Et tu hospitals?

Why don’t antipoverty programs work? “The unrelenting exploitation of the poor in labor, housing and financial markets,” according to a forthcoming book by Matthew Desmond

A new report crossed my desk this morning showing poor people and minorities are the biggest victims of America’s escalating medical debt crisis. It arrived on the heels of an eye-opening account in the Sunday New York Times magazine that provided a major corrective to traditional liberal thinking on why anti-poverty programs haven’t worked.

After some initial successes in the 1960s, the war on poverty over the next five decades consistently failed to reduce the national poverty rate below one-sixth of the population. “If American poverty persisted, I thought, it was because we had reduced our spending on the poor,” writes Princeton University sociology Matthew Desmond, author of the Pulitzer Prize-winning book Evicted.

“But I was wrong,” his new book, Poverty, by America, concludes. He now claims “stalled progress on poverty reduction” is primarily caused by our failure to “confront the unrelenting exploitation of the poor in the labor, housing and financial markets.”

Sector by sector, Desmond documents how low-wage employers, low-income landlords and the financial sector’s big banks and payday lenders systematically rip off the poor. This three-legged stool of oppression offsets nearly all the gains delivered by successful anti-poverty programs like supplemental nutrition assistance (previously known as food stamps), the low-income tax credit, housing vouchers and public housing, and increased child welfare allowances.

Dumping medical debt on the poor

Today’s Urban Institute issue brief added a fourth leg to the stool dumped on the poor: the unpaid medical bills caused by the gaps and loopholes in America’s toilet bowl of a health insurance system. Fully two-thirds of the 15% of American adults with past due medical debts earn less than 250% of the federal poverty level, the cutoff line for most hospital systems’ financial aid programs. More than a quarter of these medical debtors owe only hospitals, with three-fourths of debtors attributing some or all of their debts to unpaid hospital bills. Estimates of total unpaid medical debts range between $80 billion and $200 billion. For many, their unpaid bills dwarf their total household assets.

Despite the Affordable Care Act’s expansion of insurance coverage and most states expanding Medicaid, “the persistence of medical debt highlights the ongoing challenges families face in obtaining affordable health care,” writes Michael Karpman, a research associate at the Urban Institute. They include “high prices for services, gaps in access to health insurance coverage, and inadequate protection against out-of-pocket costs for many people with high-deductible insurance plans.”

The ACA requires non-profit hospitals, which account for about 60% of all facilities in the U.S., to establish patient assistance programs as a condition of their maintaining tax-exempt status. Yet those policies “are often difficult to find, use vague language, and have varying documentation requirements, income and asset limits.” They are also unclear as to what charges are discounted and what services and providers are covered. A 2020 GAO study found virtually no federal oversight of these programs.

The result? Non-profit hospitals spend less on charity care than either for-profit or government-run hospitals, the report says. A few states – Illinois, Maryland, New Jersey, Oregon and Rhode Island – have passed laws mandating hospitals write off the medical debts of people earning poverty and near-poverty level wages. A few others have restricted debt collections.

Of course, there’s plenty more that states could do to rein in medical debt. The 11 states that haven’t expanded Medicaid could cover adults earning up to 138% of the poverty level, following the examples of conservative states like South Dakota, Oklahoma and Missouri, the most recent to expand the program. An estimated 3.7 million people would gain coverage in those 11 states, the two largest being Florida and Texas.

The company they keep

It's rather sad to think about the company the nation’s non-profit hospitals keep when they add to the burdens of the nation’s poorest citizens. Desmond’s critique starts with employers of low-wage workers. “Nearly 23% of American workers labor in low-paying jobs, compared with roughly 17% in Britain, 11% in Japan and 5% in Italy,” he writes.

He might have added that millions of those workers toil in the nursing home and home health industries, as well as the lowest rungs of the hospital industry. All three industries vociferously oppose unionization among their lowest paid workers.

On the legal front, no country in the OECD makes it more difficult for low-wage workers to organize unions than the U.S. Legal union busting is the primary reason why only Estonia and Lithuania have lower unionization rates. The U.S. is tied with Turkey for third-to-last among countries that report the data.

Guarantors of enforced poverty also include the landlords and corporate entities operating multi-family buildings in low-income communities. They “take in profits that are double those of landlords operating in affluent communities,” Desmond writes, citing a study he co-authored in the American Journal of Sociology.

Moreover, rents in poor communities have risen much faster than renters’ incomes, and not because of housing shortages, he says. For instance, rents in cities at diverse at Birmingham, Ala., and Syracuse, N.Y., where vacancy rates were 19% and 12% in 2021, respectively, saw rent increases of 14% and 8% over the previous two years.

The big banks, like big hospitals, contribute to poor families’ excessive financial burdens by charging usurious fees and interest rates. The nation’s largest banks charged their customers $11 billion in overdraft fees in 2021, 84% of which came from just 9% of customers with an average balance of under $350. “The poor were made to pay for their poverty,” Desmond writes.

And, as is the American way, systemic racial inequality runs through all of these rip-offs. For instance, about 7 million families do not have bank accounts. Black and Hispanic families are five times more likely than white families to remain unbanked.

Where can they go? Check-cashing stores charge anywhere from 1% to 10% of the total amount simply to cash paychecks – as much as 4 hours of work in a 40-hour workweek. That is the equivalent of a $1.6 billion annual tax on the nation’s lowest wage workers. Pay-day loans, where interest rates on an annualized basis are measured in hundreds of percent, cost low-wage workers another $8.2 billion in fees.

What can be done?

“Those who have amassed the most power and capital bear the most responsibility for America’s vasty poverty,” Desmond concludes. “Political elites who have utterly failed low-income Americans over the past half-century; corporate bosses who have spent and schemed to prioritize profits over families; lobbyists blocking the will of the American people with their self-serving interests; property owners who have exiled the poor from entire cities and fueled the affordable housing crisis.”

He should have added to his list a health care sector that burdens its poorest citizens with extra debts from unpaid medical bills. It is the height of irony for health care officials to proclaim a desire to address the social determinants of health while simultaneously pursuing payment policies that contribute to millions of the nation’s poorest citizens suffering the ill health associated with persistent poverty.

About 60% of the Urban Institute’s respondents with past due hospital bills were contacted by a collection agency. The most common workout was creation of a partial payment program that dragged out over many years — an additional source of stress in already stressful lives.

“Because hospitals are a source of past due medical debt, and the families that owe medical debt have lower income,” Karpman told me, “there’s lots of potential for states to regulate hospital financial assistance and payment collection practices to mitigate the burden of medical debt.”

While it wasn’t covered in his report, another option would be for the federal government to step up scrutiny of hospitals’ charitable care policies. When warranted, the IRS could withdraw non-profit status from those that fail to serve their charitable mission.