When Consumer Debt Collection Meets Health Care and the Uninsured

A conflict is brewing in some states between non-profit health care providers and the uninsured low-income patients they provide health care services for. The conflict is rising out of the reality that, without insurance, some of those patients are not able to pay for the services they were provided. An article covering the findings of an investigation conducted by ProPublica revealed that non-profit hospitals in Missouri, Kansas, Oklahoma, Nebraska, and Alabama are engaging in aggressive debt collection tactics and ultimately charging uninsured low-income patients more than their insured counterparts.

Cost Differences

The issue, in large part settles around wage garnishment of low-income patients who have incomes too high to qualify for Medicaid but incomes too low to pay for the costs of health care services. According to ProPublica, the issue is made worse, for some uninsured patients, by the fact that without an insurance company to negotiate costs on their behalf, uninsured patients are forced to pay an artificially inflated cost.  For example, at one hospital that the investigation evaluated, “uninsured patients with household incomes up to double the poverty line ($23,340 for a single person without dependents) qualify for free care.” Then, “those with incomes between 200 percent and 300 percent of the line (up to $35,010) are billed at a somewhat increased rate, with about a 50 percent reduction of their bill.” That 50 percent reduction is about what insurers pay. The problem arises for those patients who either don’t qualify for charity care or don’t receive because they didn’t apply. Those patients are forced to pay the sticker price for their health care.

Non-Profits

Aggressive debt collection is not a new phenomenon for non-profit hospitals. Yale-New Haven Hospital received some negative publicity in 2003 and 2004 for similar debt collection tactics. The Yale-New Haven debt collection reached national attention with a series of articles calling attention to the practice in the Wall Street Journal. Although there are federal requirements that non-profit hospitals provide care at a reduced cost to lower income patients, the specifics of those reductions are left to the hospital. Additionally, while the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) gave the IRS the power to change the regulations regarding how the cost reduction information is publicized, according to the ProPublica, the IRS has yet to finalize those regulations.

Collection Methods

Collection methods involve wage garnishment, liens on patients’ homes, and payment plans with high interest rates. For many of the hospitals that actively pursue collection activities to recover for the services provided to low income patients, lawsuits are the primary means of collection. However, although some hospitals aggressively pursue debts, other hospitals employ policies of never collecting on the debts of their low-income patients.  For example, BJC HealthCare, a nonprofit that operates a chain of 12 hospitals, at the end of each year writes off tens of millions of dollars in bad debt it believes comes from low-income patients who should have received charity care.

Consequences

Although high health care costs are affecting people of all income levels, the ProPublica investigation suggests that there is a particularly vulnerable class of patients, those with incomes too high for Medicaid eligibility and too low to pay exorbitant hospital rates. The ProPublica investigation suggests that patients in states that have not expanded Medicaid under the ACA are at particular risk of falling in that coverage gap. Urgent questions need to be answered about how these financially burdened patients should be cared for, at the same time that decisions are made regarding what providers can or should do to ensure that they are fairly compensated for the services they provide.