Patient Responsibility & Payment Ability: The Self-Pay Gap

In the last ten years, employers have been hit with growing medical coverage costs. As those costs have gone up, and employers are unable to shoulder the burden, they’ve passed those costs to employees in the form of high deductible health plans (HDHPs). Enrollment in HDHPs has grown from 5% in 2006 to over 30% of American workers in 2020. The trendline suggests that both employers and employees will continue to lean heavily on HDHPs, leaving health systems in a quandary on how to manage that disparity between patient responsibility and payment ability: what’s known as the self-pay gap.

The costs passed on to workers are significant. High deductible health plans have a deductible of at least $1,400 for individual coverage and $2,800 for families, according to the IRS. Out-of-pocket expenses (including deductibles, copayments, and coinsurance) have an annual maximum of $6,900 for individuals and $13,800 for families. And those limits don’t include premiums. For 20% of enrollees, out-of-pocket costs were capped at more than $6,000 in 2019.

These costs keep a number of working Americans from seeking health services: the high out-of-pocket costs are too much to bear. In fact, the Los Angeles Times reported:

In the last 12 years, annual deductibles in job-based health plans have nearly quadrupled and now average more than $1,300.

Yet Americans’ savings are not keeping pace, data show. And more than four in 10 workers enrolled in a high-deductible plan report they don’t have enough savings to cover the deductible.

One in six Americans who get insurance through their jobs say they’ve had to make “difficult sacrifices” to pay for healthcare in the last year, including cutting back on food, moving in with friends or family, or taking extra jobs. And one in five say healthcare costs have eaten up all or most of their savings.

Our own research supports this finding. As revealed in our upcoming 2021 VisitPay Report, 58% of survey respondents said that rising medical costs would influence their decision to see a medical professional or seek follow-up treatment for non-COVID symptoms.

For health systems, the effects on their financial stability are profound. As the patient obligation rises, the share of net patient revenue that is patient obligation shifts as well. Without significant increases in the payment rate on patient obligation, health systems will see diminishing or even negative margins due to this dynamic alone.

Traditional approaches won’t be enough for health systems to combat this growing challenge. Health systems need solutions that are good for the patient and the provider. People want—and need—to be able to seek medical services. And we know patients want to pay their medical bills. 

In order to bridge the payment gap created by rising patient responsibility, health systems must think differently about the patient journey. They must look to other industries outside of healthcare to mirror the kinds of convenient, flexible, and transparent experiences patients expect. By rebuilding the financial experience to better cater to their patients’ needs, health systems will also see an increase in payment rates—ensuring their own financial wellbeing, too.

See the impact the self-pay gap can have on revenue.

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