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By 2024 it is estimated that one out of every five dollars in the United States will be spent on medical care. Even though the Affordable Care Act has increased the number of insured Americans, insurance plans have been shifting a larger fraction of financial responsibility to patients through higher deductibles, more coinsurance, and larger out-of-pocket maximums.

As out-of-pocket expenses begin to exceed the insured’s capacity to pay, both providers and patients are faced with the growing problem of medical debt in the form of unpaid medical bills. In order to fall within federal guidelines, nonprofit hospitals are required to provide a certain amount of charity care, which often takes the form of debt forgiveness. This leaves hospitals with both the empirical and moral challenge of deciding which patients’ debts should be forgiven, as well as what amount indebted patients are ultimately able — and willing — to pay.

This topic was of interest to St. Olaf College Associate Professor of Economics Ashley Hodgson and Assistant Professor of Economics Thomas Bernardin.

“We had a data set that allowed us to see who had paid their medical bills and who received charity care, but we noticed that there was a wide range of practices across hospitals in terms of who received charity care. This raised some normative questions for us,” says Hodgson. “Who should receive charity care? Are there good, ethical reasons for hospitals to have different policies around who receives charity care? Are there strategic ways that hospitals can take advantage of existing charity care laws in the way they classify patients?”

“Who should receive charity care? Are there good, ethical reasons for hospitals to have different policies around who receives charity care? Are there strategic ways that hospitals can take advantage of existing charity care laws in the way they classify patients?” — Associate Professor of Economics Ashley Hodgson

In order to answer these questions, Hodgson and Bernardin teamed up with students Dohyun Lee ’19 and Yanglu Pu ’19 as part of this summer’s Collaborative Undergraduate Research and Inquiry (CURI) program.

The college’s CURI program provides opportunities for St. Olaf students from all academic disciplines to gain an in-depth understanding of a particular subject by working closely with St. Olaf faculty members in a research framework. This project also received funding from the Institute for Freedom & Community, which works to promote free inquiry and constructive dialogue among diverse points of view on complex political, social, and moral issues, such as healthcare.

Lee, an economics and mathematics major, was excited to work on an interdisciplinary project that tackles a combination of behavioral and healthcare economics. “And, obviously, for St. Olaf students, CURI is the foremost thing to consider” in order to gain research experience, explains Lee.

CURI projects provide a chance for students to sit in the driver’s seat and experience the process of academic research first-hand. Lee and Pu say that Hodgson and Bernardin pushed them to participate as much as possible. “They wanted us to be the protagonists of the project. I was really thankful that we could contribute our thoughts and what we know about the field into this research,” Lee says.

Their research project, A Game Theoretic and Empirical Approach to Medical Debt Resolution and the Provision of Charity Care, used economic theory to build an empirical model to explore who should receive charity care — which patients’ debts should be forgiven, how much patients’ bills should be reduced, and which patients will ultimately be able to pay in full.

As a statistics and economics major, Pu was eager to bring her data skill set to the table. In their research, they dug into each hospital’s religious affiliation, leniency, charity application process, and state regulations to see how these factors could influence the possibility of a patient getting healthcare. “This project was the perfect chance for me to utilize practical statistical modeling because we were provided with a huge dataset — about one million observations related to patient and hospital characteristics,” says Pu.

She hopes that the model they built can be put to use in the future once it’s been refined. Ideally, patients could enter their situation into the model early on in the process to see if they’d be a strong candidate for charity care.

However, their research quickly revealed how complex the laws and regulations around charity care can be. For instance, Hodgson notes that “you can improve equity by making it easier for people to qualify for charity care. However, that means that there will be some people who qualify and receive charity care who ‘shouldn’t,’ because they can afford to pay. Vice-versa, you can make qualification requirements more strict, but that will leave more people who need charity care without a way of getting it.”

For this research team, the summer is just the start. Research will continue as they work toward a strong and robust result, but, in the meantime, their research “is shedding light on how care providers are dealing with people who don’t or can’t pay their medical bills,” says Bernardin. There is a lack of research around charity care, and Lee and Pu anticipate their research could become a resource for patients and health providers down the road.

Beyond promoting awareness, Bernardin hopes their research helps “improve care providers’ ability to provide charity care and financial assistance, inform care providers’ negotiations with insurers so that all parties better understand the effects of shifting costs and by extension medical debt to patients, and reduce medical debt by more efficiently designing charity care and financial assistance policies — a win-win for care providers as well as patients.”

There are multifaceted challenges facing our healthcare system, but Bernardin hopes his students saw “how useful data can be in addressing these challenges and how our work as scientists has unavoidable, deep, and important ethical dimensions.”