Financial Assistance for Patients with Medical Conditions

Overview

ImpactMatters generates estimates of impact — estimates that quantify the causal effect nonprofits have on social outcomes relative to cost. For example: a nonprofit provides 90 percent of your dollar to a patient in need. Our estimates incorporate best practices in social science, described in our Impact Methodology.1


Description

In the United States, the cost of medical care is steep for many. The average American spends $10,000 on healthcare annually. About half of that cost is paid out-of-pocket or through private insurance.2 Patients with life-threatening, chronic and rare conditions can see much higher costs. The average cost of a single day in the hospital is $2,200. And households with one or more chronic conditions are more likely to have medical debt and higher out of pocket expenses compared to households with no chronic conditions.3 Additionally, there are approximately 7,000 rare diseases affecting 25 to 30 million Americans. The average drug approved for rare disease treatment costs nearly $120,000 each year.4

Cancer is one of the most expensive medical conditions to treat in the United States. As the cost of care increases, a growing proportion of patients are underinsured (spending more than 10 percent of their income on health care costs). Cancer patients are more likely than non-cancer patients to experience financial toxicity — the financial stress related to the costs of medical care.5 More than 42 percent of the 9.5 million people over 50 years old who were diagnosed with cancer from 2000 to 2012 drained their life’s assets within two years, according to a recent study.6 Yet little is known about the causal relationship between financial stress and health outcomes of cancer survivors. Observationally, financial strain adversely affects patient health. Compared to non-financially strained cancer patients, cancer patients with financial distress are more likely to avoid taking medicine as directed in order to save money and may experience a lower quality of life, more symptoms and pain, and poor physical and mental health.7,8 Cancer patients are also 2.5 times more likely to file for bankruptcy after diagnosis compared to individuals who have not been diagnosed with cancer.9

Kidney disease can also be financially draining. Although Medicare covers the majority of the cost, a portion of the $89,000 per patient annual price tag of hemodialysis is paid out-of-pocket.10 This is also true of kidney transplants. Studies in high income countries show that out-of-pocket costs reduce adherence to medication and treatment.11

To alleviate the financial strain of medical conditions, nonprofits provide financial assistance to patients and their families. Financial assistance helps patients with key expenses including insurance premiums and co-insurance, transportation costs, medication costs, nutritional assistance, rent or mortgage payments and utility bills. There are often eligibility requirements for financial assistance, including diagnosis of a medical condition, demonstrated financial need and residency in a specific area. Some nonprofits focus exclusively on providing financial assistance to patients while others also fund research and provide screenings and supportive services. Many of these nonprofits are geographically focused (by region, state or city).


Outcome

Financial assistance for a patient

We measure the success of financial assistance programs as the amount of financial assistance provided to a patient. This financial assistance results in patients having additional income at a time of need. We do not estimate the effect of financial assistance on health. We discuss why below.

By reducing financial stress, additional income may improve the health outcomes of patients with severe medical conditions. Some, but not all, nonprofits discuss their financial assistance programs as intending to help patients focus on treatment and recovery. There are a few pathways for financial assistance to improve health, including stress reduction and an increased likelihood of taking medicine as prescribed. However, few nonprofits report the mental or physical health status of patients served. Those that do offer self-reported observations of a general reduction in stress due to the financial assistance provided. In addition, there is a lack of consensus in the medical community on how to measure stress and how to place a value on the health toll associated with stress using standard metrics such as disability-adjusted life years (DALYs).

An alternative approach would be to link financial status to mortality, but there is little research available linking the two. One propensity score matching study (Ramsey et al. 2016) found that severe financial distress requiring bankruptcy protection after cancer diagnosis appears to be a risk factor for mortality. Despite finding a statistically significant correlation between bankruptcy and increased risk of mortality, the authors could not draw a causal link between the two. Given the dearth of research on the causal link between financial strain and mortality, and the lack of information from nonprofits on the financial status of patients, we cannot plausibly link financial status to mortality. We instead focus on financial assistance provided (i.e., additional income) as the outcome of interest.


Methodology for estimating attributable outcomes

In algebra, we calculate the outcomes attributable to a financial assistance program (O) as follows:

O = T * (1 - C)
where:
T = Total dollar value of financial assistance
C = Counterfactual; proportion of financial assistance from the nonprofit that would have been received otherwise.

The counterfactual is estimated at zero, based on two foundational assumptions. First, we assume there is functionally no upper limit to the amount of cash transfers that continue to be valuable to patients as they are far from reaching the point of diminishing marginal returns. This is a reasonable assumption given the severe financial strain faced by many patients with cancer, kidney disease, or other life-threatening, chronic and rare diseases. As such, Nonprofit A’s provision of aid does not displace Nonprofit B’s provision of aid; the aid from both nonprofits is exactly additive. Second, each nonprofit is an independent entity with its own programmatic resources, and nonprofits do not coordinate their provision of aid to the same patient. Nonprofit A’s provision of aid should not have any effect on Nonprofit B’s provision of aid. Together, these assumptions imply that the benefit of financial assistance to a patient constitutes a net gain; the gain is not offset by reductions in financial assistance provided to other patients.


Methodology for estimating cost

Below, we summarize the most important aspects of our methodology for estimating the costs of patient financial assistance programs. For a detailed discussion of what sources of data we use, how we treat specific line items and accommodate variation in accounting practices, see Reference Manual on Data Analysis.

Costs we include

ImpactMatters estimates cost-effectiveness from the perspective of a socially minded donor. This means we count all important costs associated with a program regardless of who incurs them. Generally, the key cost-bearing parties are: the nonprofit itself; organizations with which it partners to run a program; the government (taxpayers); and the nonprofit’s beneficiaries.

Nonprofit costs

We include in our calculation the total cost of a nonprofit’s financial assistance program, which encompasses both the dollar value of financial assistance provided as well as administrative costs directly associated with providing financial assistance.

In-kind assistance to patients

In addition to financial assistance, nonprofits may also provide patients with assistance in kind (e.g., flights to seek treatment, wheelchairs). We include this in-kind assistance in the total amount of financial assistance to patients, provided that the nonprofit has reported a dollar estimate of its in-kind assistance. We do so on the assumption that in-kind assistance is also effectively a boost to income: it allows patients to save money in one area of expenditure and, instead, spend the savings in another.

Other activities

Some nonprofits run other programs that are not directly related to providing financial assistance, such as medical research, conferences and events, and health screening services. We net out the costs of these unrelated programs to isolate as best as possible the cost of the financial assistance program. However, if the costs of unrelated programs has not been itemized by the nonprofit, we apply a standard cost adjustment per ImpactMatters protocol. See Reference Manual on Data Analysis for more details on this calculation.

Beneficiary costs

We assume that beneficiaries do not incur any costs in the receipt of financial assistance from a nonprofit unless such costs are reported by the nonprofit.


Methodology for calculating impact

To calculate the impact of a financial assistance program, we divide the total dollar value of financial assistance provided to patients by total program-related costs incurred by all cost-bearing parties. Crucially, the numerator and denominator must match logically: The denominator reflects the costs incurred in generating the attributable outcomes reflected by the numerator.


Cost-effectiveness benchmarks

To rate the cost-effectiveness of financial assistance programs, we apply our standard benchmarks for programs that aim to boost the income of beneficiaries. We use the same set of benchmarks whether programs aim to boost income immediately via a transfer of resources (as in the case of financial assistance for patients) or in the future by, for instance, raising beneficiaries’ earning potential, or both. The benchmarks are as follows:

  • 4 stars: Programs that boost income by 85 percent as much as total program cost

  • 5 stars: Programs that boost income by 150 percent as much as total program cost

Under this set of benchmarks, our analysis yields no 5-star ratings for programs providing financial assistance to patients. Lacking evidence from the research literature, we are limited to estimating only the immediate and pecuniary benefit of financial assistance for patients and can only speculate about its potential future and nonpecuniary benefits. As such, our estimate of attributable outcomes includes only the amount of the transfer itself. Because our estimate of cost includes both the amount of the transfer and any costs to administer the transfer, no financial assistance programs achieve 5 stars with the above benchmarks. However, we recognize the social importance of these programs, which address the very real problem of staggering costs of medical care in the country. To fairly represent financial assistance programs, we adjust upwards the star ratings of the highest-performing among the rated programs. Specifically, programs that boost income by at least 85 percent as much as total program cost are awarded 5 stars in total. Programs that boost income by between 70 and 85 percent of total program cost are awarded 4 stars in total. Programs that boost income by less than 70 percent of total program cost or less are awarded 3 stars.


Nonprofit checklist of data needed to calculate impact

The following data is necessary to estimate the impact of financial assistance programs.

Table 1

Checklist item

Required from nonprofit?

Details

Program activities

Yes

A program is a set of goods or services provided by the nonprofit to a population of beneficiaries with the goal of improving one or more outcomes. Generally, a program consists of the same components delivered to each beneficiary, with only minor deviations across different settings.

Geography

Yes

We recommend nonprofits report the geographic area of operations and if there are any eligibility requirements related to patients’ area of residence.

Timeframe

Yes

We recommend nonprofits report annual figures that align with their fiscal year.

Beneficiary type

Yes

If the nonprofit targets a specific beneficiary population besides patients with medical conditions, we recommend providing basic descriptors of that population (e.g., low income people).

Eligibility requirements

Yes

We recommend nonprofits report any eligibility requirements for financial assistance, such as income level, type of condition and geographic area.

Number of financial assistance recipients

Yes

We recommend nonprofits report the total number of patients provided with financial assistance over the specified timeframe.

Total financial assistance granted

Yes

We recommend nonprofits report the total dollar value of financial assistance provided over the specified timeframe.

Counterfactual amount of financial assistance granted

No

We assume the counterfactual is zero.

Program cost

Yes

We recommend reporting total costs, including the total dollar value of financial assistance and the costs to administer that financial assistance.

Beneficiary cost

No

We assume beneficiary costs to be zero unless reported otherwise by the nonprofit. We recommend nonprofits report beneficiary costs if substantial.

Partner cost

No

We assume partner costs to be zero unless reported otherwise by the nonprofit. We recommend nonprofits report partner costs if substantial.

Limitations of our analysis

Oversimplification of the outcome

Using “dollars of financial assistance provided” as our metric of analysis does not intuitively convey the potential downstream effects of financial assistance. For instance, receipt of financial assistance may reduce stress, improve recovery time and survival rates. Financial assistance may also increase feelings of hope for patients and their families at a time of need. We do not attempt to quantify these downstream effects, for two reasons. First, as byproducts of the receipt and use of financial assistance, they are, strictly speaking, accounted for by “dollars of financial assistance provided.” Second, we lack solid evidence from the research literature on the causal link between reduced financial strain and health and psychological outcomes, prohibiting any reliable modeling of nonprofits’ impact on those outcomes.

Cost of reaching special populations

Some nonprofits may have to incur additional costs to reach particularly disadvantaged patients. For instance, a nonprofit may incur higher costs to search for and help low income patients. There may be costs associated with processing documents to verify eligibility based on income brackets, both on the part of the nonprofit and the patient. To communicate whether a nonprofit serves low income patients, we add special descriptors to their impact reports such as “patients in need” and “people living in poverty.”

Data quality

Our estimates rely on data made public by nonprofits on their websites, annual reports, financial statements and Form 990s. There are, of course, ambiguities in the data and our interpretation of the data may not always match the nonprofit’s intention. For instance, some nonprofits report different figures for the total dollar value of financial assistance provided and number of recipients on different parts of the Form 990 (e.g., between Form 990: Part III: line 4 and Schedule I). In this case, we use the most frequently reported figure. For more detail on our sources of data and how we interpret them, please see Reference Manual on Data Analysis.

Representativeness of (analyzed) programs

We only issue ratings for nonprofits if we can perform analysis on 15 percent or more of the nonprofit’s total program budget. This approach means some nonprofits are rated on only some of their programs. The remaining programs, which we could not analyze, could be more or less cost-effective than the programs we analyzed.




Footnotes

1

This methodology was developed in collaboration with Dean Karlan, Shannon Coyne and Michael Ioannou at Northwestern University.                                                                                                                                                                                                

2

National Health Expenditure Data Factsheet                                                                                                                                                                                                

3

Richard et al. (2018) The burden of out of pocket costs and medical debt faced by households with chronic health conditions in the United States.                                                                                                                                                                                                

4

Smith, A. Gordon. (2017) The Cost of Drugs for Rare Diseases Is Threatening the U.S. Health Care System.                                                                                                                                                                                                

5

National Cancer Institute. (2019) Financial Toxicity (Financial Distress) and Cancer Treatment (PDQ)                                                                                                                                                                                                

6

Zafar et al. (2013) The financial toxicity of cancer treatment                                                                                                                                                                                                

7

Gordon et al. (2017) A Systematic Review of Financial Toxicity Among Cancer Survivors: We Can’t Pay the Co-Pay                                                                                                                                                                                                

8

Fenn et al. (2014) Impact of financial burden of cancer on survivors’ quality of life                                                                                                                                                                                                

9

Ramsey et al (2013) Washington State cancer patients found to be at greater risk for bankruptcy than people without a cancer diagnosis                                                                                                                                                                                                

10

University of California San Francisco. The Kidney Project, Statistics                                                                                                                                                                                                

11

Dodd et al. (2018) The impact of out-of-pocket costs on treatment commencement and adherence in chronic kidney disease: a systematic review                                                                                                                                                                                                

12

Ramsey et al. (2016) Financial Insolvency as a Risk Factor for Early Mortality Among Patients With Cancer                                                                                                                                                                                                

13

Ramsey et al. (2016) Financial Insolvency as a Risk Factor for Early Mortality Among Patients With Cancer