Hospital patients felt an increased financial burden in 2014 as medical costs rose while revolving credit became less available, according to TransUnion's latest Healthcare Report. The report found that consumers' ability to pay for select medical procedures fell by more than 11% last year.
From a credit standpoint, the average consumer's total revolving credit line on products such as bank-issued credit cards, store credit cards and home equity loans dropped from $34,111 in Q4 2013 to $33,676 in Q4 2014. Revolving credit lines for the subprime population dropped at a faster rate during this same time period, from $9,705 to $9,006.
"We are finding that the healthcare providers that have been the most flexible in adjusting their billing practices also appear to have performed best during these transitional years," said Gerry McCarthy, president of TransUnion Healthcare. "A key change in the industry is the increased prominence of upfront cost estimates and more timely and transparent healthcare bills."
TransUnion Healthcare's proprietary ratio comparing available revolving credit to select healthcare costs declined to 13.5 to 1 in Q4 2014, down from 15.2 to 1 in Q4 2013. The ratio means that for every $100 in healthcare costs, consumers had $1,350 in revolving credit to potentially make those payments in the last quarter of 2014. For the same quarter in 2013, consumers had $1,520 in revolving credit for every $100 in healthcare costs.
"Our latest report demonstrates that consumers continue to feel the pressure of rising healthcare costs, McCarthy said. "Despite a slowly improving economy, many consumers are finding they have less money to make these payments. This issue is not just about patients, though, as thousands of healthcare administrators across the country face the challenge of providing quality care while also seeking fair compensation.
Patients in the subprime credit risk tier (those consumers with a VantageScore 3.0 credit score lower than 601) may find it most difficult to pay for their healthcare. TransUnion data shows that subprime consumers' healthcare ratio has dropped from 4.3 to 1 in Q4 2013 to 3.6 to 1 in Q4 2014.
"Some consumers in the subprime risk category may qualify for a type of charity care, though this is reliant on whether or not hospitals are equipped with the latest technologies to qualify them," added McCarthy. "If hospitals cannot readily provide this charity care, they may end up taking on more bad debt if patients are unable to make payments."
The findings in the report didn't surprise National Association of Health Underwriters President Tom Harte. As employers' premiums rise they are "cost shifting," or putting more financial demands on the employee and their dependents in the form of higher deductibles or other strategies, such as changing the plans they offer. Harte said employers are being faced with an average 20% jump in premiums.
The TransUnion Healthcare Report includes anonymous data estimates from thousands of providers, including hospitals and healthcare clinics from across the nation. The data points focus on patient payment responsibilities for key, commonly administered procedures, including major joint replacement, cesarean section and natural birth deliveries. That information was, in turn, compared with financial data gathered from TransUnion's proprietary Industry Insights Report. The TransUnion Healthcare Report looks at available revolving credit as an indicator for how consumers might cover out-of-pocket medical costs.
The latest report found that average patient payment costs increased approximately 11% in the past year, from $2,245 in Q4 2013 to $2,491 in Q4 2014. The increase is primarily attributable to skyrocketing costs for popular joint replacement procedures, which rose nearly 20% from $2,617 in Q4 2013 to $3,135 in Q4 2014. Cesarean section birth costs dropped 5% ($2,042 in Q4 2013 to $1,939 in Q4 2014) while natural birth costs remained about the same ($1,677 in Q4 2013 to $1,674 in Q4 2014).
Patient deductible costs rose nearly 7% in the last year from $1,062 in Q4 2013 to $1,133 in Q4 2014. This increase occurred before a government report that 16.4 million people now have secured healthcare coverage during the most recent open enrollment period of the Affordable Care Act.
"Deductibles have nearly doubled over the past five years through the adoption of high deductible plans offered by employers and the implementation of the Affordable Care Act," said McCarthy. "We will be tracking this trend closely as we suspect that average deductibles could rise much more in the coming years. The continued increase in deductibles will place even more importance on transparency of costs in the billing process and will require providers to offer payment plans that will demand a new level of effort to collect reimbursement."