New York Leading in Attacking Medical Debt
David R. Jones, The Urban Agenda
Last week, New York became only the second state after Colorado to prohibit credit reporting agencies from collecting information about or reporting on medical debt. And it became the first state to prevent hospitals and licensed health providers from reporting medical debt to credit bureaus.
That’s a big deal.
More than 740,000 New Yorkers currently have medical debt on their credit reports, according to a study by the Urban Institute. The problem affects low-income New Yorkers, and disproportionately impacts Black and brown patients. That said, it’s also a pervasive problem in upstate and rural counties of New York with some communities having more than 10 percent of their residents reporting medical debt in the collections process.
It’s no secret that a bad credit report can create obstacles to renting a home, qualifying for loans, securing a job and more. But what is not widely known is that our healthcare system is supported by a billing, payments, collections and credit reporting infrastructure where errors are common, according to a 2022 federal Consumer Financial Protection Bureau report. But beyond the issue of inaccurate data, there’s a more compelling reason to keep medical debt off of a person’s credit report — it is not predictive of a person’s creditworthiness. And we know that the financial consequences of medical debt fall hardest on low-income patients, leaving them vulnerable to legal action by hospitals and other providers. Governor Kathy Hochul underscored this in her remarks last week as she signed into law the “Fair Medical Debt Reporting Act (S.4907a/A.6275a).”
“Medical debt is such a vicious cycle. It truly hits low-income earners, but it forces them to stay low-income earners because they can never get out from under it,” said the Governor, who over the past two years has enacted four laws aimed at protecting New Yorkers from predatory medical debt collection practices, including banning medical providers from placing liens on patients’ homes and garnishing their wages in debt collection cases.
The new law, which goes into effect immediately, was approved by the State Legislature earlier this year and championed by State Senator Gustavo Rivera and State Assemblymember Amy Paulin. It applies to all medical debt, including medical debt charged to medical credit cards. The law excludes medical debt charged to regular credit cards since those bills are aggregated.
It was a great source of pride that the Community Service Society of New York (CSS), the organization I lead, hosted the Governor’s bill signing ceremony. Besides medical debt, the Governor also signed into law three other consumer protection measures: prohibiting price-gouging on medicine during a drug shortage; requiring companies to notify customers of automatic subscription renewals; and making merchants post the highest price a consumer might pay for a product.
End Medical Debt Campaign
Since 2015, nonprofit hospitals and state operated hospitals have collectively sued 75,000 New Yorkers for past due medical debt. CSS research found that in many cases, those being sued were low-wage workers who work retail and service jobs, or live in the state’s poorest communities. The average amount of medical debt triggering lawsuits was under $2,000.
As the operator of Community Health Advocates (CHA), the state’s independent healthcare ombudsman program, CSS helps New Yorkers navigate the complex healthcare system, solve billing issues, dispute coverage denials and understand their healthcare rights. A 2019 analysis of CHA’s Helpline found a 64 percent increase in calls from New Yorkers who said they were afraid and felt helpless as collections agents for healthcare providers came after them with oppressive collections practices.
A year later, we launched the #EndMedicalDebt campaign in partnership with a diverse group of advocates across the state with the aim of alleviating the problem of medical debt and seeking legislative remedies to rein in hospitals and other medical providers that pursue extraordinary medical debt actions that put the financial health of patients at risk. The campaign was premised on the concept that because they are nonprofit charities that pay no income or property taxes – unlike their patients – and receive millions to cover uncompensated care, New York hospitals should not be in the business of suing patients. Especially patients who in many cases qualify for hospital financial assistance.
Now that the Fair Medical Debt Reporting Act is law, the EMD coalition is setting its sights on passing legislation to reform the state’s outdated Hospital Financial Assistance Law (HFAL). The law requires all New York hospitals with funding from the State’s $1 billion Indigent Care Pool (ICP) to have a financial assistance application and policy. But it is abundantly clear from continued lawsuits and aggressive debt collection action against patients that those eligible for financial assistance were not properly screened, were unable to complete the application process, or were improperly rejected.
The “Ounce of Prevention Act (S.1366/A.6027),” would require one common financial assistance application for all hospitals to follow and modernize the eligibility rules, ensuring that patients qualifying for financial assistance can receive the healthcare they need without the fear of facing financial ruin.
We hope the Governor will be back soon to sign that too.