A developing meme in the storyline against market oriented health care reforms is that consumer-directed health plans are responsible for an increase in hospital bad debt. Given that hospitals have a history of reporting thoroughly misleading data on the cost of care, as when they conflated uncompensated charity care with uncompensated Medicaid/Medicare care and then happily blamed the uninsured, such claims deserve close scrutiny.

A nice little paper from Oregon Health Policy and Research at Oregon.gov suggests that one should take this latest storyline with a boulder sized grain of salt. To start with, the measure of uncompensated care used by hospitals in Oregon is “full established charges.” The report defines uncompensated care as “the total amount of health care services, based on full, established charges, provided to patients who are unable or unwilling to pay. Uncompensated care includes both unbilled charity care and bad debt (services billed but not paid).”

Bad debt is “the unpaid obligation for care provided to patients who have been determined to be able to pay, but have not done so. Services are billed, but not paid. For insured patients, certain amounts that are patient responsibility, such as deductibles and coinsurance, are counted as bad debt if not paid.”

In short, bad debt happens when the hospital figures that someone should be able to pay at the full, fanciful, amounts that hospitals list but no virtually one pays unless he is a) uninformed and b) uninsured, but doesn’t.

The diagrams show that changes in uncompensated care in Oregon jumped in 2000 even though gross patient revenue and bad debt stayed more or less the same until 2002. In 2002 bad debt grew. This continues until 2004-2005 when it screeches to relative halt.

AHIP estimates suggest that nationwide there were slightly more than a million HAS/HDHP policies in force by January 2005. Given the demographics of hospital use, the fact that HSA qualified policies were legalized in 2003 and the fact that only an estimated 2.9 percent of private Oregon health insurance policies were high deductible by January 2008, it is hard to understand how they would be the cause of the big bad debt increase in 2002-2003. Plus, the bad debt increase starts in 2002- 2003 and moderates in 2004-2005. If HSA/HDHP plans were the cause, one would expect to see bad debt continuing to increase as HSA/HDHP plans grew in numbers unless people who don’t pay their bills were the first group attracted to HSA/HDHP plans.

Given that the previous storyline was that HSA/HDHP plans are attractive to only the “healthy and wealthy” this is difficult to believe. The wealthy generally pay their bills, and the healthy generally don’t use hospitals.

Other possible reasons for the bad debt increase? Hospitals could have upped the expected payment rate for various services. Or perhaps they felt that more people could pay the full amounts that almost no one does.

With hospitals, it is impossible to know for sure.