A little-noticed provision of the health care reform law could
help millions of people avoid staggering medical bills, liens on
their homes and debt collection calls.
In passing the Affordable Care Act (ACA), Congress directed the
Internal Revenue Service to draft rules to flesh out a portion of
law, spelling out the consumer protections for those receiving
charitable care at nonprofit hospitals. The agency complied,
issuing its detailed proposal a few days before last week's
favorable U.S. Supreme Court ruling affirmed the bulk of the law as
constitutional.
The proposed rules, issued June 22 by the IRS, would apply to
the nearly six in 10 U.S. hospitals that operate as tax-exempt,
nonprofit charitable hospitals. They would be required to provide
additional consumer protections and services to patients who
qualify for charity care and medical financial aid. If finalized,
the rules would bar the hospitals from using the most aggressive
debt collection tactics against low-income patients who don't pay
their medical bills.
'Really important provisions'
"These are really important provisions," says Mark Rukavina,
executive director of The Access Project, a Massachusetts-based
program that helps consumers with massive medical debt negotiate
with hospitals to lower their bills or work out affordable payment
plans.
"For a lot of these medical bills they create a range of
problems, obviously debts and bills that people are struggling to
pay," Rukavina says. "But then they end up reporting to a credit
reporting agency or end up on a credit report ... That ends up
upping the price that people pay on credit cards and mortgages
because they lower their score."
Under the proposed rules, hospitals that seek tax-exempt status
from the IRS must have charity care policies for free or reduced
medical care and publicize those rules to patients. Currently,
patients admitted for care may not be informed that charity or free
care services may be available to them and there is no uniform
policy for how hospitals relate that information.
"Often times, people know little or nothing about these
policies. You have to ask," Rukavina says. "For some people, they
might get full free care and for others it might be based on a
sliding scale based on income."
The American Hospital Association, the national group
representing all types of hospitals, disagrees that the new rules
are needed. "America's hospitals strive to be responsive to the
patients and communities they serve and many have developed
innovate ways to make patients aware of financial assistance
available to them," an association representative said in an
e-mailed statement. "The IRS proposed rules could discourage
hospitals' innovations and best practices, because they are overly
prescriptive. The AHA will work to improve the proposed rules to
preserve hospitals'" ability to address the unique needs of their
communities.
The public has until Sept. 24, 2012, to comment on the proposed
rules, which could take effect shortly after that if the IRS makes
no further revisions.
The Government Accountability Office describes nonprofit
hospitals as those that provide medical care to the poor, promote
community health care, conduct medical research, are exempt from
paying local, state and federal taxes and provide no portion of net
earnings to any individual.
More than half -- 57.5 percent -- of all U.S. hospitals are
nonprofit, according to the hospital association. For-profit
and government hospitals will not be subject to the new IRS rules.
Rukavina says he hopes they will follow the IRS guidelines
voluntarily.
'Extraordinary' collection acts banned
The proposed rules will also offer relief from aggressive debt
collection and negative credit reports for some. They bar
charitable hospitals from taking "extraordinary collection
actions" on patients receiving financial assistance.
Prohibited acts under the IRS proposed guidelines include:
- Reporting negative information about the patient to the
credit reporting agencies.
- Placing liens on a patient's property.
- Foreclosing on real property.
- Seizing bank accounts or other personal property.
- Filing civil suits.
- Causing arrests or detainment.
- Garnishing wages.
"For the people who qualify for financial assistance, hospitals
are prohibited from pursuing extraordinary collection action,"
Rukavina says. The IRS offers only a temporary reprieve if patients
fail to file the required paperwork with the hospital. In those
cases, they can still be subject to debt collection. There could be
up a 240-day reprieve before collection efforts could begin for
those patients.
Ask for adjustments now
Rukavina recommends people who have existing medical bills with
nonprofits to consider asking for adjustments. "They should ask the
hospital for information on their financial assistance or charity
care programs and apply -- even retroactively," Rukavina says.
"Oftentimes, they will be granted retroactive coverage and those
bills will be forgiven."
"Once the act is fully implemented, you would absolutely hope to
see the number of bankruptcies resulting from medical debt
dropping," Rukavina says.
No free ride
Although the health reform measures could mean significant savings
on health care costs for some families and coverage for millions
who don't currently have insurance, they are not free. By
2014, everyone must have health insurance or pay an annual fee
based on income if they aren't insured. The fee can be waived if
you can't find a plan that costs less than 8 percent of your annual
income or if your income doesn't meet the federal tax filing
threshold. Families will still have to pay the cost of premiums and
office and prescription drug co-pays.
Rukavina acknowledged that some families will struggle to make
the required health insurance premium payments or penalties -- even
with the tax credits and reduced premium payouts for low- and
moderate-income families. Some may even resort to putting those
payments on credit cards if they don't have the cash.
"There will be out-of-pocket costs associated with health care,
but we should see fewer people incurring large debt because of it,"
he says. "That's not to say that there won't be some people who --
even with lower out-of-pocket costs -- won't feel pain. People will
still struggle. Hopefully, it will be more feasible for them to pay
those costs over time."
Some of the ACA's provisions -- such as a ban on denying
coverage to children with pre-existing conditions and allowing
children up to age 26 to remain on their parents' health plans
-- have already taken effect. But the bulk of
them, including the individual mandate that everyone have
health insurance coverage or pay a penalty fee, kick in by
2014. About 30 million uninsured Americans are expected to gain
medical coverage under the law.
"About 90 percent of people who are currently uninsured will be
eligible for subsidized private health insurance or Medicaid," says
Sara Collins,vice president, affordable health insurance for the
Commonwealth Fund, a private health research foundation. "You will
have a central place where you can go to find out whether you are
eligible for either Medicaid or the premium subsidies."
What should you do now?
What should consumers with health care concerns do now? Some
provisions of the ACA are already in effect and can be beneficial
to many people.
"What's important to do right now is make sure that you are
aware of all the coverage options that you have," Collins says. If
you are under age 26 and uninsured, "You might be able to come
under your parents' plan."
People with diabetes, heart disease and many other conditions
who've been denied health care coverage should seek out plans that
are now available to them.
"If you don't have health insurance or haven't had health
insurance for six months, and you have pre-existing conditions, you
might want to look into the pre-existing condition health plans
that are available now in all 50 states," Collins advises. "There's
no premium subsidy, but for a lot of people it's impossible to get
coverage on the market."
Leading up to 2014, some consumers may be tempted to hold off on
taking care of nonessential health care needs until they can get
full coverage. Neither Rukavina nor Collins advise anyone to ignore
health needs.
"It's important to get care when you need it," Collins says.
"Things will change dramatically in 18 months ... but it's still
important for people to investigate what their possible options are
for coverage now."
Adds Rukavina: "Hopefully, we won't have people delaying
treatment that need it."