July, 2016 |

Here We Go Again? Yet Another Unintended Consequence of the ACA

July 27, 2016 Mark Hammerstrom

In a recent blog I wrote about the shifting burden of health care costs onto the consumer. In many ways that should be no surprise, but there is no doubt that this shift is catching many consumers off guard. This may be the ‘canary in the coal mine’ for increased economic hardship for many Americans. At least additional hardship in terms of making important health care choices based on the cost of, rather than the necessity of, medical treatment.

Adding to the canary’s plight is another side of the impact of the Affordable Care Act (ACA) which is where and to whom the cost of care has shifted.

Recently CNBC reporter Dan Mangan wrote a story entitled “Wealthy spending more on health care than poor and middle class, reversing trend.” As the basis of his story, Mangan cited two recently published studies, one from Harvard and another from the journal Health Affairs.

Both studies documented the rather dramatic change that has occurred in who spends the largest amount on health care. Mangan’s opening sentence tends to say it all: “Health-care inequality is the new income inequality.”

He goes on to summarize the Harvard report:

“The study…reveals that the poor — who as a group have more health needs and live shorter lives than higher income groups — in recent years have become the group with the lowest-spending per capita, after decades of being the biggest spenders…In other words: People who need health care the most are now getting less of it than the people who need it the least.”

He goes on to relate that, according to another study in Health Affairs, this shift “…came as a result of a reduction in per capita health spending by or on behalf of the poor, at the same time as spending by the rich ramped up significantly.”

Mangan goes on to quote one of the authors of the Health Affairs study as saying: “We fear it may presage deepening disparities in health outcomes[.]”

Pausing here for just a minute: Does anyone think this was an intended consequence of the ACA? I hardly think so. Recalling the political brouhaha that accompanied the passage of the ACA, a significant benefit to the act was that the poor would now receive, or at least find an easier and affordable way to receive, much needed health care. Quite apparently not so. According to one of the authors of the Health Affairs study, Dr. Steffie Woolhandler, “A major change happened.” I think that is an understatement.

Quoting Mangan’s report again: “The study suggests that the downturn in overall health spending by the poorest quintile, or one-fifth of the population, may be at least partly blamed on stagnant wage growth for most workers, coupled with a big increase in the number of health insurance plans with high deductibles…Research has shown that high-deductible plans can discourage health-care usage, particularly among people with lower incomes.”

According to Mangan, Woolhandler indicated that “…the data doesn’t reveal whether the poor, as a group, are getting too little in the way of health care, or whether the rich are getting too much as a group. Both scenarios are possible, but ‘we cannot tell,’ she said. However, the shift revealed by the study ‘cannot possibly be an efficient use of resources’ by the health-care system…’To be efficient, that has to track with need.’”

Woolhandler said the ACA has been “a partial solution…” Many of the individual health plans sold on government-run exchanges “come with such huge deductibles…The federal government has more or less endorsed the idea that these huge deductibles are acceptable, and that has been part of the problem.”

Of course this shift comes with a price. According to the report the poorest men can expect to live fifteen fewer years, and the poorest women ten years, when compared to similar age groups in the wealthier classes.

More shoes to drop? No doubt. The politicization of our health care system, and how to pay for it, are coming with consequences that are markedly impactful and unexpected. This can’t help but affect the care we all pay for and receive.

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Are U.S. Consumers’ Overall Experiences in the Credit Market Improving? Survey Says…

July 21, 2016 Lisa Brammer

The Federal Reserve Bank of New York conducts a Survey of Consumer Expectations (SCE) every four months. In their latest SCE Credit Access survey which was conducted last month in June, panelists were asked about their expectations and experiences regarding credit demand and access during the past 12 months.

The Federal Reserve Bank released the results of their survey in a press release and it is mostly good news: “The release shows an improvement in consumers’ experiences in the credit market compared to the February release, with a decline in the proportion of “discouraged” and “rejected” consumers.”

Application rates for credit cards increased and application rejection rates for all credit types (except housing related) decreased to an almost all time low, so that’s all well and good, but respondents of the poll were somewhat cynical when asked about future approval rates.

The average perceived likelihood of a credit application being rejected rose for almost all types of credit except requests for credit card limit increases. Most of the pessimism centered on expected rejection rates for mortgage applications which went up almost 5 percentage points since October of 2015.

Fortunately, the survey also reported that the percentage of respondents who actually needed credit, but were too discouraged to apply for it decreased to the lowest levels seen since the survey began in October of 2013.

No Doubt About It: The Burden of the Cost of Healthcare to the Consumer is Growing

July 13, 2016 Mark Hammerstrom

The last two blogs I have written have focused on consumer debt (rising) and financial regrets (not saving enough for retirement, no emergency fund, too much college debt, etc.). Consumer debt, at least according to the New York Fed, seems manageable. Even though it is at or near historic highs the economy is providing enough steam that consumers are, so far, able to afford it. Of course, financial regrets don’t seem to go away; for example, saving for retirement when you are in your late fifties.

We hear a lot about excessive student debt being at or near a tipping point for many Americans. Yet, there does seem to be some initiative to help these folks avoid financial ruin through different re-financing options, government relief and so on.

The shock of Brexit seems to have worn off, too, at least for the moment. So, are we really living in a financial la-la land? I have wondered what the next shoe to drop will be, and perhaps this is it.

In a post from ACA International entitled “Study: Consumers’ Healthcare Financial Burden is Growing” the organization cites a recent report from TransUnion Healthcare (June, 2016) that, not surprisingly, finds the burden for medical costs is quickly shifting from employers to consumers. This change is not only in relation to increasing costs for premiums passed on to employees, but also the changes in the plans themselves which included much higher co-pays, deductibles and co-insurance.

Rising debt, combined with little or no savings to cover unusual or emergency items, has led consumers to be unprepared to budget and plan for these increases in the cost of medical care.

Some data points cited from the report include:

“For every $100 in healthcare costs in first quarter 2016, consumers had $1,720 in revolving credit to potentially make those payments.” This compares to more than $2,200 in 2015.
Additionally, “…approximately 51 percent of patients owe more than $1,000 in bills to their healthcare providers.”
“Seventy-seven percent owe more than $500” according to the report.
43 million consumers have overdue medical bills on their credit reports. (This according to a Consumer Financial Protection Bureau report issued in 2014, “Consumer credit reports: A study of medical and non-medical collections”).
Consumers saw a 13 percent increase in their average deductible and out-of-pocket maximum costs between 2014 and 2015. This will no doubt be higher for 2016 as well.
Consumer’s average deductible also grew between 2014 and 2015 from $1,131 to $1,278. Again, in 2016 this will increase again.
Average out of pocket costs also increased during that period to $3,065.

Quoting Gerry McCarthy, president of TransUnion Healthcare, in a news release: “Our findings emphatically demonstrate that despite the advent of the Affordable Care Act, more patients are struggling to pay their healthcare costs,” he said.

In many cases, hospitals are beginning to offer consumers more financing options and begin financial discussions prior to treatment. While that can be a sensitive subject, helping consumers understand accurately what they are going to pay for care can alleviate surprises and help decrease delinquencies on the front end.

All that said, what has been the effect on those seeking healthcare? That is, has there been a change in the deferment of needed medical care due to these increasing costs of treatment? Yes, according to a recently released 2016 study by Harvard University. According to this study, there has been a dramatic shift in healthcare spending from the poor to the rich. In summary, the report concludes that because of the increase in the number of high deductible and high out of pocket insurance plans, the poor appear to be deferring needed medical attention. Those who are wealthier can afford to pay their costs, although the report also points out that they tend to be the healthier of the two groups.

Once again, an unintended consequence of the ACA? It certainly appears so. Stay tuned; another blog on this will follow.

A. Alliance advises vigilance in this rapidly changing environment and stands ready to assist our clients manage their debt collections even in the most challenging situations.