Still Waiting After all These Years: Many Nonprofit Hospitals Financial Aid Policies Still Fail Health Department Audits

Over a decade ago, New York State enacted Manny’s Law, which required New York’s non-profit hospitals to provide hospital financial assistance to low-income patients. The law is named after Manny Lanza, a young New Yorker with a brain condition who died after being precipitously discharged from a hospital because he was uninsured. Under Manny’s Law, hospitals must provide financial assistance to uninsured, low-income patients in exchange for receiving funds from the State’s $1.1 billion Indigent Care Pool. In 2012, the Department of Health began to audit the hospitals’ financial aid programs in response to reports of inadequate compliance.

A Freedom of Information Law request filed with the Department of Health shows that a decade later, hospitals still fail to comply with Manny’s Law—and, in fact, appear to be regressing, with the audit showing that they were less compliant in 2018 than they were the prior two years. The audit includes a list of questions that hospitals can pass or fail, and the chart below shows the total number of failed questions:

What kinds of problems did the audit reveal?

First, the audit found that a decade after the passage of Manny’s Law, many hospitals’ financial aid applications still include impermissible requirements that make it hard for patients to apply. For example, 17% of hospitals audited had incorrectly adopted a “Medicaid denial first” policy. Medicaid applications can take a lot of time to process. Requiring a patient to receive a denial before beginning the financial assistance process causes unnecessary delay for patients. Other impermissible hurdles to hospital financial aid revealed by the audit included requiring patients to provide their: past tax returns (14.3%); monthly bills and other financial obligations (13.1%); and Social Security numbers (12.0%).

Second, the audit found that many hospitals’ financial assistance policies do not protect low-income patients from extraordinary collections actions that are explicitly forbidden under state law because they are so harmful to patients. For example, one in five hospitals said that they allow accelerator clauses that mean missed payments trigger higher rates of interest (20.0%). Interest adds hundreds or thousands of dollars to medical bills that patients are already struggling to pay. (A bill to reform New York State’s onerous 9 percent judgment interest rate awaits Governor’s Hochul’s signature (S55724B/6474B).) Next, the audit reveals that hospitals are allowing collections agencies to pursue their patients without the hospitals’ written consent (9.1%). This means patients are hassled by debt collectors even while they are working on applying for financial assistance or otherwise trying to work with the hospital to pay their bill. Finally, hospitals’ policies do not explicitly prohibit forced sales or foreclosures on patients’ homes (7.4%).

Third, the audit found that hospitals apply asset tests when determining discounts, which is not allowed in almost any other health care affordability program in the state. And hospitals report that they continue to consider assets that the law says they are not allowed to consider, including a patient’s home (10.9%), retirement accounts (9.7%), college savings accounts (8.0%), and cars that anyone in the patients’ immediate family uses for their primary transportation (8.0%). This failure to comply with the law means eligible patients are denied help or are prevented from applying.

These failures to comply have serious consequences for patients who should have been protected by Manny’s Law and offered care at discounted rates. According to a 2019 poll, 45 percent of New Yorkers say they delay or avoid health care altogether because they cannot afford it. Thirty-five percent of New Yorkers say that obtaining necessary health care meant serious financial struggles such as using up all of their savings, being unable to pay for food or heat, and racking up large amounts of credit card debt. Over 52,000 New Yorkers have been sued by hospitals over medical bills they cannot afford over the past five years. Hospitals then place liens on patients’ homes and garnish their wages.

Make Manny’s Law a Reality: Fix the Hospital Financial Assistance Law

What should New York do about this? One simple change is to require hospitals to use one standard application form to be developed by the state. This would obviate the need for the Health Department’s audits of a failing system that lets every hospital design and implement its own policy. Other states already do something like this. For example, Massachusetts uses its state Marketplace to award hospital financial assistance. Advocates have recommended the adoption of a single application form  for years and so has  the Department of Financial Services Health Care Administrative Simplification Workgroup – a multi-stakeholder group of healthcare experts. It was also proposed in last year’s Patient Medical Debt Protection bill.               

After all these years, patients need our healthcare system to be simpler and more accessible. That remains the unfulfilled goal of Manny’s Law. Adopting one uniform statewide Hospital Financial Assistance form, to be used by all of New York’s hospitals, would be an important first step in leveling the playing field between patients and healthcare providers.   

A state Workgroup investigating ways to simplify administrative processes around health care recommended a number of policy changes that could make life easier for patients. The Health Care Administrative Simplification Workgroup was created in the FY20-21 enacted budget and submitted its final report to the Legislature a few weeks ago.

Several of the Workgroup’s recommendations had been proposed through last year’s Patient Medical Debt Protection Act, which would have enacted significant financial protections for patients – but did not pass the state Legislature. Key recommendations from the Workgroup include:

  1. Standardizing the Financial Assistance Application: The Workgroup recommended that the state develop a standardized form to be used at all hospitals for financial assistance applications. New York State started auditing hospitals’ compliance with the hospital financial assistance law in 2012. Hospitals routinely fail this audit by requiring information Social Security numbers, and tax returns as part of the application. This leads to low- and moderate-income patients becoming responsible for bills that the state has already determined they cannot afford. A standard application would eliminate these hurdles.
  2. Regulating Facility Fees: Another piece of the Patient Medical Debt Protection Act that appears in the Workgroup recommendations is that providers inform patients about facility fees before they receive services. The Workgroup also recommends prohibiting facility fees charges for preventive care visits. Facility fees are overhead charges for hospital care, but they are increasingly charged to patients who receive services elsewhere as more and more doctors’ offices are purchased by hospitals. This recommendation could be enacted this year by passing A3470B/S2521B.
  3. Standardizing Financial Liability Forms: Another patient-friendly recommendation from the Workgroup is for providers to standardize patient financial liability forms. Patients are sometimes asked to sign these forms before appointments without adequate time to understand what they are signing. This is an unfair practice, as the forms ask patients to accept financial responsibility for the costs of care before they know what care they need or how much it costs. Patients have even been denied care for refusing to sign the forms.

           Another batch of recommendations in the report would improve the prior authorization process, which is how health plans decide whether a doctor’s recommendation is medically necessary before approving payment. The Workgroup recommended that plans clearly identify which services require pre-authorization, review those services annually to decide if pre-authorization is sensible, and flag situations where patients are required to get multiple pre-authorizations for the same treatment when it is needed more than once. The Workgroup also recommends that health plans post their clinical review process in an easily accessible location on their websites so that patients and anyone helping them can understand why services are authorized or not. Patients need this information to appeal decisions that might be against medical best practices or are inappropriate for their specific health care needs.

The Biden Administration is planning to draft a new public charge rule, and is gathering information before it does so through a public comment process. Advocates have until October 22 to submit their comments (you can read the request for comments here.)

The previous Administration’s expansion of the public charge rule is still harming New Yorkers. The Trump Administration proposed a major expansion of public charge in September 2018. The proposal, if enacted in full, would have meant immigrants who used a long list of public programs could later be denied permanent residency. The final rule was much smaller in scope than what was originally proposed, and did not include health programs like Medicaid.

Further, the final rule was revoked by President Biden in March 2021. But the proposal caused damage in-and-of itself: immigrants who were not subject to the rule still fear enrolling in programs that will help them access health care, even when those programs were not part of the expanded public charge rule. This confusion and fear surrounding the rule is known as the “chilling effect.” Immigrants were afraid to make mistakes that would jeopardize their future here while the rule was in place, and they are still afraid that a future Administration will use their health care needs against them. As many as 260,000 low-income children lost access to desperately needed health care and other services during 2020 because of the chilling effect.

President Biden must address these fears by clearly defining public charge in regulations. Public charge was applied narrowly before the Trump Administration, so narrowly it was almost never used. The new rule should explicitly and narrowly define public charge to avoid future abuses. It should also explicitly list programs that are not subject to public charge, like Medicaid and SNAP. Protecting Immigrant Families has created a sign-on letter for advocates with other recommendations; the deadline to sign on is October 20. Advocates who sign the joint letter should also consider submitting their own individual comments. Another good resource is this Health Affairs blog post.

New York State and the Biden Administration also need to do more to make sure immigrants can access health care:

  • Some New Yorkers are barred from enrolling in public health coverage because of their status. New York could immediately provide relief to those excluded immigrants by passing A880/S1572, which would allow income-eligible immigrants to enroll in the Essential Plan. 
  • At the federal level, the Biden Administration should remove the 5-year bar to becoming eligible for Medicaid coverage.

Medicare is a life-saver for older Americans, but it does have out-of-pocket costs that can expose some patients to medical debt. A new issue brief created for HCFANY by the Medicare Rights Center explains some of the causes of medical debt for people enrolled in Medicare and describes some steps patients can take to avoid it.

Some of the causes of medical debt for people covered through Medicare are the same as for people with other types of insurance. More and more New Yorkers say they cannot afford to pay for care because of deductibles and out-of-pocket costs. This can be especially difficult for patients who are cannot afford supplemental coverage but are not low-income enough for Medicaid.

Like other patients, people with Medicare deal with medical billing errors and service denials. Patients who have had their care plan denied by insurers are then in a position where they have to ask their doctor for a different care plan; attempt to appeal, which can be overwhelming without help; or pay on their own. Finally, Medicare patients have to navigate covered versus non-covered services. Long-term care, dental care, and even ambulances can leave them on the hook for large medical bills.

Patients with Medicare coverage should review their Medicare Summary Notice to know what bills may be coming and whether any services they’ve received in the past three months were not covered. They can get help with billing questions, appealing service denials, or finding affordable care by calling the Medicare Rights Center at 800-333-4114.

New York State should also do more to protect patients from medical debt. One reason that medical errors are so common and that it is so hard for patients to know what services are covered by what providers is because the current health care system is so fragmented. A single-payer system, like the one that would be created by the New York Health Act, would eliminate the complexity that causes so much distress for patients in today’s system.

New York should also take steps to make medical billing more fair in the current system:

  • Funding consumer assistance programs,
  • Capping interest rates on medical debt judgments,
  • Barring providers from placing liens on patients’ homes or garnishing their wages,
  • Banning facility fees, and
  • Making the state’s hospital financial assistance policy easier to apply for.