How one state has risen as ‘a leader’ in medical debt protections
Hospital entrance to an emergency department in New York City. Deb Cohn-Orbach/UCG/Universal Images Group via Getty Images
Many states are cracking down on medical debt collection and payment practices, but New York’s efforts stand out, one expert says.
Last year, the nation’s three leading credit reporting agencies agreed to remove certain medical collections from individual credit reports, a change affecting the credit scores of millions of Americans. The shift came amid growing state efforts to protect individuals from the negative impacts of medical debt.
But 15 million Americans still owe a collective $49 billion in outstanding medical bills, according to the Consumer Financial Protection Bureau. While that’s down from $88 billion reported in March 2022, a new report from The Commonwealth Fund, a nonprofit health policy research organization, suggests continued efforts are needed to prevent and reduce the buildup of medical debt.
In the past year, at least 12 states have enacted legislation to address medical debt collection and payment practices. Delaware banned creditors from charging interest on medical debt. Virginia prohibited medical collection lawsuits on debt more than three years past-due. And New Jersey banned imposing wage garnishments on individuals with incomes less than 600% of the federal poverty level.
But New York stands out, said Maanasa Kona, author of The Commonwealth Fund report and assistant research professor at Georgetown University’s Center on Health Insurance Reforms.
“Amongst the 50 states, I think [New York] is now a leader in terms of how much they protect patients and how generous their financial assistance programs are required to be,” she said.
A law that goes into effect in October establishes comprehensive protections for patients, including new regulations for how hospitals charge patients and handle collections.
The new law requires hospitals to allow patients to apply for financial assistance at any time during the collection process, to disregard an individual’s immigration status in determining their eligibility for assistance and to limit interest rates on payment plans to 2%. It also directs hospitals to waive all charges for people with incomes below at least 200% of the federal poverty level, or an annual income of $62,400 for a household of four.
“Most state legislative action has focused on prohibiting the negative downstream impacts for folks who have already incurred medical debt,” Kona added. As an example, she pointed to efforts across states, counties and cities to purchase and forgive community members’ medical debt, which is more helpful to people who have already incurred debt.
To really get ahead of the accrual of medical debt, “it would be helpful to see more [upstream] solutions,” Kona said.
For example, in some states, such as Illinois, patients who qualify for public benefits such as the Supplemental Nutrition Assistance Program or the Women, Infants and Children Nutrition Program are automatically eligible for financial assistance. That eliminates the need for patients to apply for assistance and wait for eligibility determinations, Kona said.
Implementing medical debt protections is one thing, but Kona said states should consider how they will enforce those new regulations.
New York’s legislation, for example, requires hospitals to report information on financial assistance applicants’ race, ethnicity, gender, age and other factors, which Kona said can help state regulators identify any patterns of discrimination.
State attorneys general can also address violations. Washington state’s attorney general, for instance, “has been very proactive on this issue, and they’ve really gone after some hospitals they’ve suspected of wrongdoing,” Kona said.
Earlier this year, Washington Attorney General Bob Ferguson, who is also the Democratic candidate for governor in this fall’s election, reached a settlement with one of the nation’s largest health care systems, requiring the company to forgive more than $137 million in medical debt among nearly 100,000 patients and repay them more than $20 million for charges that could have been reduced with financial assistance.
Ultimately, “the enforcement piece is what’s going to be on [states’] agendas next,” Kona said, “because they have to figure out how to make sure that these protections are actually working.”
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