Ten States Aim to Protect Low-Income Patients from Medical Debt

Millions of Americans carry around the burden of medical debt. Patients may even put off medical care if they fear getting hit with a surprise bill.

More states are trying to pass legislation that would protect low-income patients from burdensome medical debt. Many hospitals already provide financial support to low-income families and individuals, but patient advocates say many people aren’t aware of these programs and don’t know how to apply.

Saying Goodbye to Aggressive Debt Collections

Unnecessary medical debt has become a hot-button issue during the pandemic. Last year alone, ten states, including Connecticut, Maryland, New Mexico, and Maine enacted a range of laws that have consequences for providers and debt collectors. Many of these laws require hospitals to offer financial assistance to low-income patients, while limiting aggressive debt-collection practices. Other states, like Washinton and Vermont, are considering legislation that would bolster existing consumer medical billing protections.

According to the U.S Census Bureau, around 19% of Americans have medical debt with higher percentages among Latinx and African American patients. The median amount owed was $2,000. Medical debt is also the biggest reason for debt collections, more than credit card debt. A study from the Journal of the American Medical Association looked at $140 billion in medical debt collections reported to TransUnion, one of the three major credit-reporting agencies.

Many patients often have insurance with high deductibles, which means they have to pay a large amount out-of-pocket before the insurance company will cover the costs.

Lawmakers appear to be responding to reports of hospitals trying to collect money from low-income patients as well as recent figures showing how much the price of care has increased. Recent hospital disclosures show that facilities can charge different prices for the same service.

Dale Folwell, North Carolina Treasurer, recently called out the hospitals in his state for their aggressive billing practices. “They are not doing enough for the lower- and fixed-income people of our communities,” he said in an interview.

Hospitals have also admitted that many low-income patients don’t receive financial assistance even though they are eligible.

According to the American Hospital Association, facilities have given out more than $700 billion in financial aid since 2000, while offering other types of community benefits.

“The hospital field does more than any other part of the healthcare sector to support patients from all backgrounds, giving treatment regardless of their ability to pay,” said Stacey Hughes, an executive vice president at the association.

Some facilities are required by law to provide financial assistance to low-income patients. Non-profit health networks must offer this option under the Affordable Care Act.

But patient advocates say the current system is flawed.

For example, non-profit facilities can set their own income eligibility requirements for these programs.

“There’s a lot of room for improvement in the federal regulations,” said Mark Rukavina, a program director at Community Catalyst, a nonprofit focused on patient advocacy.

The Internal Revenue Service manages tax-exempt status for non-profit facilities. A spokesperson for the IRS said the charity-care requirements for tax-exempt status are “detailed and specific.”

Several states had laws on the books limiting medical debt before this wave of recent legislation, but they are now looking to strengthen protections for low-income patients. Lawmakers have also heard stories from their constituents struggling with medical debt.

Some patients can’t afford their bills, “just as plain and simple as that, so you try to reduce the pressure on them by giving discounts, and that’s what we did,” said Illinois state Sen. Mattie Hunter. Illinois recently lowered the amount that can be billed to uninsured patients.

Of the laws passed or enacted in 2021, some mandate financial assistance for patients based on income levels while requiring hospitals to check patients’ eligibility for aid before sending their bills to collection agencies. Others bar overly aggressive collection tactics such as putting liens on patients’ homes.

Lawmakers in New York are currently considering bills that would require hospitals to use a common form for patients applying for financial aid. It would also provide assistance to more patients and ban certain debt-collection practices, among other changes.

“No one should be at risk of having their wages attached or a lien put on their home or their credit rating ruined because of medical debt,” said Richard Gottfried, chair of the New York State Assembly’s health committee.