A Washington State hospital bill that was wiped out by charity care rules has resulted in a lawsuit by the state hospital association against the state health department.
The hospital bill was sent to a patient who did not live in Washington State and had “lifesaving surgery” while visiting family members in the state, said Jared Walker, founder of DollarFor, an organization that focuses on charity care.
DollarFor helped the patient apply for charity care, because their income and household size qualified for a waived bill. The hospital refused to grant the application, saying the patient was from out of state, Walker said.
So they appealed to the Washington department of health, which issued the ruling saying the residency requirement was not legal. The bill was indeed wiped away, Walker said by email, but “it was a battle.” Walker did an Instagram video describing the situation.
The Washington State Hospital Association then sued the health department to overturn the residency ruling, saying that as a result, people from around the world would flood to Washington State and ultimately drive up the cost of care for Washington residents. “That is absurd,” Walker said in his video.
Growing importance of charity care
The dispute points to the growing importance of charity care, as big hospital bills fall on the shoulders of Americans who can’t afford them.
Nonprofit hospitals are required to deliver a some community benefit, including free or discounted charity care and other loosely defined benefits, to maintain their tax-exempt status. The regulations on charity care are federal, in Internal Revenue Service code, Section 501 (r), under the Affordable Care Act. Practices vary by state and by hospital on how this charity care is delivered, but it’s generally based on the size of a household and its income, as a percentage of the federal poverty level. Tax-exempt hospitals are required to make a Financial Assistance Policy for charity care public as described by the I.R.S. on this page.
The Washington State Department of Health proposal, from September, described as an interpretation of current Washington law, says that the charity care law includes anyone from anywhere, not just Washington State residents. Instead of the existing state policy, which could be interpreted to allow residency restrictions, the proposal would “require hospitals to provide charity care to indigent persons without regard to a person’s residency. A hospital charity care policy restricting eligibility to patients residing within specified geographic boundaries would not be considered to comply.”
Some hospitals, the health department wrote, “have implemented charity care policies and practices that restrict eligibility for charity care to persons who reside inside hospital-specified geographic boundaries (e.g., by zip code(s), city(ies), county(ies), state(s), or country), and deny charity care to persons who reside outside those hospital-specified geographic boundaries.” The new proposal would specifically eliminate all geographic requirements.
DollarFor, which helps people see if they can get free or discounted care, has a calculator on its website allowing anyone to fill in income and household size figures to assess whether charity care is available. It also has a step-by-step guide, beginning with a request for a hospital’s financial assistance policy.
Hospitals express concern
“The state has long endorsed hospital policies that limit non-emergency charity care to residents of Washington State or geographies that correspond to the hospital’s service area,” wrote Taya Briley, executive vice-president and general counsel of the Washington hospital association, in a letter on the group’s site.
“On Sept. 18 the Washington State Department of Health (DOH) issued a statement changing its 30-plus-year interpretation of the state’s charity care law. DOH will now require all hospitals to provide charity care for any service to anyone in the world who seeks it. Washington hospitals are gravely concerned the new approach will make it harder for Washingtonians to get timely access to the health care they need.”
“Mid-size and larger hospitals provide free and discounted care for people with income up to 400% of the federal poverty level, which is $58,000 for an individual and $120,000 for a family of four,” the hospital association wrote on its site. “Smaller hospitals provide free or discounted charity care to people with incomes up to 300% of the federal poverty level or about $43,000 for an individual and $90,000 for a family of four.”
“The new interpretation removes the hospital’s ability to discern what the organization can absorb while still providing care to local patients and would make the state a medical tourism destination,” Briley wrote. The association said added costs for care for out-of-state patients would be borne by Washington residents.
Current law “ensures all Washingtonians within 300 percent of the federal poverty level are eligible for financial assistance on out-of-pocket hospital bills,” the state attorney general’s office states. “Families making up to 400 percent of the federal poverty level could be eligible for financial assistance depending on the hospital.” Up to half of the state’s residents are currently eligible for charity care, news reports said.
The health department concluded in its interpretation of the law: “The Legislature has provided that hospitals must provide charity care and must determine charity care eligibility based on the income (relative to the federal poverty level, adjusted for family size) of patients who have exhausted third-party coverage. Statutory eligibility for charity care … shall not be based, in whole or in part, on an indigent person’s residency.”
The health department said all hospitals would be required to be in compliance with its interpretation by Jan. 16, 2024. In reply, the hospital association sued.
Hospitals resist forgiving bills
Other hospitals have resisted charity care applications based on residency as well, Walker said in an interview with ClearHealthCosts earlier this year.
Hospitals generally make charity care applications hard to find on their websites, and make the applications complicated. Some have also resisted charity care if a person is insured, or if a bill is under $2,500, he said. They can also slow-walk an application and send a bill into collections even as it is being appealed.
I asked Walker if other states prohibit residency requirements, and he wrote in an email: “I would say yes. I would actually say EVERY state prohibits denying patients for emergency care because of residency.”
The statute under which charity care is granted, Section 501(R) of the Affordable Care Act, “says that it should apply for ‘ALL emergency and other medically necessary care provided by the hospital,'” Walker wrote. “The fact that some hospitals add residency requirements into their policy is just another example of them doing whatever they want because they know that there is no accountability.”
Of course, he said, this does not apply to medical tourism — if a person travels out of state for discretionary surgery. It is emergency and medically necessary care.
Doug Aldeen, an Austin, Texas, healthcare law expert, said the income and household size requirements for charity care are broad enough that millions of Americans are getting hospital bills that they should not have to pay.
A family of four that earns $120,000 in Adjusted Gross Income is at 400 percent of the Federal Poverty Level, which qualifies for charity care under many hospitals’ policies. But the hospitals make it difficult to find the policy and then place obstacles in front of applicants as Walker described, Aldeen said.
Most people unaware
Susan Null, medical bill advocate at Systemedic, Inc., in New City, N.Y., wrote in an email: “I believe that most people are unaware that financial assistance of any type is available to them for their medical bills.”
If she mentions it, “If I specially use the term ‘charity care,’ the typical response is that they don’t fit into that category,” she wrote.
“When our clients have said they don’t want to pursue financial need, it is usually because they think they make too much money to qualify for it, or they have started the process and either refuse or are uneasy with providing all of the personal financial information that the application requests.”
I asked her if changing the name from “charity care” to “free or reduced-price care” would help expand applications.
‘I think changing the name would help to overcome the stigma associated with ‘charity’ but wonder if there would still be reticence among certain people to share the personal data that would be required,” she wrote.
“I don’t bring this up with hospitals, but I do bring it up with clients/potential clients who reach out to us regarding hospital bills, as this is the fastest way to receive the most discount on the services.”
I told her Aldeen’s estimate of the breadth of eligibility, and asked her if she was surprised.
“I was completely surprised by the number itself,” she wrote. “Although when I think back on cases we have handled, I have found that some clients who I thought would have exceeded the salary limits, in fact, did not. That’s why I always recommend asking the question before making an incorrect assumption.”
“I think it would be helpful to share with consumers exactly where to start this process. I also think they should be emboldened to reach out to the CEO or CFO of the hospital if they believe their case has not been handled appropriately. While they won’t likely reach that person, they will reach an assistant who will be sure to get a higher level administrator involved in the review.”
Senate report on inadequate charity care
Charity care was in the news recently when Sen. Bernie Sanders of Vermont issued a report, described here by The Washington Post, from the Senate Health, Education, Labor and Pensions (HELP) Committee saying in part: “Many nonprofit hospital systems across the country are failing to provide low-income Americans with the affordable medical care required by their nonprofit status — despite receiving billions in tax benefits and providing exorbitant compensation packages to their senior executives.”
“In 2020, the nation’s 2,978 nonprofit hospitals receive an estimated $28 billion in federal, state, and local tax benefits as a result of not paying those taxes — an average of $9.4 million per hospital,” the report says. That same year, however, those hospitals “spent only an estimated $16 billion on charity care.”
States handle this differently, the Consumer Finance Protection Bureau explains on its site.
“California, Connecticut, Illinois, Maine, Maryland, Nevada, New Jersey, New York, Rhode Island, and Washington have protections that apply to all hospitals, the C.F.P.B. writes. “Louisiana, Oregon, and Texas have protections that apply only to nonprofit or state hospitals. Colorado, Massachusetts, and South Carolina have state-run financial assistance programs.”
What you can do
DollarFor has a calculator on its website allowing anyone to fill in income and household size figures to assess whether charity care is available. It also has a step-by-step guide, beginning with a request for a hospital’s financial assistance policy.
To do it yourself:
- Find out the financial aid or charity care policy of the hospital. You can Google: Hospital name and “charity care” or “financial aid” is a good place to start. See if you qualify, and apply. This sounds very straightforward, but we have learned that the hospitals tend to not be very public or clear about their applications for aid, so it might require a little bit of searching on the website. Don’t forget: You can always call the hospital and ask them for their charity care or financial aid policy. Pro tip: Call several times, because different people in the same office might be more or less helpful.
- Keep careful records of what you applied for and when, and who you talked to and when. This will be useful if you need to make an appeal. We have also heard that these applications can take a long time.
- If your application for financial aid is denied, ask why – or seek advice for an appeal.
- Red flag: When you are looking for financial aid, some places will try to direct you to “financing,” which might be an application promising interest-free or low-interest credit, for example via CareCredit. This can be tricky. The financing application is basically an application for consumer credit, and it might have similar terms and conditions to credit card debt – hefty interest and penalties, for example.
- Investigate the Medicaid policies where you are. In New York, for example, you can apply for Medicaid, and if it is granted, there is a 90-day lookback period during which hospital bills may be covered by Medicaid. This varies a lot by state and by situation.
- After the fact, you may also be able to get your bill classified as charity care — though it’s often easier to do it in advance if you can. DollarFor says it will argue your bill for you after the fact if you qualify, or will help you do it yourself.
- Your city or state may have a legal aid service or other resource for helping people with bills. See here for examples of Washington State and Texas and other state resources, for example; you can search in your own state or city for local help.
- The National Consumer Law Center collects consumer debt advice and expert tips, including articles about medical debt.
- The National Consumer Law Center has more details in its recent review of hospital financial assistance
- The Consumer Financial Protection Bureau also has consumer tools on debt protection.
- There may be other options for financial aid based on diagnosis. We have heard of condition-specific groups for aid for, say, cancer care or abortions or diabetes or muscular dystrophy. This type of financial aid is outside the scope of this post; you may be able to find help by searching online or consulting with other patients.
- The Consumer Finance Protection Bureau works to fight unfair medical debt collection, but they should not be your first stop for charity care.