How Consumers Pay for Medical Care: Providing Better Ways to Ease the Pain of High Costs

According to a new study published by Gallup, Americans borrowed $88 billion to pay for healthcare in the last twelve months. One in four Americans is skipping care due to cost, potentially fueling deeper debt down the road for untreated illnesses. This will only exacerbate an issue that is already out of control.

With rising care costs, higher deductibles and greater out-of-pocket balances, consumers are on the hook for a larger portion of their overall healthcare liability, accounting for 20-35% of an average health system’s revenue.

Looking more closely at how patients pay for medical care emphasizes grave shortcomings in the current system that are not sustainable long-term. Better solutions are needed to ensure payment plans are manageable, not optional. A great financial experience will keep patients satisfied and health systems paid. 

The Ways Patients Pay

In a national study VisitPay conducted, consumers acknowledged a variety of funding sources to handle medical bills, as depicted in the chart below.

How do these payment methods measure up?                  

Checking Account (65%)

While checking accounts may be a viable alternative for some, it cannot and will not be the solution for all. The Gallup study suggested that even households earning $180,000 or more worry about personal bankruptcy because of a health crisis.

With a median US household income of $59,039 in 2016 and average disposable income of $400, dipping into the checking account will only be an option for a minority of people. And only up to a certain dollar amount for most.

Credit cards (36%)

Credit cards are used by many to pay for medical care. With an average APR of 19.24%, interest can be a huge incremental expense to an already foreboding liability. For example, for a balance of $2000, if patients use a credit card to cover this expense and pay $150 a month, they would owe over $250 in interest, or $2250 in total, taking almost 2 additional months to pay off the debt. And that’s the best-case scenario. For many, $150 a month payments for 16 months are not realistic and payments might be much longer, with interest continuing to accrue.

While credit cards are an easy and convenient way to pay for goods and services, there are smarter and more affordable ways to borrow money for medical care. If consumers are granted the same ease and flexibility in healthcare to which credit cards have afforded them in other industries, they’ll be more likely to tailor a plan and pay. Moreover, they’ll be more likely to seek the care they need and deserve.

Savings Account (20%)

Savings are yet another viable and liquid way consumers pay for healthcare. However, a culture already strapped for cash may not benefit by wiping out savings to pay for medical care. With many Americans living paycheck to paycheck, savings may not be a viable option at all, especially if the medical liability is excessive.

Health system payment plan (9%)

Payment plans offered by health systems can be a more flexible and affordable option for consumers, yet there may be obstacles in obtaining them. One, payment plans often require personal conversations with a financial advocate, and many patients feel intimidated or embarrassed to inquire proactively. Furthermore, they may not know they can ask. Two, payment portals accessed through electronic health records are often rudimentary and cumbersome, turning patients off before interest is turned on.

A simple, more convenient digital solution would heighten patient interest and gain deeper traction. After all, consumers have grown to expect a favorable financial experience in other industries.

Other methods

Consumers also use other means for paying off medical debt. These include borrowing from family members and borrowing from the bank. Others take money out of accounts such as IRAs and CDs, again precluding a need to dip into savings or retirement accounts to pay for medical care. Many are resorting to fundraising methods such as Go Fund Me to cover medical expenses and avoid collections and bankruptcy.

The option of not paying at all

According to Benedic Ippolito, an American Enterprise Institute research fellow and health economist, Americans often think of medical debt as different than other types of debt. He proposes that consumers treat medical debt as a lower priority than paying the mortgage or car. Thus, they often don’t pay at all, even at the risk of a tainted credit report.

Bad credit and no payment are deleterious options for both parties.

A great solution to ease the pain of paying for medical care

Many health systems settle for out-of-the-box EHR solutions that are good enough. Yet good enough doesn’t remove adoption barriers and promote ease of use. If no one uses the solution, it can’t impact customer satisfaction, loyalty or the bottom line.

Moving the needle from a good to great solution will remove patient frustration and confusion, prompt higher payment rates and build a more satisfied and loyal customer base.

VisitPay simplifies the patient financial experience in ways they want and deserve. With convenience, flexibility and clarity, patients have more options in how to structure payments, facilitating more willingness to pay. Tailored payment plans yield happier patients who are more likely to return to the same provider the next time they seek medical care.

Removing financial barriers is no longer nice-to-have. It’s mandatory to drive better health outcomes for all.

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