Bill to Protect Patients From Hospital Collection Efforts Advances

People who have unpaid hospital bills would gain some protection from lawsuits and collection actions under a measure approved by a House committee on Friday.

The measure, House Bill 565, would require that hospitals demonstrate a “good faith” effort to agree to a payment plan before taking a patient to court or engaging a debt collector.

In addition, people who have filed an appeal with their insurance carrier could not be sued until their claim has been resolved.

Hospitals would also be barred from seeking to have a worker’s wages garnished if they are eligible for free or reduced-cost care, nor could they seek to have a lien placed on a former patient’s home.

The measure passed the Committee on Health and Government Operations unanimously on Friday evening. The vote, coming just before the legislature’s “crossover” deadline Monday, followed weeks of intense debate.

“Consumer debt is crushing, and it’s a huge piece of what keeps people trapped in poverty,” said Del. Lorig Charkoudian (D-Montgomery), the measure’s sponsor. “Medical debt is a particular challenge, because it’s usually coming on the heels of a major illness.”

A coalition of 57 consumer, justice and labor organizations have mobilized to support Charkoudian’s bill under the banner End Medical Debt Maryland.

The Maryland Hospital Association opposes the measure.

“We’d like to see insurance carriers come to the table and play a role in addressing this issue,” said Nicole Stallings, head of government affairs for the MHA.

“Maryland hospitals are keeping costs down considerably compared to the nation, but we don’t see these decreases making it to consumers,” she added.

Under other provisions of the bill:

• Hospitals would be encouraged to limit any payment plan they agree to with a former patient to no more than 5% of that person’s income.
• Hospitals would be barred from reporting a debt to a consumer credit agency or suing a patient within six months of the first bill.
• If it turns out that a patient was billed incorrectly because they were eligible for free care, he or she must be reimbursed, as long as the discovery is made within eight months of the first bill.
• If a hospital discovers that a patient was eligible for free or reduced-cost care after winning a judgement against them, they must seek to vacate the judgment or strike adverse information reported to a consumer reporting agency.

Consumer advocates say a report conducted by National Nurses United, the largest nurses union in the U.S., underscored the need for Charkoudian’s bill.  commissioned by National Nurses United, the largest nurses’ union in the U.S.

Researchers found that:

• Between 2009 and 2018, Maryland hospitals filed 145,746 medical debt lawsuits against their patients, seeking $268,711,620. That amount represents 0.18% of the institutions’ revenue.
• At least 3,278 patients filed for bankruptcy after those suits were filed.
• The median amount sought by hospitals during that period was $944.
• More than 37,000 patients had their wages garnished as a result of hospital lawsuits.

Patients mistakenly billed for millions

Charkoudian filed a similar bill last year but it was withdrawn to allow more time for stakeholders to confer.

In an interview, she said her push for patient protection legislation gained new urgency last month, following the release of a little-noticed study by the state’s Health Services Cost Review Commission (HSCRC).

That report found that hospitals billed — and in some cases collected — money from people who were eligible for free care.

“HSCRC determined that approximately 60% of UCC (i.e. unpaid charges) attributable to individuals with a household income under 200% of the federal poverty level is reported by hospitals as bad debt, rather than free care,” the commission determined.

“The analysis in this report suggests that hospitals attempted (and failed) to collect this debt from a sizable number of patients likely eligible for free care,” they added. “In addition, approximately 1% of total hospital charges to individuals who likely qualify for free care are paid by those individuals (this amounts to approximately $60 million statewide).”

Charkoudian said hospitals are failing to properly screen all their patients to determine whether they qualify for free or reduced-cost care, then are pursuing them for charges that should be recouped through the state’s uncompensated care fund, not the patients.

“The hospitals will say [that] when we took those people to court or when we referred it to a debt collector, we didn’t know that they were eligible for reduced cost care,” she said. “But that’s on them to make sure they’re screening people to make sure they know they’re eligible.”

Stallings, the hospital associations lobbyist, said the numbers “aren’t surprising.”

“Marylanders are facing serious rises in out-of-pocket costs and insurance deductibles,” she added. “Deductibles have increased 56% from 2013-2019. While patients may have insurance cards, they often don’t have adequate coverage. Hospitals work hard to help patients face these gaps.”

The measure moves to the House floor. A Senate version of the legislation, SB 514, has received a hearing but has not been voted upon.

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