What is Uncompensated Care?
When a health care provider performs services for a patient and they are not paid or reimbursed, the services are classified as uncompensated care. This usually occurs when patients have no health insurance, or receive health care services that are not covered by their health insurance plan, and they are unable to pay the charges themselves. In some cases, they may dispute the amounts shown in the medical bills and become unwilling to pay.
Who Pays For Uncompensated Care?
If health care providers receive no insurance reimbursement or payments from patients, they must absorb the cost of uncompensated care into their practice as an overhead expense and financial loss. To determine the value of these losses, providers use as the basis the full, established costs of the medical services. They then classify the unpaid amounts as either bad debt or charity care.
Unpaid services may be classified as charity care after consideration of individual and family income, employment, and whether other available funds or assets can be used to pay the charges. After review, they may classify all or a portion of the services as charity care with no further obligation from the patient. They may also work with the patient to establish an acceptable financing and repayment plan.
When health care providers determine that the individual has sufficient assets to pay the bill and refuses to do so, or has insufficient assets but has not requested any financial assistance or payment plan from the provider, the uncompensated care costs are classified as bad debts losses. The bad debt amount includes the full cost of services provided for which there was no payment from any source. Also included in bad debt are any unpaid out-of-pocket expenses such as co-insurance and deductibles after an insurer has reimbursed a medical provider for allowable charges.
Uncompensated Care Statistics
Hospitals provided more than $38 billion in uncompensated care in 2016. Other uncompensated care statistics show that bankruptcy filings by health care providers have increased by over 110% since 2010. Some attribute the increase to financial losses from uncompensated care, resulting in insufficient revenue to cover operating expenses.
Uncompensated care statistics also indicate other factors that either contribute to or are affected by rising medical costs and unpaid medical bills. These include the following
Patient Out-Of-Pocket Costs Have Increased
Since 2015, patient out-of-pocket costs for health care services have increased by about 30%. The rise in patient expense includes increased deductible amounts and co-payments that sometimes are not paid by patients. These unpaid out-of-pocket charges result in uncompensated care costs for providers.
Impacts On Patient Treatment
Studies show that 19% of patients skip or fail to take medications because of rising costs. Another 25% neglect having their prescriptions filled, and 40% have medical debt that may already be classified as uncompensated care by providers.
Many patients are reluctant to take on more medical debt. Some may choose not to receive medical services that are not covered by their insurance plans or that have a high deductible or copay amounts due.
Patients Pay A Larger Portion Of The Bill Than In The Past
Patients have become responsible for a larger portion of total medical charges than in the past. With increases in insurance premiums and deductibles, patients now pay about 41% of medical bills. Some find this difficult, and the bills remain unpaid or are financed over an extended period, contributing to the total amount of uncompensated care costs for providers.
Most Patients Want To Pay
Uncompensated care statistics indicate that most patients want to pay their medical bills, and do not want them classified as either charity care or bad debt. Many feel that an understanding of their costs up front will help prepare them to pay their bill when it comes due.
Also of note is that more than half of Americans report having difficulty understanding medical bills, and 62% are surprised by the amounts they must pay out-of-pocket. These concerns have prompted some providers to review their billing methods and to avoid uncompensated care costs by discussing all charges for services up front and collecting deductibles and copayments in advance.