Recent Census data derived from the Survey of Income and Program Participants (SIPP) found that in 2017 (the most recent year), 19 percent of U.S. households carried medical debt and had a median debt amount of $2,000. The study revealed that 27.9 percent of Black households and 21.7 percent of Hispanic households had medical debt in comparison to 17.2 percent of white non-Hispanic households. Debt collection lawsuits have also been found to be disproportionately prevalent in communities of color. Medical debt and collection actions, therefore, further perpetuate racial inequities by limiting economic opportunities and further contributing to the wealth divide.
The COVID-19 pandemic has certainly exacerbated issues with medical debt in the U.S. Although federal relief provided for COVID testing and vaccinations free of charge to all individuals, and some insurers waived treatment co-pays, many Americans still found themselves with overwhelming medical debt related to COVID-19. Even during the height of the pandemic and the economic recession that has ensued, some hospitals continued suing patients for medical debt. According to a study conducted by John Hopkins University, at least 16 hospital institutions continued to take legal action during the first seven months of 2020.
Getting an unexpectedly large bill and a summons to appear in court after receiving medically necessary care can be paralyzing. For many Americans, it means taking time off from work, paying for transportation and parking, and hoping you can present your case effectively if you cannot afford legal representation. The Pew Charitable Trust reviewed debt collection lawsuits from 2010 to 2019 and found that less than 10 percent of defendants had any legal counsel, although nearly all plaintiffs had legal representation. The few defendants who did have legal representation were found to be much more likely to reach a mutual settlement. Many hospitals have been criticized for taking legal action; some are continuously tacking on daily interest fees to the debt and some are holding patients responsible for the hospital’s legal fees associated with taking them to court.
Many people of color working low-income jobs are not provided paid leave options. It becomes nearly impossible for them to afford to take a day off work to make a court appearance. However, when someone fails to show up in court on an assigned date, a default judgement may be issued against them that allows the hospital and/or debt collector to garnish wages or require monthly payments, without the debtor’s knowledge. Unfortunately, about 70 percent of the debt collection lawsuits in the past decade have resulted in default judgements where extenuating facts and personal hardship circumstances are not considered. The result is a ruling in the plaintiff’s favor and a court order taking a cut of someone’s paycheck. This leaves people helpless and is especially harrowing when it is already difficult for one to afford housing and food expenses.
Possible Solutions to Medical Debt Lawsuits
A recent blog focused on state legislative efforts to enact medical debt protections, but some states have taken a different approach and have developed innovative strategies to help provide relief from medical debt. Here are two examples.
Tennessee launched a new pilot platform in Chattanooga to help keep individuals out of the courtroom. Some communities throughout Tennessee have seen thousands of medical debt cases with aggressive legal action. Unfortunately, many people are unable to appear in court, often leading to a default judgement. The Tennessee Med Debt Pilot Program introduced a free Online Dispute Resolution (ODR) process offered by the Tennessee Supreme Court Access to Justice Commission. Individuals will be able to send text messages at their convenience to Erlanger Health System, which has agreed to work with patients through the portal, to resolve issues with a third-party neutral mediator. The hope of the ODR system is for debtors and the hospital to successfully resolve the bill without needing to settle the dispute in court.
The Minnesota Attorney General’s Office has held a regulatory agreement with Minnesota’s nonprofit hospitals since 2005 referred to as the “Hospital Agreement,” which is renegotiated every five years, to ensure that hospitals are serving their charitable missions. The Office does monitor these agreements. After an investigation launched by the Attorney General’s Office into Hutchinson Health’s unilateral termination of favorable hospital billing terms, a settlement agreement was announced in October 2020 to offer protections against aggressive billing and debt collection practices. Hutchinson’s termination of their favorable hospital billing terms resulted in drastic increases for individual’s monthly medical bills far beyond the initially agreed payment amount. The settlement will require Hutchinson to provide affected patients with the lowest available monthly payment between their original payment plan and new payment plan amounts, which has already allowed for $184,000 in debt forgiveness. The Hospital Agreement also requires Hutchinson to provide financial assistance to eligible patients and provide discounts to uninsured patients.
Sharing Your Story to Advocate for Change
Action against unfair medical billing requires community action in order to understand the full extent of the issue. Patients who feel victimized from aggressive medical debt collection practices are encouraged to share their stories and advocate for protections. Increased negative public attention of hospitals’ aggressive practices have appropriately prompted some hospitals to stop suing patients. An investigative piece from Kaiser Health News reported that University of Virginia Health System (UVA) was pursuing thousands of patients for medical debt and utilizing aggressive collection tactics such as seizing wages and bank accounts and putting liens on personal properties. UVA limited their lawsuits after the investigation, which highlighted personal stories of how aggressive collection efforts have financially devastated their patients. In 2021, UVA announced that it would cancel a massive backlog of lawsuits dating back to the 1990s. While sharing a personal story dealing with medical debt collections may be daunting, it can make a lasting impact to keep hospitals accountable to the communities they serve.