Testimony on the New York City Department of Consumer and Worker Protection Proposed Rules Relating to Debt Collectors
Carrie Tracy, Senior Director, Health Initiatives
The Community Service Society of New York (CSS) would like to thank the Department of Consumer and Worker Protection (DCWP) for the opportunity to comment on the proposed amendments to its rules relating to debt collectors. CSS is a 175-year-old non-profit dedicated to fighting poverty and improving the lives of working New Yorkers. Our health programs help New Yorkers enroll into health insurance coverage, find health care if they are ineligible or cannot afford coverage, and help them use their coverage or otherwise access the healthcare system. We do this through a live-answer helpline and through our partnerships with over 50 community-based organizations working in every county of New York State. Annually, CSS and its partners serve approximately 130,000 New Yorkers, saving them over $80 million in healthcare costs.
The Burden of Medical Debt in New York
Nationally, medical debt has a disproportionate impact on low-income people and people of color. In 2021, the Journal of the American Medical Association published an analysis of the medical debt of nearly 40 million unique individuals. The researchers found that medical debt predominately impacts patients who live in low-income zip codes.[1] In 2022, the federal Consumer Financial Protection Bureau (CFPB) issued an analysis that describes how $88 billion of medical debt accounts for 58 percent of all consumer debt. The CFPB study also found that Black and Hispanic people and low-income people of all races and ethnicities are more likely to have medical debt than the national average.[2]
In New York, over 740,000 New Yorkers have medical debt according to the Urban Institute.[3] Medical debt is a serious problem for many New Yorkers. The Urban researchers found that within each region, people of color and people living in households with lower median incomes disproportionately experienced medical debt.[4] While an average of 3.8 percent of New York City residents overall have medical debt, some low-income neighborhoods around the city have much higher levels: up to 7.2 percent in areas of the Bronx, 4.4 percent in Northern Manhattan, and 5.4 percent in parts of Brooklyn.[5]
The Urban Institute study of medical debt in New York determined that medical debt appears to be correlated with hospital litigation hotspots identified by CSS.[6] A related study determined that 73 percent of adults with medical debt owed some or all of that debt to hospitals—providing further evidence that hospital debt collection practices are largely responsible for New Yorkers’ medical debt burdens.[7]
A 2022 PerryUndem survey funded by the Robert Wood Johnson Foundation found that 53 percent of New Yorkers say they are not confident they can afford routine health care, and 70 percent are not confident they can afford costs related to a major illness.[8] The survey found that 38 percent of respondents said they or a family member avoid medical care because they are afraid of bills. Thirty-four percent said they are facing financial hardships because of medical debt, including being put into collections, using up their savings, or being unable to pay for basic necessities. The survey also showed that the medical billing system can be error-prone and stressful for patients. Almost a third (31%) said they had questioned or appealed a health care bill and 20 percent said they paid a bill they thought they did not owe because they were afraid of being sued or harassed for not paying.
CSS administers Community Health Advocates (CHA), New York’s consumer health assistance program. In 2019, CHA staff identified a 64 percent increase in the number of consumers asking for help with medical debt.
In an effort to learn more about consumer experiences with medical debt in New York, CSS researchers pulled and reviewed a random sample of court records of hospital lawsuits against patients between 2015 to 2022. This research resulted in a series of six Discharged into Debt reports. CSS research has determined that a relatively small number of hospitals were responsible for more than 75,000 lawsuits against patients. The random sample of cases found that almost all cases were won on default; lawsuits disproportionately affected low-income communities and communities of color; and hospitals were placing liens on patient homes and garnishing wages of patients with low-wage jobs.[9]
New York’s Hospital Financial Assistance Law (HFAL) requires non-profit hospitals to provide discounts to patients with incomes below 300 percent of the federal poverty level (FPL).[10] Internal Revenue Service (IRS) regulations require non-profit hospitals to make reasonable efforts to determine whether a patient is eligible for HFA before taking any extraordinary collection actions, including lawsuits.[11] The majority of patients who had been sued lived in zip codes where the median income is below 300 percent FPL, suggesting that many New York nonprofit hospitals failed to screen these patients for eligibility for hospital financial assistance.[12] None of the thousands of court files reviewed for the reports indicated that the patient being sued had been evaluated for hospital financial assistance eligibility and found ineligible in advance of being sued.[13]
CSS has also published three reports studying New York hospitals’ compliance with the 2007 HFAL. These reports found that hospitals continue to fail to comply with the HFAL, despite state guidance and an annual compliance audit conducted for the State Department of Health.[14]
Proposed Rule Amendments
CSS lauds DCWP for proposing amendments to the rule that will significantly increase consumer protections relating to debt collection. CSS’s testimony will focus on the amendments relating to collection of medical debt.
§ 5-77. Unconscionable and Deceptive Trade Practices
In §5-77(f)(2)(v), DCWP proposes language for a notice of consumer rights to be included in all validation notices. The proposed notice language includes the following information for consumers with medical debt:
You may qualify for financial assistance with medical debt. If you have a low or limited income, ask the collector or the hospital if you qualify for help under the “Financial Assistance Policy.”
CSS supports this proposed language, which will provide critical information for consumers with medical debt. These notices are an important opportunity to educate patients about their potential eligibility for financial assistance when hospitals fail to inform them. As described above, in CSS’s review of thousands of court files from cases in which a hospital sued a patient for medical debt, not one pleading stated that the patient had been screened and found ineligible for hospital financial assistance prior to undertaking suing the patient.
Patients who ask for CHA’s help with hospitals bills in collection often say that they were not told about hospital financial assistance until they spoke to a CHA Advocate. CSS has documented hospitals’ failure to comply with state and federal requirements in three reports.[15] In 2012, CSS searched hospital websites, sent letters to hospitals, and wrote to the state hospital association in an attempt to obtain financial assistance applications, summaries, and policies. Ten percent of hospitals failed to provide any information about their financial assistance policies.[16] A 2012 requirement from the State Department of Health that hospitals post these materials on their websites has made the materials somewhat more available to patients, but many hospitals in New York City still do not post their financial assistance applications and policies on their websites.[17]
The proposed language could be even stronger. If a hospital has referred a bill to a debt collector, the debt collector would not be able to determine whether the patient qualified for hospital financial assistance. Instead of saying “ask the collector or the hospital if you qualify for help,” it would be better to say, “ask the collector or the hospital to assist you with filling out a hospital financial assistance application.”
In §5-77(f)(10), the proposed rules require that debt collectors treat any statement by a consumer that a medical debt should have been covered by insurance, a third-party payer, or financial assistance, or that the debt resulted from a lack of price transparency or a violation of federal, state, or local law as a dispute and a request for verification. It requires the collector to treat all accounts related to a discrete hospitalization the same as the disputed bill, note in all related accounts that the patient has disputed the bill, and furnish the consumer verification on each related medical debt. Additionally, it requires the debt collector to verify that the covered medical entity has met its obligations under federal, state, and local law and the facility’s financial assistance policy.
CSS supports this proposed amendment. In its review of court filings related to medical debt lawsuits, CSS found that many of the patients who responded to the lawsuits said that they had not paid the bill in dispute because they thought that their insurance had covered it. Medical providers and insurance carriers frequently take months to resolve billing disputes, and patients are often left in the dark about the outcome. This provision will protect patients who are not responsible for a bill. Moreover, the requirement that bill collectors verify that the medical provider has complied with federal, state, and local law and the provider’s financial assistance policy will ensure that eligible patients are screened for financial assistance before being penalized with collection actions.
In §5-77(j), the proposed amendments prohibit a debt collector from collecting a medical debt if the debt collector knows or should know that: collecting would violate federal, state, or local law or the provider’s financial assistance policy; the patient has an open application for financial assistance; the patient should have been provided financial assistance for all or part of the debt; or a misrepresentation was made to the patient about their eligibility for financial assistance. A debt collector would be required to take reasonable corrective measures, including informing the provider that placed the debt that the debt might be subject to the financial assistance policy or a violation of law. The debt collector would be required to add a statement that “A FINANCIAL ASSISTANCE POLICY MAY APPLY TO THIS MEDICAL DEBT” in the patient’s accounts, notify the patient in writing by mail or delivery service, and notifying any receiving party. Finally, the debt collector would be required to provide disclosure to the consumer about the financial assistance policy clearly and conspicuously in written communication by mail or delivery service.
CSS supports this provision. As stated above, consumers with medical debt that has been submitted for collections or a lawsuit frequently say that they were unaware that hospitals are required to provide hospital financial assistance to low-income patients. This provision would ensure that eligible patients are able to apply for financial assistance and receive relief from burdensome medical debt. CSS also supports extending this provision to include situations in which the collector knows or should know that the consumer has an ongoing insurance appeal.
Finally, CSS supports requiring debt collectors to include information about hospital financial assistance in all communications with consumers, not just with validation notices. Debt collectors should also be required to tell consumers about financial assistance when a consumer says that they are unable to pay the bill, even if the consumer does not ask about financial assistance.
Hospital-specific requirements
CSS applauds DCWP for including medical providers other than hospitals in its medical debt consumer protections. However, state and federal law impose a higher level of responsibility on hospitals than other providers to ensure that financial assistance eligible patients are not subject to extraordinary collections actions. As described above, New York’s Hospital Financial Assistance Law requires non-profit hospitals to provide discounts to eligible patients.[18] IRS regulations implementing a provision of the Affordable Care Act require non-profit hospitals to make reasonable efforts to determine whether a patient is eligible for HFA before taking any extraordinary collection actions.[19]
Accordingly, CSS urges DCWP to add a section to the rules specifying that a hospital may not engage in extraordinary collection actions or refer a medical debt to a debt collector without first making an affirmative determination that the patient does not qualify for hospital financial assistance. Hospitals can approve a patient for financial assistance in three ways: (1) processing an financial assistance application from the patient; (2) using credit scoring software or other methods to determine a patient’s income; or (3) accepting the income determination made by the New York State of Health website when a patient applies for coverage through the marketplace.[20] A hospital may not deny a patient hospital financial assistance, however, based on factors other than an application.[21]
Thank you again for providing this opportunity to testify and your consideration of our concerns. Please contact Carrie Tracy (ctracy@cssny.org) with any questions.
[1] Raymond Kluender et al, “Medical Debt in the US, 2009-2020,” Journal of the American Medical Association, 2021, pages 250-256.
[2] Consumer Financial Protection Bureau, “Medical Debt Burden in the United States,” February 2022.
[3] Michael Karpman, Fredric Blavin, Dulce Gonzalez, Jennifer Andre, Breno Braga, “Medical Debt in New York State and Its Unequal Burden across Communities,” July 2023, page 11.
[4] Id. at vi.
[5] Id. at 3, 13.
[6] Jennifer Andre, Michael Karpman, Fredric Blavin, Dulce Gonzalez, and Breno Braga “Medical Debt in New York State: Estimates for Large Cities and Towns, State Legislative Districts, Congressional Districts, and Other Geographic Areas,” October 2023.
[7] Michael Karpman, Most Adults with Past-Due Medical Debt Owe Money to Hospitals, March 2023, https://www.urban.org/sites/default/files/2023-03/Most%20Adults%20with%20Past-Due%20Medical%20Debt%20Owe%20Money%20to%20Hospitals_0.pdf.
[8] Robert Wood Johnson Foundation, “How New Yorkers Feel about Affordability and Healthcare Reform: Results from a Statewide Survey,” March 2022, https://www.rwjf.org/en/library/research/2021/11/healthcare-affordability-majority-of-adults-support-significant-changes-to-the-health-system.html.
[9] Amanda Dunker and Elisabeth Benjamin, “Discharged into Debt: New York’s Nonprofit Hospitals are Suing Patients,” March 2020; Amanda Dunker and Elisabeth Benjamin, “How Structural Inequalities in New York’s Health Care System Exacerbate Health Disparities During the COVID-19 Pandemic: A Call for Equitable Reform,” June 2020; Amanda Dunker and Elisabeth Benjamin, “Discharged Into Debt: A Pandemic Update,” January 2021; “Discharged Into Debt: Medical Debt and Racial Disparities in Albany County,” March 2021; Elisabeth Benjamin and Amanda Dunker, “Discharged into Debt: Nonprofit Hospitals File Liens on Patients’ Homes,” November 2021; Amanda Dunker and Elisabeth Benjamin, Amanda Dunker and Elisabeth Benjamin, “Discharged into Debt: New York’s Nonprofit Hospitals Garnish Patients’ Wages,” July 2022; Elisabeth Benjamin and Amanda Dunker, “Discharged Into Debt: Hospital Profile - Upstate University Hospital,” December 2022.
[10] N.Y. Pub. Health L. Section 2807-k(9-a)(a).
[11] 26 CFR § 1.501(r)-6, https://www.irs.gov/charities-non-profits/billing-and-collections-section-501r6.
[12] Elisabeth Benjamin and Amanda Dunker, “Discharged into Debt: Nonprofit Hospitals File Liens on Patients’ Homes,” November 2021; Amanda Dunker and Elisabeth Benjamin, “Discharged into Debt: New York’s Nonprofit Hospitals Garnish Patients’ Wages,” July 2022.
[13] Amanda Dunker and Elisabeth Benjamin, “Discharged into Debt: New York’s Nonprofit Hospitals Garnish Patients’ Wages,” July 2022.
[14] Elisabeth Ryden Benjamin, Arianne Slagle, Carrie Tracy, “Incentivizing Patient Financial Assistance: How to Fix New York's Hospital Indigent Care Program,” January 2012; Carrie Tracy, Elisabeth Benjamin, Amanda Dunker, " Unintended Consequences - How New York State patients and safety-net hospitals are short changed," January 2018; Amanda Dunker and Carrie Tracy, “An Ounce of Prevention: Reforming the Hospital Financial Assistance Law Could Save Pounds of Patient Debt,” April 2023.
[15] Elisabeth Ryden Benjamin, Arianne Slagle, Carrie Tracy, “Incentivizing Patient Financial Assistance: How to Fix New York's Hospital Indigent Care Program,” January 2012; Carrie Tracy, Elisabeth Benjamin, Amanda Dunker, " Unintended Consequences - How New York State patients and safety-net hospitals are short changed," January 2018; Amanda Dunker and Carrie Tracy, “An Ounce of Prevention: Reforming the Hospital Financial Assistance Law Could Save Pounds of Patient Debt,” April 2023.
[16] Elisabeth Ryden Benjamin, Arianne Slagle, Carrie Tracy, “Incentivizing Patient Financial Assistance: How to Fix New York's Hospital Indigent Care Program,” January 2012, page 7.
[17] See, e.g., SUNY Downstate website https://www.downstate.edu/patient-care/patient-family-support/insurance-billing/index.html; NYC H+H website, https://www.nychealthandhospitals.org/financial-assistance/; Calvary Hospital website, https://www.calvaryhospital.org/.
[18] N.Y. Pub. Health L. Section 2807-k(9-a)(a).
[19] 26 CFR § 1.501(r)-6, https://www.irs.gov/charities-non-profits/billing-and-collections-section-501r6.
[20] Letter from James W. Clyne, Jr., Deputy Commissioner, Office of Health Systems Management, New York State Department of Health, May 11, 2009, page 2.
[21] Letter from James W. Clyne, Jr., Deputy Commissioner, Office of Health Systems Management, New York State Department of Health, May 11, 2009, page 2. “As another strategy for reducing or eliminating documentation, hospitals may use credit scoring software for purposes of establishing income eligibility and approving financial assistance, but only if the hospital makes clear to patients that social security numbers are helpful but not mandatory, and the scoring does not negatively impact the patient’s FICO. Credit scoring software cannot be used to deny applications for financial aid, and language referring to credit scoring should not appear on financial assistance applications.”