It is never fun to be in debt, any kind of debt, but still you hear about good debt and bad debt and now you are wondering how any debt is good. Actually, you are with tens of millions of other Americans who feel the very same way and have the very same question in mind. Is there really such a thing as debt that is good? Is there really any difference between good and bad debt when at the end of the day you still owe both and both need to be paid? And, herein lies the answer. Good debt is theoretically supposed to pay for itself and bad debt leaves you holding the bag. Let’s look at a few examples and you will be able to answer for yourself if there really is any difference between good and bad debt.
Case in Point: Obamacare and What It Is Costing Hospitals
There is a growing body of legal professionals who are specializing in health law and policy simply because of the outcry from hospitals around the nation. They are extremely concerned over the turn of events resulting from the Affordable Care Act, aka Obamacare, because instead of lowering ‘bad debt’ they are seeing a huge increase. But, you still may be wondering what the difference between good debt and bad debt is and how any debt for a hospital can be considered to be good.
A Basic Understanding of Good vs. Bad Debt
Since the simplistic definition of good debt is that which is intended to pay for itself, think of good debt as being a hospital’s investment in new technology that will not only improve diagnoses and patient care but will provide a broader reach, bringing in more patients. The revenue from those patients would pay for the technology and that is why it is considered ‘good debt.’ Unfortunately, with Obamacare, patients are still unable to pay the large deductibles and so their treatment still goes unpaid. That technology that should have been good debt is now seen as bad debt because a greater number of patients are unable to make their copays or meet their deductible and the hospital remains unpaid. That’s bad debt.
Bad Debt from a Patient’s Perspective
It doesn’t take a health law degree to see that patients under the ACA are subject to bad debt all the way around. They pay high insurance premiums that have been mandated by law, pay high deductibles before their insurance will kick in and if they can’t pay either, they are left with bad debt on their credit report. Altogether too often Obamacare has sent Americans into a credit crisis where it was supposed to have offered low cost health insurance to all. Obamacare is anything but affordable and so both hospitals and patients are seeing an increase in bad debt.
With a new administration on its way in come January, it is hoped that Obamacare will soon be repealed to be replaced by a truly affordable coverage. Advisors with a health care law degree are pouring over the current legislation and within a matter of weeks will be advising President Trump on ways to provide health insurance to everyone – a coverage that is affordable. That will be good debt. Once paid, there will be no more large deductibles or large co-pays. If you are paying for insurance with coverage, that’s good debt. Paying for insurance that doesn’t provide coverage is bad debt and that’s the difference in a nutshell.