Most hospitals offer financial assistance; new IRS rules will ensure people know

Many patients who are hospitalized are uninsured or underinsured and can’t afford to pay their hospital bills. They have no clue they may be eligible for financial assistance or “charity care.” Instead, according to a recent ProPublica report, a large number of hospitals have taken to suing patients and seizing their wages to collect on their medical debt. New IRS rules, required under the Affordable Care Act, take a first big step at ensuring non-profit hospitals post their financial assistance policies so that patients are aware of them, curbing lawsuits against patients eligible for financial assistance.

Non-profit hospitals, which represent nearly 60 percent of the hospitals in the U.S., must offer charity care under the law that gives them tax-exempt status. But, most people are not aware that these hospitals offer financial assistance. The hospitals have never been required to let people know about their charity care. Now, with these new IRS rules, these hospitals must post their financial assistance policies on their web site and provide patients with a plain English summary of their policies while they are in hospital.

In short, beginning in January 2016, before non-profit hospitals can sue patients for unpaid bills, they must first let them know that they might be entitled to financial assistance and give notice that they are planning to sue and that the patient might qualify for charity care.

As good as these new IRS rules are, they have three glaring problems:

1. They apply only to non-profit hospitals. They do not apply to for-profit and government hospitals, which means that those hospitals can use whatever tactics they please to collect payment from patients unable to afford their hospital bills. And, second, they allow non-profit hospitals to decide which patients qualify for financial assistance and how much assistance they qualify for.

2. Hospitals for the most part continue to call the shots on charity care. In most states, hospitals can decide that only uninsured patients qualify for financial assistance or only underinsured patients with incomes under the federal poverty level. A few states have clear charity care guidelines.

3. Only the IRS can enforce the rules, and the IRS is notoriously bad when it comes to enforcement.

To be clear, some non-profit hospitals are good about letting patients know they might qualify for charity care. And, it’s unclear how many non-profit hospitals sue patients or how frequently because no one keeps track of that information. But, the ProPublica report revealed that Heartland Regional Medical Center in Missouri brought 11,000 lawsuits and garnished wages from 6,000 patients between 2009 and 2013 alone.

If you think you might not be able to pay your hospital bill in full, it might be wise to use a nonprofit hospital, where you might be eligible for financial assistance. Before you choose the hospital, check to see how it rates with regard to hospital-acquired conditions and other metrics. And, read this advice on how to prepare for your hospital stay.