How employees can avoid medical debt: A look at hospital care charity programs

Americans have nearly $200 billion worth of medical debt, and as healthcare prices continue to rise, that number isn't likely to shrink — still, many Americans may not realize that they are eligible for financial assistance after receiving their hospital bill. 

The Internal Revenue Service requires non-profit hospitals to provide charity care programs, which offer free or discounted services to patients who meet the hospital or state's eligibility criteria, in exchange for its tax-exempt status. Non-profit hospitals account for 58% of community hospitals in the U.S., according to Kaiser Family Foundation, meaning many Americans do have access to hospitals with financial aid. And yet, hospital charity care is incredibly underutilized: KFF found that charity care costs represented 1.4% or less of operating expenses at half of all hospitals in 2020. 

The lack of education surrounding hospital financial assistance is just one part of the problem; many hospitals avoid mentioning their charity care program altogether, says Eli Rushbanks, general counsel and director of policy at Dollar For, a national nonprofit that advocates for patients and the elimination of medical debt. While this is a nationwide problem, Dollar For took their research to their home state of Oregon, where it became clear laws weren't being followed.

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"We started in Oregon and served those communities the longest, and a few years ago, we discovered that patients were unaware of hospital charity care programs," says Rushbanks. "Oregon had also passed a law where it put the burden on the hospitals to screen patients for financial aid eligibility before it sent them to debt collections. But that's not happening in practice."

In 2019, Oregon passed a bill stipulating that non-profit hospitals have to screen patients who fall within 200% of the federal poverty level. As of 2023, hospitals in the state now have to screen any patients with bills of $500 or more to see if they are eligible for aid. The hospitals then have to apply that aid before patients receive their bill, give refunds to those who mistakenly paid and ensure financial aid applications are easily accessible online. In Oregon, hospitals have to reduce the bill by 100% if the patient makes 200% or less of the federal poverty level; the bill is reduced by 75% if the patient makes between 200% to 300% of the federal poverty level and so on. A family of four with an annual income of $111,000, for example, can still get their bill reduced by 25%.

Oregon's eligibility requirements are relatively generous — but hospitals aren't screening enough patients, underlines Rushbanks. In fact, before Oregon's latest adjustment to screening requirements, Dollar For found that 70% of the state's hospitals were giving less charity care than they did before the 2019 law was passed.

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"Hospitals just haven't put in the time or made [compliance] a priority," says Rushbanks. "Maybe some hospitals think that they are in better compliance with the law than they actually are. Maybe they think it will cost them money."

However, Rushbanks notes that after looking at 11 years' worth of hospital data, they found no correlation between how much financial assistance was granted and the profitability of the hospitals. Hospitals may even be better off for doing a good deed: Oregon Health and Science University increased their financial assistance grants by 298% in the last two years and still saw net patient revenue increase. 

But Rushbanks isn't confident hospitals will change their tune anytime soon — instead, she asks employers to educate and remind employees about local hospital financial assistance policies and programs. If an employee finds themselves faced with a debt-inducing bill, they should immediately apply for financial aid.

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"Find the application, go to the hospital, go online, call them — just do whatever you need to do to get your application in as soon as possible," says Rushbanks. "Even if a patient has been sent to debt collections and they start getting contacted by a debt collector, they still have a few months to apply for financial assistance." 

As for hospitals, Rushbanks asks their executives to reconsider whether avoiding compliance with federal and state laws while pushing patients to financial ruin is actually good for business. 

"I really urge them to go look at their financials and see if they can even find a correlation between financial assistance and profitability," says Rushbanks. "Because the debt these patients are struggling with is the number one cause of bankruptcy, and financial assistance may not even affect their bottom line at all."