As healthcare costs weigh on patients, states could play a bigger role, report finds

As substantial costs remain Americans’ top point of criticism for the healthcare industry, a patchwork of state requirements for financial assistance and protections against medical debt leaves many patients at risk of crippling financial burdens, according to recent reports from healthcare policy and research group The Commonwealth Fund. 

One of these reports, released Thursday, shares the results of a national survey fielded in May with nearly 26,000 adult respondents. 

Similar to other recent polling, it showed the cost of health insurance premiums (cited by 42% of respondents) as the top issue in need of addressing, closely followed by high out-of-pocket costs (36%). Grievances over the steep expenses were shared across political divides and types of insurance coverage. 

On the two respective cost issues, respondents said they believed the federal government was best positioned to solve the problems (51% for premiums, 41% for out-of-pocket), followed by insurance companies (28%, 36%). 

A distant third cited by the respondents was their state-level government (9%, 11%)—though a separate Commonwealth data brief released a week prior suggests there’s much to be done by state policy leaders hoping to protect residents from unmanageable costs. 

That brief notes that increased interest in the issue over the last five years has led to:

• Prohibitions on medical debt in consumer credit reports, in 14 states, 
• Blocks on wage garnishing or home foreclosures due to unpaid medical bills, in 23 states,
• Requirements that hospitals offer a payment plan, in 12 states
• Limits on interest payments related to medical debt, in 18 states
• Required patient screening for financial assistance or public insurance eligibility before an unpaid bill is advanced to collections, in eight states
• Mandatory financial assistance for free or discount care based on patients’ income levels, in 21 states

“However, gaps in these protections remain—despite the good intentions of state laws—that leave patients unprotected and providers unaccountable,” Commonwealth Fund researchers wrote in the report. 

For instance, even among the 21 states that require hospitals to offer financial assistance, five limit that support to the uninsured and thereby leave some of those who are underinsured without protection. Immigration is another thorny area, with only five of the states explicitly prohibiting discrimination against immigrants when determining assistance, and three states excluding undocumented immigrants entirely. It’s also rare for the states’ protections to extend to medical debt that is converted into general consumer debt (via credit cards or other financing tools), or for the medical debt protections to apply to settings or services delivered outside a hospital. 

More broadly, various procedural and administrative hurdles can keep patients in many states from accessing state-directed protections. Here, the researchers noted that only nine of the 21 states that require hospital financial assistance also require that a denial appeal pathway be made available to patients. Patients are at an inherent disadvantage in legal disputes with providers or collections agencies over prohibited actions, such as wage garnishment, due to organizations’ easier access to legal resources, often leading to default judgments in court, the report’s authors wrote. 

In states that have banned actions such as wage garnishment, "the burden might be on the patient to demonstrate they are entitled to protections,” the authors wrote in another example. “Many patients, however, are unaware of this, or they are unable to take action because of a default judgment. States could instead require the creditor to demonstrate that a patient is ineligible for protections.”

Even where protections are in place, the Commonwealth researchers said that the current status quo for state enforcement and oversight is “underdeveloped.” 

Many states collect little to no information on how hospitals may be complying, they wrote. Few strike the right balance with their violation penalties, either landing on monetary penalties that are too small to affect behavior or have such substantial impact, such as in the case of a licensure revocation, that regulators are hesitant to wield it. Here, the researchers advocated for a private right of action—or giving patients the ability to directly sue a violating hospital or debt collector—to maximize compliance despite finite public enforcement resources.

“Well-designed medical debt laws can help patients weather coverage gaps and avoid negative financial consequences,” they wrote. “States can strengthen [these protections] by broadening eligibility for financial assistance and extending medical debt protections to more categories of medical debt. Pairing these expansions with lighter procedural burdens and stronger enforcement will help ensure that protections on paper translate into protections in practice.”