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States Continue to Enact Protections for Patients with Medical Debt

Summary:
Two in five Americans have outstanding health care bills, according to the Kaiser Foundation. Those with payments overdue are more likely to be uninsured, low-income, and either Black or Hispanic. What’s more, the total amount of outstanding medical debt in the United States is much bigger than people think. ~~~~~~~ Most states have not yet enacted laws preventing the accrual of medical debt, but many have implemented protections for people who already have accumulated debt. In light of this . . . Earlier this summer, the Biden administration announced updated guidance on medical debt. In addition to a proposed federal rule to prevent medical bills from being included in credit reports, the administration recommended that states take action

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Two in five Americans have outstanding health care bills, according to the Kaiser Foundation. Those with payments overdue are more likely to be uninsured, low-income, and either Black or Hispanic. What’s more, the total amount of outstanding medical debt in the United States is much bigger than people think.

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Most states have not yet enacted laws preventing the accrual of medical debt, but many have implemented protections for people who already have accumulated debt. In light of this . . .

New York Strengthens Its Financial Assistance Standards

States Further Regulate Billing and Collections Practices

To prevent the snowballing of medical debt, Delaware and Maine now prohibit creditors from charging interest on medical debt, while New Jersey and New York establish caps on interest rates. Delaware and New Jersey now require hospitals to offer patients reasonable payment plans while limiting the amount patients can be required to pay monthly. Delaware, New Jersey, and Florida also placed new restrictions on the sale of medical debt, while New York fully prohibited the practice.1

States Enact Protections Related to Medical Debt Lawsuits

Florida and Virginia now bar medical debt collection lawsuits unless they’re initiated within three years of the debt becoming due. Several states now require hospitals and debt collectors to meet certain conditions, such as ensuring a patient is not eligible for financial assistance, before they can initiate legal action to collect on medical debt. For example, Rhode Island and New Jersey now prohibit lawsuits where the debt collector knows or should know that the insurance coverage decision that contributed to the debt (e.g., a coverage denial) is still under review or being appealed.

States also have limited what creditors can take from patients through the legal process. Delaware now fully prohibits wage garnishment, while New Jersey prohibits it for those with incomes under 600 percent of the federal poverty level. Delaware also prohibits creditors from foreclosing on patients’ homes to collect on unpaid medical bills. Oregon has increased the amount of home equity protected from seizure.

More States Turn to Medical Debt Forgiveness

Looking Forward

Commonwealth Fund

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