Patients Becoming Consumers: The Sale of Medical Debt

If you have taken the risk to go without health insurance, now may be a prudent time to reassess. Recent partnerships between hospitals and credit agencies have made the consequences of not having insurance even more dire. You cannot depend on your hospital to offer generous interest-free payment plans like before. With banks and financial firms buying medical debt from hospitals, patients with medical bills are fast becoming consumers with credit card debt.

Why and How Your Debt Gets Sold

Frustrated with carrying the burden of millions of uninsured or underinsured patients, many hospitals (especially non-profits) are starting to transfer their patients' medical debt to various credit card companies, private equity firms, and banks. Though hospitals will lose money by selling the debt at steep discounts, this is much preferable to the typical loss of 90 cents per dollar for medical bills patients don't immediately pay, according to a recent BusinessWeek article.

Of course, the credit companies stand to gain the most from this arrangement. Not only do they profit from buying discounted debts from hospitals eager to salvage what they can from unpaid bills, these middle credit and debt management firms charge interest rates as high as 27% for late payments.

Where does this leave you, the patient? Massive debt, with no easy way to pay it off.

Consequences for the Uninsured

Even before this sort of debt transfer, having no health insurance was risky enough. You knew you were risking your own health and great potential cost if something should happen to you or your family. But you weighed the consequences and took your chances anyway.

Now, the scales have tipped way over. You can't depend on free financing from your hospital anymore. Instead, you'll face the same harsh credit terms that haunt others with consumer debt. Few can recover easily from high interest rates on top of high medical debts.

Reconsidering Health Insurance

If you're still reluctant to buy health insurance because of the cost, take another look at your budget and shop around—health insurance may be more affordable than you think. Certain plans such as catastrophic or high-deductible plans cater to those most concerned about major medical emergencies. These plans have high-deductibles, but have lower monthly premiums than other health plans.

Considering the relatively small premiums to the enormous potential payout, you'll be hard-pressed to find a better way to secure your money than a health insurance policy.