Vicious cycle of financial debt for patients: Bridging the 'No Surprise Act'

The idea of debt conjures a swell of emotions in the modern American mind. For some, it's a ladder - the mortgage, the student loan, the business line of credit that built a life. For others, it's a trapdoor. Regardless of your personal inclination towards the topic, debt has been a part of life for humans for thousands of years. This started all the way back in 3000 BCE in ancient Mesopotamia, where people were writing IOUs on clay tablets. The human tradition continued for thousands of years, eventually making its way to America. While mostly dormant for a time, the credit market in America dawned on a new era with the introduction of the automobile. Automobiles were quite expensive at the time roughly $500, which of course would be a steal by today's standards, but for the time was quite cost prohibitive. To fill this gap, at the dismay of Henry Ford, a company named GMAC started to give auto loans at 35% downpayment. This created rampant demand for credit and firmly embedded the idea of debt into everyday American life. Fast forward to the modern era, and there is credit for everything whether it is your house, your small business, heck even a burrito at Chipotle. There is no shortage of people looking to fund their life with debt. And this American infatuation has penetrated healthcare.

In the grand scope of America's history, medical debt is a relatively new concept, only beginning to be officially established in the 1980s and 90s. Since then though, the amount of medical debt in the United States has ballooned. The Kaiser Family Foundation estimates that there is 220 billion in medical debt outstanding in the United States alone and a separate Gallup survey found in 2024 that Americans borrowed 74 billion in those 12 months alone. In the past the majority of these patients with medical debt would be people that were uninsured that simply had to pay out of pocket, but this dynamic is changing. According to accounting firm Crowe, in 2011 self-pay after insurance only accounted for 11% of bad debt in the United States. By 2018 this number had expanded all the way up to 58%. This is mostly due to increasing deductibles and decreasing insurance reimbursements.

There is the obvious financial strain of this problem; it is estimated that there are 530,000 medical expense related bankruptcies in the United States and Johns Hopkins surveys showed that having medical debt increased the likelihood of housing instability by 7%. Then there are the nonobvious strains of medical debt, with the most sinister being that it drives patients away from the care they need. 55% of people deferred medical care due to expected cost and out of this those with current debt 49% skipped seeing their doctor, even if it was essential. This obviously has massive negative effects on people's health, lowering life expectancy as a result. Nowhere is this a bigger issue than in behavioral residential health.

On average, behavioral healthcare is one of the most expensive forms of treatment a patient can receive. Costs of residential mental health programs can start at $500 and go all the way up to $8,500 per day in costs. For an average time of 30 to 60 days in the program, costs for a single patient can go over $500,000. These high costs are also compounded by other structural issues in the industry. Using out-of-network in behavioral residential facilities is the norm, not an exception. This means lower reimbursement rates for providers, and larger self pays for patients. Another reason is the administrative roadblocks put up by insurance companies. Whether it is determination of 'medical necessity' which states that patients no longer needed the care, or excessive use of prior authorizations, both methods employed by insurance companies deny patients much needed reimbursements, leaving them with massive surprise bills. The final biggest reason is that patients in behavioral residential facilities are simply ill-equipped to be able to pay off their debts. Patients in behavioral health crises by definition have compromised cognitive, emotional, and executive functioning.

Right now, patients are making one of the most financially consequential decisions of their lives blind. They have low visibility into insurance reimbursements amount per day, have very little idea if at some point the insurance company will pull the metaphorical insurance reimbursement plug all together, and are doing it during a time of emotional distress. Having a tool to plug this gap and give patients financial intelligence we believe would transform the industry; and the data backs this up. When patients receive cost estimates upfront, their likelihood of paying goes up by 50%. We also know that every dollar not collected at or before the visit costs $4–8 to collect later. Having financial intelligence upfront would also allow patients to enroll in financial assistance programs proactively instead of retroactively. The case is clear: empowering patients with financial intelligence before they ever set foot in a care setting isn't just good for patients; it's transformational for the entire behavioral health ecosystem.

This is what Diaspora is looking to provide. By aggregating reimbursement claims from all around the country, we believe we can make an intelligence layer for patients pre-intake to give them an accurate picture of their financial responsibility before they initiate care. We believe our tool will change patients' lives financially and physically for the better. If you are interested in giving more patients access to essential behavioral health care, please contact us at Diaspora.