Addressing persistent patient affordability barriers.

The affordability of healthcare has been a prominent issue for many years. It’s an increasingly urgent concern for both patients and their providers. As one long-time industry observer commented, “Today, what matters most to consumers is whether a needed service is accessible and affordable, and what their out-of-pocket responsibility will be.”^{[1] footnote [1]}

Affordability problems threaten patient health, provider finances and equitable access to care. This paper examines recent data that illuminates the extent and complexity of the issue. The essential features of a comprehensive approach to patient financing that can help many patients are also discussed.

The current state of affordability.

The overall landscape.

The most recent tracking of healthcare affordability from Gallup/West Health categorized a substantial 45% of people as either “cost insecure” or “cost desperate” (Figure 1).^{[2] footnote [2]}

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Figure 1

This finding aligns with another survey in which half of U.S. adults said covering health expenses is difficult. The response levels were sizable across types of insurance coverage as well as for the uninsured (Figure 2).^{[3] footnote [3]}

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Figure 2

The stress appears likely to continue. Fifty-six percent of adults over age 50 remain “very concerned” about the cost of medical care.^{[4] footnote [4]} Nearly two-thirds of Americans aged 60 to 70 view healthcare costs as a leading worry in retirement.^{[5] footnote [5]}

A deeper look at the numbers.

Various recent surveys have quantified the across the board burdens of healthcare costs. A few examples:

• Of a total 2024 cost of $7,151, the average employee paid 42% via payroll contributions and out-of-pocket expenses.^{[6] footnote [6]}
• Enrollment in high-deductible health plans has grown substantially in recent years. In 2024, 32% of employees faced a single coverage annual deductible of at least $2,000.^{[7] footnote [7]} The figure balloons to 50% in smaller firms.
• Individuals on Medicare incur out-of-pocket outlays of $6,600 annually for health services, medications and supplemental insurance.^{[8] footnote [8]}

Forecast data suggests that affordability stress will extend into the future. In the near term, 64% of Americans expect to pay more for healthcare in 2025.^{[9] footnote [9]} Longer-term projections assume flattening of the patient spending curve at nearly 4% per annum, a significant level (Figure 3).^{[10] footnote [10]} Demographics are a clear factor. By 2029, there will be 14.4 million middle-income seniors over age 75, and 20% will have high healthcare and functional needs.^{[11] footnote [11]}

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Figure 3

A note on healthcare employees.

It is worth noting that health systems, hospitals and practices confront general affordability issues not just with patients, but with their employees as well. One leader counsels healthcare organizations to “expand their focus on affordability for team members and their families in order to recruit and retain talent in the communities they serve.”^{[12] footnote [12]}

Patient responses.

How are patients dealing with affordability challenges? For some, avoiding or delaying needed care is the unfortunate solution. A study found that 26% of respondents expect to defer medical procedures in 2025 due to cost, and 32% will skip doctor visits.^{[13] footnote [13]} Those who proceed with acute care must frequently contend with finding the means to satisfy upfront payments. Advance payments are a growing trend. Hospitals now collect 23% of what patients owe before treatment.^{[14] footnote [14]}

Many patients rely on some form of debt to meet their self-pay obligations. A recent poll revealed that 31 million Americans borrowed an estimated $74 billion in the past 12 months to pay for healthcare for themselves or a household member.^{[15] footnote [15]} More than half of U.S. adults report having incurred medical debt during the past five years.^{[16] footnote [16]} Insurance coverage is no bulwark against needing to borrow: 18% of insured Americans carry medical debt resulting from hospital, doctor or diagnostic test expenses.^{[17] footnote [17]}

The amounts involved are not trivial. Consider these statistics:

• 58% of healthcare borrowers assumed debt of $500 or more in the past 12 months.^{[18] footnote [18]}
• $3,000 is the median amount borrowed in that same period by patients age 50 and older.^{[19] footnote [19]}
• 50% of all patients owe between $1,001 and $5,000.^{[20] footnote [20]}
• 25% of those with medical debt owe more than $5,000.^{[21] footnote [21]}

Many borrowers struggle to pay off this debt. Over 15% of families have past-due balances.^{[22] footnote [22]} Analysis of 2022 and 2023 data showed that 47.6% of total patient obligation was collected by providers, with the rate declining noticeably as amounts owed increase (Figure 4).^{[23] footnote [23]} Collecting from self-pay customers is a very or somewhat significant daily challenge for 29% of physician practices.^{[24] footnote [24]}

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Figure 4

To provide some relief, consumer credit reports no longer can include medical bills, and lenders are prohibited from considering medical information in lending decisions. However, there is current discussion of reversing this regulation.

What about insurance?

Health insurance is a vital element in the financial equation. However, several problems make it a less than complete solution to patient affordability. A barrier for some is lack of coverage. By 2034, the overall uninsured rate in the U.S. is expected to rise to 8.9% from 7.7% currently.^{[25] footnote [25]} Coverage gaps are even more pronounced for certain secondary care. For instance, 27% of adults lacked dental insurance in 2023, adding to overall cost burdens.^{[26] footnote [26]}

Proposed cutbacks in Medicaid benefits and in subsidies for purchasing insurance on the Affordable Care Act exchanges threaten to reduce or eliminate coverage for many with limited financial resources. This subject is explored in depth in the recent CommerceHealthcare® report “Responding to Five Current Health Insurance Trends link opens in a new window.”

Health insurance is often confusing and difficult to navigate. That can exacerbate financial stress. Respondents to one survey revealed that they labor to understand their insurance (45%) and fear denial of some future coverage (43%).^{[27] footnote [27]} Confusion can also deter utilization of benefits. A national study found that just half of Medicare Advantage enrollees were aware of their coverage for a variety of ancillary services.^{[28] footnote [28]}

Yet another source of consternation for patients and institutions alike is heavy use by insurers of prior authorization and initial claims denials. As one data point, 57% of revenue cycle leaders experienced average denial rates above 10% of 2023 claims, while 20% reported levels exceeding 13%.^{[29] footnote [29]}

Tackling affordability through comprehensive patient financing.

While complete solutions to the affordability problem involve larger considerations of public policy and healthcare market structure, greatly enhanced provider financial assistance to patients can play a central and immediate role. Though market scans suggest generally wide adoption of at least basic hospital-administered payment plans, financing needs expansion to meet today’s challenges.

CommerceHealthcare® has worked extensively with health systems, hospitals and practices on patient financing. This experience has shown that programs attain comprehensiveness and versatility when they combine five core characteristics (Figure 5).

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Figure 5

Expansive and flexible.

Financing should be tailored to individual patient requirements. That objective is well-served through a program featuring low or zero interest rate lines of credit for amounts up to $50,000. This credit line approach enables patients to cover any subsequent care charges they might incur without new loan origination.

The solution maximizes scope and flexibility of assistance. It has proven to be a cornerstone for many organizations who combine direct inhouse financing of smaller dollar amounts with reliance on a bank to manage obligations for ranges such as $1,000 up to $50,000. Another advantage is that patients avoid high credit card interest charges. Nearly one in six uses a credit card for every healthcare encounter.^{[30] footnote [30]}

Cost-effective and efficient.

Patients desire a convenient and efficient process, and providers seek to save internal staff time and expense. The program based on credit line financing through a bank features approval with no credit check in most cases. The provider is relieved of the burden of screening and selecting patients to be referred for the financing. The right bank administering the program should bring skill and diligence to execution to ensure that cost and convenience goals are met.

Transparent.

Despite various implementation barriers, healthcare continues working toward greater transparency regarding costs of care. Patients have shown a desire for such information, particularly in advance of service. However, an analysis showed that only 31% received a cost estimate before care in 2023.^{[31] footnote [31]} Almost three-quarters said the estimated charges were accurate, while 14% found the actual cost to be “much more” than the estimate.

A comprehensive program will include offering financing based on the estimated charges, which can alleviate patient concerns up front. In a survey, under half (45%) of hospitals permitted patients to qualify for financial assistance prior to care.^{[32] footnote [32]}

Consistent.

Many organizations find it challenging to conduct patient financing in a consistent manner. Coordination between multiple departments is required and frequent variation exists among employees in patient-facing skills. Outsourcing to an external organization that brings disciplined loan administration and experienced patient relations offers much-needed consistency that is essential to scaling a comprehensive program. The vendor can also provide scripts and other tools for internal staff to help maintain a consistent approach.

Technology-enabled.

Patient financing is optimized when it rests on a strong technology foundation. Important elements include integration with core financial systems, support for mobile devices, payment process automation software and use of digital payments.

As one example of deploying this synergistic mix, consider patient refunds. It is highly likely that total refunds have grown since the estimated level of $3.1 billion in 2022, given greater use of preservice estimates and upfront payments.^{[33] footnote [33]} Solutions like PreferPay® from CommerceHealthcare® manage the refund cycle, interfacing with provider systems, gathering patient information through mobile devices and offering a choice of refund modes: direct deposit, direct to debit card, e-check or paper check.

Patient loyalty: an added benefit.

Not only does the financing approach outlined in this report address the prevalent affordability hardships, it also fosters positive patient relationships and loyalty. It has been recently calculated that a loyal patient, defined as one who spends 75% or more of the individual’s healthcare expenses with one health system over a given time frame, generates three times more revenue than an uncommitted patient.^{[34] footnote [34]} Furthermore, a 1% increase in loyal patients can translate into a $40 million revenue boost for a $2 billion health system.

Conclusion.

Finding ways to help all patients secure the care they need is a vital goal. Building a robust and comprehensive patient financing platform deserves to be a key part of every organization’s strategy. An alliance with a strong bank adds the experience and resources required to onboard such a program. The benefits for patients and their providers can be substantial.

CommerceHealthcare® solutions are provided by Commerce Bank.