companies fight to offset nonpayment and collections losses. An additional factor is the concept that “you get what you pay for,” which allows some hospitals to charge up to 80% more for identical services than some of their lower-priced competitors and thus receive more revenues at a higher end cost to the patient.

Lobbyists have argued to keep pricing practices opaque, claiming that pricing for procedures, supplies and medications falls under the heading of “trade secrets.” While lawmakers have largely accepted this argument without question, some state legislatures no longer consider this notion valid when consumer protection against rising medical costs is so clearly out of control. States which have consumer protection laws on the books include:

• Colorado
• Maine
• Maryland (under consideration in the state legislature as of press time)
• New Hampshire
• Vermont
• Virginia
• Washington

However, this leaves 43 states that do not currently carry such healthcare pricing transparency measures. Even in the states that have them, there is the added problem of enforcement and reporting to verify compliance and that the costs patients and insurers are expected to pay are both reasonable for the level of care received and justifiable by legitimate medical need. Unnecessary or irrelevant tests, medications and similar services contribute to the opacity, which is observed everywhere from the Medicare and Medicaid systems to employer-sponsored insurance, as well as among uninsured patients, who are charged even higher rates for identical services in a bid to squeeze every possible dime out of each visit to a healthcare provider.

Despite recommendations based on studies by the US Government Accountability Office, or GAO, the TransUnion report and the passage of the Affordable Care Act, popularly known as “Obamacare,” which was intended in part to reform healthcare spending by patients and return more of the cost of care to insurance carriers, many observers believe the current patchwork of government, insurance and provider-level regulations has placed US healthcare on a path that can only lead to a “fatal accident” on a systemic level.

In 2015, US healthcare spending devoured 24% of the US GDP at $4 trillion. However, nearly half of those expenditures directly relate to paperwork, billing and support and administration costs. This model of inefficiency demonstrates just how critically the US healthcare system has been damaged. In typical fashion, the people who bear the cost, the patients, are frequently the ones who are least able to pay it and are thus penalized by damaged credit ratings and an inability to attain the revolving credit necessary to effectively pay their medical bills while maintaining a reasonable standard of living.

While some medical finance companies offer low- or no-cost OAC options for patients with better credit ratings, the ongoing sluggishness of post-Great Recession economic recovery has left many patients cut off from even this last-ditch medical payment option. Some healthcare providers have started offering in-office payment plan development and financing assistance, but this option further limits providers’ ROI and places patients at the mercy of the opaque and often confusing medical pricing system. The idea of quality correlating to cost has also been shown to be flawed in states like Massachusetts, which in 2010 posted healthcare costs up to 55% higher than the nationwide average for identical procedures and treatments.

As more states realize the value of transparent healthcare pricing and giving patients the information to make informed decisions about how, where and from whom to receive their medical care, the issues associated with the current model of healthcare may be forestalled or at least alleviated. However, until pricing standards and care benchmarks are brought into line with existing regulatory efforts and consumer demand, the US healthcare system continues to dance on the brink of a breaking point that many pundits consider now to be nothing more the inevitable reaping of what the system, and those who developed the opacity under which it functions, has sown.