Healthcare is a Big Issue for the ARM Industry

As a part of Kaulkin Media’s mission to shift the public conversation about the ARM industry, late last summer insideARM.com launched a series of topic-focused content offerings we’re calling The Big Issues to address a perceived lack of any in-depth, ongoing information being produced on topics of real consequence to multiple sectors of the credit and debt collection industry.

Today I am pleased to introduce our latest series, The Healthcare Issue, sponsored by Probate Finder OnDemand.  In the coming weeks—give or take—insideARM.com will publish an array of healthcare-focused content to examine the diverse ways the American healthcare system impacts ARM companies, how, in turn, those companies assist healthcare providers in improving their revenue cycle processes and their bottom lines, and how all of those threads tie into the larger US economy.  And there’s also a little piece of legislation called the Patient Protection and Affordable Care Act, enacted in March 2010, which has consumed a major part of the national discourse for more than two years.  In the process of bringing The Healthcare Issue to fruition, insideARM.com has developed a program of original content and called on both ARM industry and healthcare providers to contribute their professional perspectives on healthcare reform, medical receivables, bad debt, et cetera.

So why is healthcare a big issue for the ARM industry?

The analysis, purchase, billing, sale, and recovery of medical receivables is a growing ARM market.  Hospital systems, physician groups, elder care facilities, and medical clinics across the country are struggling under the weight of existing bad debt burdens, higher costs of providing care, shrinking financial support from state and federal sources, and rising under and uninsured patient populations—even in spite of federal insurance reform.

“But I don’t work medical paper,” you say.  “But my hospital doesn’t sell healthcare portfolios.”  “Healthcare receivables are a non-issue for my company.”

Not so fast.

Healthcare spending in America is projected to account for about one-fifth of US GDP just around the time that the major provisions of the Patient Protection and Affordable Care Act take hold.  Today, more than one in every six dollars spent in the US goes to healthcare.  In short, you can’t really talk about the US economy without talking about the US healthcare industry.  Thus, if you’re a wireless telecommunications provider, you only get a shot at something like $4.78 of every $6.00 flowing through the economy.  If you’re a collection agency working in the bank card/credit card space, consumers’ ability to meet their financial obligations to you (and your financial services clients) is impeded by the portion of their monthly budgets allocated to medical expenses.  Try telling a mother not to treat her son’s fever so that she can pay her credit card bill.

Real world examples of these hypothetical situations abound.  NPR recently aired a story on the cancellation of a state-funded health program, adultBasic, for low-income adults in Pennsylvania.  Created in 2001, the plan provided insurance coverage for those who fell into a gap between qualifying for Medicaid and the ability to afford (or obtain) insurance on the private market.  The story focused on Tom and Paula Michelle Boyle, two self-employed cancer survivors who together earn roughly $25,000 per year.  Under adultBasic, the couple paid $36 each per month for coverage.  On February 28, the plan was terminated for the Boyles and about 40,000 other Pennsylvania low-income residents.

The Boyles have options.  None of them are good.  They can try to purchase insurance on the private market.  Given their pre-existing conditions, Tom’s plan—according to one insurance company—would cost $1000/month.  Paula Michelle was informed that she was uninsurable at any price because she had Hodgkin’s lymphoma.  This is grim calculus.

The Boyles could also apply to one of the federally subsidized high-risk pools established under the new healthcare reform bill.  The program accepts patients with pre-existing conditions, but it requires applicants to have been uninsured for six months prior to enrollment.  The Boyles may be eligible in September 2011.  Even if they are accepted, the cost of their high-risk pool in Pennsylvania will be $283 each per month. You do the math.

To argue that the Boyles “should have” already been paying more than $36 each per month for insurance is immaterial.  The fact that they will now have to spend vastly more–or go without coverage–is of critical import to credit grantors and the ARM industry.

The Boyles are concerned that they may have to leave the house they have shared for almost 20 years in order to afford medical coverage.  Assuming that happens, the US housing market will have one more property on its hands.  And a housing market already overburdened with a glut of inventory, of course, is a major drag on economic recovery.  Unless the Boyles choose uninsured status or are forced to wait until 2014 for federal coverage, their out of pocket healthcare expenses are going to skyrocket.  And the dollars they put toward necessary medical expenditures aren’t going to be available for other purchases or to satisfy existing debt obligations like credit card and utility bills.

Healthcare is a big issue for the ARM industry.  Here we go then: The Healthcare Issue.

Michael Klozotsky is the managing editor of insideARM.com.  In a past life he was a healthcare analyst for Kaulkin Ginsberg Company.  He occasionally goes to the doctor and prefers Spider-Man adhesive bandages.  He can be reached by email.