Almost all businesses have some bad debts. But consumers seldom have reason to care. In the health care system, things are different. Third-party payers pay not only for the medical care of their policyholders, but also for the bad debts of others. In other words, the hospital rates that you and I pay are partly determined by how many other patients fail to pay. Bad debts are not distributed evenly among the nation's hospitals. For example, a special problem arises for hospitals designated to receive charity patients. In many communities, this is the county hospital. County hospitals complain that they are undercompensated from public funds for the care they provide. They also complain of patient dumping-the practice of transferring charity patients from other hospitals to county hospitals, in some cases risking the health of the patient.

Many proposed solutions to this problem would force all people to have health insurance, either through their place of employment or through national health insurance. Such these proposals could cost in excess of $100 billion, while reducing hospital bad debts by only about $8 billion.

In an ideal health care system, hospitals would be expected to cover their costs while charging competitive prices to all patients. Some provision would exist to reimburse hospitals for indigent care under carefully defined conditions. When those conditions are met, the best solution would be to reimburse hospitals from public funds rather than attempting to shift the cost of care to other patients. If hospitals are required by law to treat patients, whether or not the patient can pay, then the government (and voter/taxpayers) imposing this requirement should be willing to pay the cost. This provision should not relieve hospitals of the responsibility of collecting fees, however. Those with excessive bad debts would be allowed to fail. One reasonable method for funding indigent care, would be based on a fair system of tax subsidies for the purchase of health insurance. Those who choose not to insure would pay higher taxes, and the extra tax payments could serve as a pool of funds from which to pay for free care delivered at charity hospitals.

In an ideal health care system, people would be encouraged to insure for major illness and save for minor ones. But no one would be forced to do so. People who failed to purchase health insurance would pay higher taxes, and people who incurred bad hospital debts would suffer financial penalties, the same as for other bad debts.

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