The State of Medical Debt Today
Key Statistic: Medical debt affects approximately 100 million Americans, with more than half owing less than $2,500.
Yet even these relatively small amounts can have devastating effects on families’ financial stability. Research shows that Black and Hispanic/Latino adults, women, and families with low incomes are disproportionately affected by medical debt.
Current Medical Debt Landscape
- 40% of insured adults report having medical debt
- Many Americans defer seeking care due to cost concerns
- 60% of adults with medical debt cut back on basic necessities
Essential Questions for Creating Payment Guidelines
1. Minimum Balance Threshold
The Question
What’s the smallest balance that qualifies for a payment plan?
Why It Matters
Setting this threshold too high might force patients with smaller balances into immediate payment when they need flexibility. Set it too low, and you’ll create unnecessary administrative work for minimal return.
Recommendation
Consider your average patient balance and administrative costs:
- Typical range: $100-$250
- Some organizations go as low as $25
- Balance patient needs with operational efficiency
2. Minimum Monthly Payment
The Question
What’s the lowest monthly payment you’ll accept on a payment plan?
Why It Matters
This number needs to make meaningful progress while remaining manageable for patients.
Recommendation
Implement a tiered approach:
- Under $1,000: $50 minimum
- $1,000-$5,000: $75-100 minimum
- Over $5,000: 2% of total balance
Best Practice Spotlight
Colorado’s Model: Monthly payments limited to 4% of patient’s monthly gross income
3. Duration by Balance Tiers
The Question
How long should patients have to pay based on their balance amount?
Why It Matters
Balance between manageable payments and organizational cash flow needs.
Recommended Timeline
Balance: Duration
- Under $500: Up to 6 months
- $501-$1,000: Up to 12 months
- $1,001-$5,000: Up to 24 months
- Over $5,000: Custom arrangements
4. Maximum Allowable Duration
The Question
What’s the longest payment term you’ll offer, regardless of balance?
Why It Matters
Extended terms affect cash flow and increase default risk.
Recommendation
- Standard cap: 24-36 months
- Consider organizational cash flow needs and monitor collection costs
5. Patient Financial Capacity
The Question
How can you incorporate ability to pay while maintaining consistency?
Why It Matters
Rigid plans often lead to defaults and increased collection costs.
Recommendation
Develop assessment tools considering:
- Household income
- Existing medical bills
- Essential living expenses
6. Initial Deposits
The Question
Should patients make a down payment to start a payment plan?
Why It Matters
Balance between commitment and accessibility.
Recommended Framework
- Under $1,000: No deposit
- $1,001-$5,000: 5-10% down
- Over $5,000: 10-20% down
Important: Automatic Deposit Waivers For:
- Financial assistance eligible patients
- Households below 250% FPL
- Catastrophic medical events
- Active insurance claims/appeals
Defaults and Restructuring
The Question
How will you handle missed payments and plan modifications?
Why It Matters
Clear policies help maintain consistency and trust.
Recommendation
- Allow 1-2 modifications per period
- Require good faith payment for restarts
- Document clear exception procedures
Implementation Checklist
- Train staff on supportive financial conversations
- Document hardship exception procedures
- Set regular guideline review schedule
- Monitor patient satisfaction
- Track completion rates
- Ensure clear communication
Regulatory Compliance
Key Considerations
- State-specific regulations
- Federal protection compliance
- Reporting requirements
- Impact monitoring
The Bottom Line
Success requires balancing organizational needs with patient financial realities. Regular review and refinement based on performance metrics is essential.
Remember: The goal isn’t just to collect payments—it’s to create a sustainable system that helps patients manage their healthcare costs while maintaining your organization’s financial health.
Want to implement these guidelines effectively? Use this article as your roadmap to create a payment plan system that works for both your organization and your patients.
Learn how Rivia Health can help you automate and streamline your payment plan process. Visit www.riviahealth.com to discover how our solutions can create a seamless payment experience for both your organization and your patients.
