Medical debt is a pervasive issue affecting millions of Americans. In 2023, 41 percent of American adults reported having debt from medical or dental bills, and 30 percent indicated they would be unable to cover an unexpected $500 medical expense without incurring debt. Further, 64 percent of adults with medical debt in 2022 reported delaying or forgoing care, and 15 percent noted that they were denied care due to their debt. In response, states are pursuing and implementing policies to prevent and protect consumers from medical debt and its cascading consequences.
In the fourth session of the Center for American Progress’ series on state health care affordability, held on July 18, 2024, CAP Health Policy Director Natasha Murphy moderated a discussion with Minnesota state Sen. Liz Boldon (D), Oregon state Rep. Lisa Reynolds (D), and National Consumer Law Center (NCLC) Senior Attorney Berneta Haynes. These experts highlighted state reforms that are comprehensively addressing the medical debt crisis through financial assistance policy improvements, restrictions on medical debt credit reporting, and prohibitions on harmful billing and collection policies.
Minnesota protects consumers by limiting predatory medical debt collection practices
As a registered nurse of 22 years, state Sen. Boldon knows firsthand that medical debt “is not something we choose; it is something that happens largely because of a harmful health care system that we have.” With that in mind, Sen. Boldon authored the recently enacted Minnesota Debt Fairness Act to mitigate the impact of medical debt on Minnesotans. The act prohibits health care facilities from denying care based on unpaid medical debt, bans the reporting of medical debt to credit bureaus, and eliminates the automatic transfer of medical debt between spouses. It also establishes new medical debt collection rights enforceable by the Minnesota state attorney general, requires transparency in medical billing practices, and protects individuals from errors in medical billing. The act aims to provide relief and restore fairness to those affected by medical debt in Minnesota.
Oregon’s strengthened charity care and hospital financial assistance laws aim to prevent medical debt
State Rep. Reynolds, a pediatrician, noted a troubling practice where Oregon’s nonprofit hospitals were failing to provide free and reduced-cost charity care to eligible patients—a requirement of their federal tax-exempt status. A 2022 investigation from The New York Times alleged that the Oregon-based hospital system Providence Health & Services had bypassed charity care requirements, instead pressuring low-income patients to pay for care upfront and aggressively pursuing debt collection. In response, Rep. Reynolds authored H.B. 3320, enacted in 2023, to tighten Oregon’s existing charity care laws and improve access to financial assistance. The law mandates that hospitals prominently display information about financial assistance programs, streamline application processes for those programs, and screen patients for presumptive eligibility at the point of service. It also requires hospitals to refund payments to patients retroactively found eligible for assistance, provide annual reports on hospital financial assistance activities to the Oregon Health Authority, and establish an appeals process for patients deemed ineligible for assistance. Collectively, these provisions aim to ensure that hospitals fulfill their charitable obligations and provide essential support to those in need.
The NCLC offers a comprehensive framework to address the multifaceted issues of medical debt
Haynes emphasized that as a nonprofit organization, the NCLC develops frameworks for laws and regulations to safeguard consumers from abusive and deceptive practices. The NCLC’s Model Medical Debt Protection Act addresses multiple contributors to the medical debt crisis. The act requires health care facilities to create and implement financial assistance policies, setting income thresholds and minimum levels of assistance to ensure broader coverage. It also provides protections for consumers in debt collection by establishing minimum requirements for payment plans and banning interest charges, late fees, and prepayment penalties for eligible patients. Finally, the act includes safeguards against aggressive collection practices, such as home liens. It serves as a template for states to adopt comprehensive measures to address medical debt. To date, New York, Maryland, and Illinois have incorporated provisions from this act into their medical debt reform legislation.
State medical debt policies bolster federal initiatives
State Sen. Boldon, state Rep. Reynolds, and Haynes agreed that an overlapping and complementary relationship exists between federal and state efforts to address medical debt. Given the scale of the medical debt crisis, a “belts and suspenders” approach is needed, with state-level actions reinforcing and building upon federal interventions such as the Consumer Financial Protection Bureau proposal to remove medical debt from credit reports. This dual-layer strategy ensures that protections are comprehensive and can withstand potential fluctuations in federal policy efficacy or enforcement. Additionally, state policies can serve as testing grounds for innovative solutions that, if successful, can be scaled up to the federal level.