Medicare and Medical Debt

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.

In a recent survey, one-third of people who still haven’t been vaccinated against Covid-19 said fear of the cost is a factor. Federal law is very clear: no health care provider is allowed to bill any patient for the vaccine. But with a health care system that produces so many medical billing horror stories, it’s little wonder that patients don’t trust providers to follow the law.

Many patients trying to obtain preventive care like vaccinations or cancer screenings receive unexpected medical bills. The Affordable Care Act (ACA) prohibits cost-sharing for these services, and for good reason: regular preventive care helps people avoid or manage many chronic illnesses, gives them better outcomes for many types of cancer, and helps us control infectious diseases like flu and Covid-19 through vaccinations. But bills for preventive care still sneak through. One common issue arises when providers use the wrong billing code. If a service isn’t coded as protected preventive care, patients get charged. Patients then have to try and decipher what went wrong, even though the bills they receive are not required to include those codes or even explain what services are being charged for. Legislation proposed in New York State called the Patient Medical Debt Protection Act would have required providers to list all services being charged for in plain language on every medical bill but has failed to pass two years in row.

Facility fees are another way that patients end up with bills for preventive care. Facility fees are administrative charges not associated with any medical service. They are typically charged by hospitals. However, as hospitals purchase more outpatient medical offices, more patients get hit with facility fees outside of hospitals. Facility fees aren’t charges for any specific medical service, so the ACA’s prohibition on charging for preventive care doesn’t apply. (You can learn more about facility fees here and here.) Legislation that would have barred billing for facility fees after preventive care visits passed the New York Senate this session but failed to move in the Assembly. The bill also would have required providers to tell patients ahead of time that facility fees will be applied to their bill, giving them the chance to schedule appointments somewhere else.

Patients are so distrustful of our health care system that it is interfering with our ability to achieve public health goals. Patient protections such as those that prohibit cost-sharing for Covid-19 vaccinations can help. However they can’t solve the problem. Patients should only receive medical bills that clearly explain charges and be told ahead of time about fees that will be added to their bill no matter what care they receive. Health care providers and public health officials can educate the public about vaccinations and preventive health screenings, but it won’t convince patients who have learned from experience that the only way to avoid unaffordable medical bills is to avoid medical care whenever they can.   

Ellen, a Long Islander, received an unexpected and unwelcomed bill from a hospital system when she went to her doctor’s office for a biopsy.  She was not anticipating a “net facility charge” of $2,142 which she was not informed of.   She protests that she was not provided with any notice that she would be charged extra for a facility charge when she was visiting a doctor.  She also received a bill for net charges of $618.07 from the Doctor.  “Had I known that was the billing practice, I would not have visited this doctor,” she says.

She adds, “There was nothing from the doctor or her staff, or from the circumstances of the procedure, that would have indicated to me that I was being treated at a hospital.  Both the examination and the procedure took place in a typical examining room at the doctor’s office. I was not even placed on a special chair for the procedure— I was wearing my street clothes.”  The facility fee is not a charge for an actual health service.  As of now, it is a legal way for the hospital that bought your doctor’s office or clinic to add the hospital’s overhead cost to your doctor’s bill.  Health Insurance often will not pay these facility fees, leaving the patient stuck with the bill, uninsured patients are always stuck with these facility fee bills. 

A new bill, the (A3470B/S2521B), would regulate these health care facility fees and provide some semblance of protection by not allowing a provider to seek payment of these fees if not covered by insurance, unless they had notified and explained the fee and amount at least seven days in advance of the procedure.  If approved by the New York State Legislature and signed into law by the Governor, the would ensure that patients will no longer be held responsible for this kind of surprise bill and what happened to Ellen will no longer happen to any other New Yorker. The bill would also prevent facility fees for preventive care – New York will be the first state to do so if it passes!

Author: Emily Vaculik, Citizen Action of New York    

The COVID-19 pandemic has exacerbated the debt problems of many Americans but has had particularly bad impacts on those already struggling. Families devastated by the impacts of the virus often have to confront additional burdens — abusive debt collection tactics for their medical bills. Decades of discriminatory financial policies have led to a disproportionate amount of debt collection harassment in Black and Brown communities. In December 2019, The Urban Institute found that debt collection had affected 42% of Black consumers; but only 26% of white consumers. According to an article in the New York Amsterdam News, the largest portion of debt for communities of color comes from medical services and student loans (read the article here).

              A 2017 survey by the Consumer Financial Protection Bureau (CFPB) found that Black Americans are contacted by debt collectors at higher rates than white respondents: 44% of Black respondents reported being contacted about debt, while only 29% of whites were contacted. Even when income gap differences are accounted for, Black Americans are sued at higher rates: 45% of respondents living in communities of color faced debt collection litigation, while only 27% of similarly situated respondents in white communities were sued.

              On October 30, 2020, the CFPB released a regulatory revision for the enforcement of the Fair Debt Collection Practices Act, the federal law that prohibits debt collection companies from abusive, unfair or deceptive debt collection practices. The revision allows consumers to limit the amount of harassing phone calls from debt collectors by restricting how often debt collectors may contact affected consumers. While the revision was important, it did not do enough to remedy abusive debt collection practices – particularly for communities of color. Debt collectors have the ability to seize money and personal property in their pursuit of debt collection – devastating families economically and often impeding them from paying for their basic needs like food, clothing, housing and utilities. This has a particularly detrimental effect on Black and Brown communities trying to recover from their discriminatory exclusion from the financial mainstream.  

              New York should consider adopting stronger policies regarding debt regulation to protect consumers from harassing debt collection practices. One legislative proposal is the Patient Medical Debt Collection Protection Act (PMDPA), which particularly addresses medical debt – one of the main sources of debt for Black Americans. The PMDPA addresses several debt collection practices, including shortening the statute of limitations for collection of medical debt and lowering interest rates on medical debt. New York needs stronger protections to protect consumers, particularly Black and Brown consumers, from pervasive predatory debt collection practices.