Here’s what you need to know about medical debt in Wisconsin

Medical debt—a financial burden for tens of millions of Americans facing hundreds of billions of dollars in health care costs—affects everyone, since those unpaid bills can lead to higher prices for everyone else. And yet, even with advances in health insurance coverage, there are still things hospitals and elected officials could do, including in Wisconsin, to reduce that weight on household finances and the national economy.

What is medical debt?

The medical community has traditionally used the term “uncompensated health care” to describe one of two things: “charity care,” also known as community or indigent care, and “bad debt.” 

The former refers to care for which a hospital does not expect payment because it’s been determined that the patient simply cannot afford the care they need; in other words, the hospital writes off the bill. The latter refers to care for which a hospital does expect payment, but for one reason or another, it doesn’t collect. 

Hospitals provide charity care at varying levels, according to the American Hospital Association (AHA). This care must be budgeted for depending on the hospital’s financial condition, geographic location, specific mission, and more. These hospitals typically have their own processes to identify who can and cannot afford to pay in advance of billing in order to determine if a patient’s care will need to be funded by an alternative source, such as a charity care fund. 

Bad debt similarly tends to be caused by indigent and/or uninsured patients, “making the distinctions between the two categories arbitrary at best,” the AHA states. 

While health care executives have argued that hospitals are already trying their best to help patients who can’t afford care, health care advocates have argued that hospitals could be doing a lot more, including in Wisconsin. 

How big is medical debt in Wisconsin, and why does it happen?

A report from the Wisconsin Hospital Association found that overall, uncompensated care for Wisconsin hospitals in 2021 totaled $1.29 billion. In 2022, those same hospitals  provided $1.3 billion in uncompensated health care services.

Charity care accounted for $582.6 million of the total in 2022, and $536.6 million of the total in 2021. Both figures are less than the total in 2020 and 2019, before the COVID-19 pandemic started. 

In contrast, bad debt increased during this same time frame. According to 2022 figures, bad debt encompassed $697.5 million of that $1.3 billion total. 

The decrease in both charity care and uncompensated care overall is likely due to the pandemic.

An emergency order from the federal Department of Health and Human Services allowed an additional 23.3 million Americans to gain health care coverage via Medicaid, according to a report from the Office of the Secretary for Planning and Evaluation (ASPE). The order suspended the periodic review of Medicaid recipients to determine whether they’re still eligible, allowing them to remain continuously enrolled throughout the worst of the pandemic until the provision expired last year. 

Brian Potter, chief operating officer for the Wisconsin Hospital Association, told the Wisconsin Examiner that state recipients who qualified for this expansion remained insured under Medicaid despite changes that may have kicked them off the program, such as an increase in income, under normal circumstances. 

Bobby Peterson, executive director at ABC for Health, which provides legal assistance to low-income people who are struggling to pay off their medical debt, told the Wisconsin Examiner that while “continuity of coverage is really helpful,” the increase in bad debt numbers concerns him. 

In his view, “hospitals aren’t getting paid either way.” He points out that while charity care erases debt, patients who are classified as “bad debt” tend to be sued in court and have their credit scores negatively affected. A 2022 report from ABC also found that health care providers have been sending unpaid bills to collection at an increased rate. 

Peterson said that his work has led him to believe that hospitals could be doing a lot more to provide financial assistance to patients. He told the Examiner that he’s personally encountered financial assistance staff at health care facilities that don’t appear to understand their own employers’ financial policies. He believes these workers need more training. 

“They seem to miss opportunities to direct people in a more proactive way” to options for helping them get covered, he said.

How do we fix the problem?

The emergency order that expanded Medicaid coverage during the early days of the pandemic and allowed for the continuous enrollment provision ended a little over a year ago. 

As a result, states began the process of redetermining members’ eligibility and disenrolling those who no longer qualified for the program. As of this month, 20.3 million Americans have lost their health care coverage as a result of that provision ending, including nearly 600,000 Wisconsinites, according to the Kaiser Family Foundation. 

Democratic Gov. Tony Evers has been pushing to expand Medicaid in the state of Wisconsin during his time in office, despite repeated struggles with Republican lawmakers. 

Evers’ 2023-25 biennial budget proposal included allocations for Medicaid expansion, as well as accounts for additional federal Medicaid matching funds which could be used to cover an estimated 89,700 people in Wisconsin, many of them employed but uninsured. 

In May 2023, however, the Republican-controlled legislature voted to remove Medicaid expansion funding from the budget proposal despite the fact that the Wisconsin Department of Health Services has outlined in detail the benefits of expanding the program. 

“States that have expanded Medicaid have experienced positive outcomes as more people gain access to needed treatment and care, hospitals stay open, and jobs and the economy grow,” the department states. 

These states also, notably, see massive declines in medical debt. 

The department states that expanding Medicaid would have provided Wisconsinites whose jobs do not offer accessible and affordable health care insurance with essential support as well as improved their access to preventive and behavioral health services, medications, and care for chronic diseases. This in turn would have strengthened worker productivity and decreased absenteeism. 

Additionally, had the budget passed with the Medicaid expansion included, Wisconsin could have realized $1.6 billion in tax dollar savings from 2023 to 2025, also according to the Wisconsin Department of Health Services.

On a more micro level, and in light of Medicaid expansion being paused for now in Wisconsin, Peterson says that he’d like to see hospitals do more to take into account which patients are in a health crisis that is only being exacerbated by financial distress.

“For a lot of people having health issues, they’re facing a lot of stress,” he said. “They probably have other medical bills. It’s a very challenging environment for both their physical and mental health.”

Peterson says that financial assistance program employees can also stand to be a bit more empathetic in these situations. He told the Examiner that he’s seen hospital staff labeling patients who have trouble managing their own health care as “non-compliant,” for example.

“It doesn’t work real well with people under a lot of stress,” he said.