Researchers at MIT and the Dana-Farber Cancer Institute are proposing a new means of helping people access new therapies for cancer, Hepatitis C, and several rare diseases that might otherwise be too expensive to afford: healthcare loans (HCLs). Healthcare loans can be likened to mortgages for massive healthcare bills, spreading out the cost over a period of years to make them affordable for the patients who need them most. HCLs sound like an effective solution for soaring healthcare costs—but are they realistic? The concept of HCLs is all speculative at this time, but we foresee inherent flaws if this were adopted on a larger scale.
Securitization is No Guarantee
Unsecured loans make it the responsibility of the provider to buy back the debt if a patient defaults. Knowing this potential for recourse, the MIT researchers are proposing that these consumer healthcare loans be securitized. That is, blending a variety of loans and converting them into securities for investors to purchase. In practice, an investor would purchase part of the treatment with patients fulfilling their end with an annual payment during a repayment period. If implemented correctly, according to the theory, the return on investment could be substantial for investors and make prohibitively expensive treatments more attainable for people previously unable to afford them.
A crucial element that the researchers neglected to factor into their equation is what happens when patients default on these loans. Who will bear that financial responsibility? Even securitized HLCs could still load the burden of financial responsibility upon the hospitals and other medical groups providing the treatment. These kinds of loans are perhaps as risky as the unsecured ones.
Qualification is Problematic
Proponents of healthcare loans argue that life-saving treatments exist yet the costs prohibit those who need them from accessing them. But securitized loans are difficult to qualify for to begin with. So who makes a good candidate for this kind of loan? What if the patient is terminally ill? Lenders could balk at the prospect of financing someone who might die before the loan is paid off. This also becomes problematic since the whole concept of healthcare loans hinges upon making treatments more attainable—those who are dying or who exhibit certain issues might be denied the care they need because they don’t qualify for a securitized loan. Additionally, as the treatments become more in demand due to their newfound affordability, prices will also continue to increase.
HCLs sound beneficial in theory, but in practice they leave much to be desired. While patients are in need of affordable means of paying for their medical care, hospitals also need reliable revenue streams. Developing viable patient payment plans that allow patients to pay in a way that’s best for them has been proven time and time again to be the most effective means of resolving patient debt and improving cash flow. The inherent riskiness of securitized healthcare loans denies hospitals and patients a reliable way to do exactly this.