Medical Debt and Seniors: How Consumer Law Can Help
Americans are living longer, in part due to dramatic advances in medical care. One of the costs of longer life expectancies is that someone has to pay for this medical care. While access to quality medical care is essential for seniors and should be a universal right, it can leave them saddled with unmanageable medical debt. Consumer law remedies are critical in helping seniors avoid financial ruin due to overwhelming medical bills.
Medical debt issues are critical for many older Americans, especially low- and moderate-income seniors. One out of seven older Americans has reported that paying medical bills was either “very difficult” or used up all their savings.1 While many do have access to health insurance to pay for the bills, there are still gaps in the systems that burden seniors with substantial health care debt.
Advocates representing elder clients with large medical bills should know that they have a range of powerful consumer tools at their disposal. There are a number of legal and non-legal strategies, including:
Informal advocacy and negotiation.
Finding outside sources of funds to pay the medical debt.
Debt prioritization strategies.
Bankruptcy.
Potential affirmative claims under federal and state fair debt collection practices acts, state consumer protection acts, and other state laws.
If the client is sued over a medical debt, raising consumer-related defenses.
This Consumer Concerns provides a quick overview of some of these strategies. It summarizes information available in the National Consumer Law Center’s publication Fair Debt Collection (2004 and Supp.).
A. STRATEGIES FOR DEALING WITH MEDICAL BILLS BEFORE A CLIENT IS SUED
There are several ways to assist seniors facing medical debt who are not yet facing collections lawsuits, including:
1. Informal Advocacy/Negotiation
Negotiating with hospitals or medical providers is an underutilized but often effective strategy in dealing with medical debt. Even a pre-litigation request to a hospital or medical provider for a reduction in the amount allegedly owed can lead to surprisingly good results. Hospital and providers’ willingness to reduce bills is largely due to a phenomenon in health care pricing called “cost-shifting.” Cost-shifting results when hospitals and other medical providers concede huge discounts to third-party payers such as HMOs and Medicare/Medicaid. Because of these discounts, the providers attempt to shift many of their costs onto the shoulders of “self-payers” (i.e., the uninsured or underinsured.) The shocking consequence is that a medical provider/creditor may charge a low income, uninsured patient two or three times what it accepts as payment from private insurers. Practitioners should find out whether a medical creditor is engaged in cost-shifting, and if so, what discounts it is giving to various payers. This knowledge can be used to attempt to extract concessions for clients.
Another avenue for informal advocacy is to use any appeals processes available to the client. For example, Medicare beneficiaries are statutorily entitled to an appeal process, whether they are in original Medicare or a Medicare HMO.2 Many states also have a managed care ombuds office to resolve disputes over HMO coverage. In addition, many HMOs have their own internal patient appeals processes.
2. Find Other Sources To Pay The Bill
Another effective method to deal with medical debt is to find someone else to pay for it. Be sure that your elderly client applies for any assistance programs to which she is entitled. This may include government or private programs, such as:
3. Counseling Your Client About Whether And When To Pay Medical Bills
It is important when counseling clients who have large medical bills to look at their overall financial pictures. Sometimes clients simply cannot afford to pay medical bills and all their other bills. In that case, it is important to make sure that clients do not forego payment of higher priority bills, such as mortgages or car loans, in order to pay medical bills. Medical bills are unsecured debt, and as such usually should not take priority over secured debt or essential expenses such as food and utilities. However, the priority of a medical debt does depend on each individual client’s circumstances and may need to take non-financial factors into account, such as ability to obtain future care from a certain facility to which the client owes a debt.
Clients should understand that they should never move medical bills up in priority because of debt collection harassment. Advise clients against converting unsecured debt into secured debt by, for example, taking out a second mortgage to pay for medical bills. More information about how to prioritize bill payment is available in NCLC’s publication Surviving Debt (2006 ed.), available by calling NCLC’s publication department at (617) 542-9595.
4. Bankruptcy
Bankruptcy can be an important method to address overwhelming medical debt. A 2001 study showed that about one-third of personal bankruptcies involve significant medical debt, and the financial consequences of medical problems are responsible for over 45% of bankruptcies in the U.S.3 Another study investigating the link between medical expenses and bankruptcy filings found that over 25 percent of debtors surveyed cited illness or injury as a specific reason for filing for bankruptcy with about the same number of filers reporting uncovered medical bills of $1000 and higher.4 Extensive information about bankruptcy practice is available in National Consumer Law Center, Consumer Bankruptcy Law and Practice (6th ed. 2000) and in Surviving Debt.
5. Affirmative claims
Sometimes a client will have affirmative claims against a creditor or collection agency collecting on a medical debt. Affirmative claims may arise from the manner in which the client’s agreement to pay the medical bills was obtained or from overreaching collection methods. An affirmative lawsuit might involve claims under:
Federal Fair Debt Collection Practices Act (FDCPA). The FDCPA provides a useful remedy if your client is being harassed by a third-party debt collector over medical bills. In addition to prohibiting harassment and deceptive collection practices, the FDCPA includes restrictions on how and when a debt collector is permitted to communicate with a consumer.
Truth in Lending Act (TILA).5 Many hospitals offer payment plans to consumers who owe large amounts of medical debt. These plans are covered by TILA in some circumstances. More information about TILA can be found in NCLC’s publication, Truth in Lending (5th ed. 2003 and Supp.).
Emergency Medical Treatment and Active Labor Act (EMTALA).6 Your client may have an EMTALA claim if he was refused treatment at an emergency room because of medical debt.
State Fair Debt Collection Statutes. The most suitable remedies for health collection harassment are often state remedies. Most states have their own debt collection statutes. Many of these state statutes apply to both creditors and collection agencies, and thus would apply to collection activities conducted by a hospital or other medical provider.
State UDAP Statutes. State unfair or deceptive acts or practices statutes (UDAP) are often the most powerful remedies for overreaching collection behavior, especially by medical creditors. Every state and the District of Columbia has one of these statutes, which are consumer protections acts of broad applicability. UDAP statutes have many advantages, because they can be used to challenge a wide range of abusive behavior that may or may not violate another state or federal law. In addition, state UDAP statutes often proscribe unfair or deceptive debt collection tactics. Many UDAP statutes allow private actions for violations of other state or federal laws.
Special Exemption Statutes for Medical Debts. A few states have passed laws limiting health care debt collection or otherwise assisting consumers facing health problems. These laws are discussed in National Consumer Law Center’s publication Fair Debt Collection §14.7.
Other State and Common Law Remedies. There are a number of other state and common law remedies applicable to medical debt collection, such as:
the tort of intentional infliction of emotional distress
invasion of privacy
limitations on collection fees
unconscionability
B. IF YOUR CLIENT HAS BEEN SUED
Practitioners defending consumers sued over medical debt have a number of viable defenses. Aggressive advocacy can often result in very favorable outcomes. Medical debt collectors are accustomed to obtaining default judgments, and are not used to being forced to put on a case. Thus, they often cannot meet their burden of proof. Practitioners should not be discouraged into thinking that nothing can be done for a client faced with catastrophic medical bills.
A medical bill collections plaintiff may sue under various theories, each with different elements and different burdens of proof. The burdens of proof may also differ from state to state. For a summary of the theories used by medical creditors/collectors and potential defenses with respect to those theories, see NCLC’s publication, Fair Debt Collection.
C. ADDITIONAL RESOURCES
Books and Articles
The Access Project, The Free Care Safety Net (February 1999).
Alan Alop, Defending Hospital Collection Cases, National Center on Poverty Law (2001) (also included in NCLC’s Consumer Law Pleadings on CD-ROM (2001)).
National Consumer Law Center, Fair Debt Collection (5th ed. 2004 and Supp.)
National Consumer Law Center, Surviving Debt (2006 ed.).
Claudia Schlosberg, Immigrant Access to Health Benefits: A Resource Manual, The Access Project (2002).
Chi Chi Wu, Medical Debt, 39 Clearinghouse Rev. 465 (Nov./Dec. 2005).
American Bar Association Commission on Law and Aging
740 15th St., NW
Washington, D.C. 20005-1022
(202) 662-8690 www.abanet.org/aging
Center for Health Care Rights
520 S. Lafayette Park Pl., Suite 214
Los Angeles, CA 90057
(213) 383-4519 www.healthcarerights.org
Center for Medicare Advocacy
P.O. Box 350
Willimantic, CT 06226
(860) 456-7790
and
1101 Vermont Ave., NW
Suite 1001
Washington, D.C. 20005
(202) 216-0028 www.medicareadvocacy.org
Centers for Medicare and Medicaid Services
(formerly Health Care Financing Administration)
7500 Security Boulevard
Baltimore, MD 21244
(800) MEDICARE www.medicare.gov
(U.S. government official site for Medicare information)
Community Catalyst
30 Winter Street, 10th Floor
Boston, MA 02108
(617) 338-6035 www.communitycatalyst.org
Medicare Rights Center
1460 Broadway, 17th Fl.
New York, NY 10036
(212) 869-3850
and
1030 15th St., NW
Suite 250 Washington, D.C. 20005
(202) 589-1316 www.medicarerights.org
National Academy of Elder Law Attorneys
1604 N. Country Club Rd.
Tucson, AZ 85716
(520) 881-4005 www.naela.org
National Association of Consumer Advocates
1730 Rhode Island Ave., NW, Suite 805
Washington, D.C. 20036
(202) 452-1989 www.naca.net
National Consumer Law Center
77 Summer St., 10th Fl.
Boston, MA 02110
(617) 542-8010;
Publications: (617) 542-9595
and
1001 Connecticut Ave., NW
Suite 510
Washington, D.C. 20036
(202) 452-6252 www.consumerlaw.org
National Center on Poverty Law
50 East Washington St.
Suite 500
Chicago, IL 60602
(312) 263-3830 www.povertylaw.org
National Senior Citizens Law Center
1101 14th St., NW, Suite 400
Washington, D.C. 20005
(202) 289-6976 www.nsclc.org
The Access Project
89 South St., Suite 404
Boston, MA 02111
(617) 654-9911 www.accessproject.org
This brochure was supported in part by a grant, #90-AP-2647, from the Administration on Aging, Department of Health and Human Services, Washington, D.C. 20201. Grantees undertaking projects under government sponsorship are encouraged to express freely their findings and conclusions. Points of views or opinions do not, therefore, necessarily represent official Administration on Aging policy. April 2006.
NOTE: This Consumer Concerns reflects the current law only. There are likely to be changes after this publication that advocates should keep careful track of.
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1Cathy Schoen, et al., Medicaid Beneficiaries: A Population at Risk, Commonwealth Fund (1998), available at www.cmwf.org.
2 The Medicare Rights Center (www.medicarerights.org) and the American Association of Retired Persons (AARP, see www.aarp.org) both have publications on Medicare appeals.
3 Melissa B. Jacoby, Teresa A. Sullivan, and Elizabeth Warren, Rethinking the Debates over Health Care Financing: Evidence from the Bankruptcy Courts,” 76 New York University Law Review 375 (May 2001).
4 David U. Himmelstein, Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler, Market Watch: Illness and Injury as Contributors to Bankruptcy, HEALTH AFFAIRS-WEB EXCLUSIVE (February 2, 2005), http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.63/DC1. See also Melissa B. Jacoby, Collecting Debts From the Ill and Injured: The Rhetorical Significance, But Practical Irrelevance, of Culpability and Ability to Pay, 51 AMERICAN UNIV. L.R. 229 (Dec. 2001).
and NCLC