It seems that U.S. companies aren’t the only ones suffering from bad debt. The phrase denotes loans that cannot be repaid, either because the debtor is bankrupt, has serious financial problems, or simply because the money cannot be collected. The IRS states that this money may be deducted on your taxes as long as you have explicit documentation stating the exchange as a loan, not a gift. They also require the past seven years’ records, which can be tricky enough as a simple business owner, but seems unbelievably daunting if you’re an entire country.
Italy Suffocates Under Mountain of Bad Debt
The nation known for its bustling, tourist covered streets, beautiful Renaissance art, and delicious cuisine recently asked the European Union to extend the guarantee that helped its banks put a dent in their 345 billion euro pile of debt. The country has the highest amount of non-performing loans (meaning they’re not getting paid off) in all of Europe, and although the GACS program brought that incomprehensible number down to 258 billion euros, they’re looking for an extension. Apparently, the GACS guarantee has been attracting investors to the bad debt (including those from the U.S.), explaining their interest in a continuation of the service.
Hospital Debt Grows
They may not be facing the kind of numbers that an entire country needs to tackle, but hospitals in the U.S. are dealing with their own bad debt issues. Due to an increase in patient balances after insurances (PBAI), hospitals have seen a $2.6 billion spike in uncompensated care. Higher out of pocket costs have resulted in patients owing more per visit, many of whom cannot afford the changes. Medicare bad debt rose 17% in the four years between 2012 and 2016, resulting from patients not paying their deductibles or co-insurances.
Jonathan Wiik, principal for healthcare strategy at TransUnion Healthcare, and John Yount, vice president of healthcare for TransUnion, both seem to agree on where the change needs to occur.
“Providers need to act; otherwise, bad debts and uncompensated care will continue to rise… Hospitals need to make sure they’re actively engaging their patients to ensure they have funding mechanisms for the care needed.”