Sens. Murphy, Van Hollen Introduce Legislation to Reform Medical Debt and Strengthen Consumer Protections

WASHINGTON, Sept. 26 -- Sen. Christopher Murphy, D-Connecticut, issued the following news release:

U.S. Senators Chris Murphy (D-Conn.) and Chris Van Hollen (D-Md.), introduced legislation to strengthen consumer protections and reform medical debt practices. The Strengthening Consumer Protections and Medical Debt Transparency Act would put in standard practices to make sure that health care entities communicate with consumers any debt that is owed, and alerts the consumer of any assistance that they qualify for before any debt is sent into collections. The legislation also directs the U.S. Department of Health and Human Services (HHS) to create a public database to collect information from health care entities about their debt collection practices.

"With increasing deductibles and co-pays, even people with insurance are facing big medical debts. And many hospitals continue to go after patients for relatively small overdue amounts. That's not right, and it's now clear that medical debt has become an issue Congress needs to deal with. The pandemic just increases the urgency. My legislation seeks to reduce medical debt by reforming hospital practices and forcing disclosure on which health care providers are using egregious measures to collect on debt. No one in this country should go bankrupt for an illness--and hopefully my colleagues join me in this effort and pass this legislation without delay," said Murphy.

"The COVID-19 pandemic is wreaking havoc on American families' health and safety - while also taking a devastating toll on their pocketbooks. Yet even in the midst of this unprecedented crisis, some hospitals continue to grab Americans' hard-earned paychecks to collect outstanding medical debts. This is unacceptable. That's why I'm proud to team up with Senator Murphy to introduce legislation to protect Americans from these predatory practices during COVID-19 and beyond. I urge Congress to act on our proposals at once," said Van Hollen.

"Medical debt has reached epidemic proportions in our country. The UCONN Health Disparities Institute has been working tirelessly to understand its root causes, to measure it and to shed light on its devastating consequences on peoples' health, their financial wellbeing and on widening healthcare disparities among people of color," said Victor G. Villagra, MD, Associate Director of the University of Connecticut's Health Disparities Institute. "But in the absence of a federal law that requires public reporting of debt collection practices by hospitals and other healthcare entities finding reliable data can greatly hamper such efforts. We are grateful to Sens. Chris Murphy and Chris Van Hollen for introducing this bill. It not only provides for a transparent public source of information but coupled with previous legislation against garnishment of debtors' wages for COVID-19 related debt, it introduces broader consumer protections such as requiring timely, itemized, lay-person understandable explanations of what is owed and a sensible cap on interest rates charged. Medical debt is the only source of involuntary debt plaguing Americans; this bill could not be more welcomed."

"The Connecticut State Office of the Healthcare Advocate often represents patients who have worked hard and played by the rules, including paying big healthcare insurance premiums, only to find themselves harassed by medical debt collectors at the very time they or a loved one are fighting illness or injury," said Ted Doolittle, Connecticut's State Healthcare Advocate. "That's not fair. This legislation starts to address that problem by demanding transparency from healthcare providers about their debt collection tactics and statistics, while providing plenty of room for the honest majority of health providers to work out decent, common-sense payment plans with their patients."

"We applaud Senators Murphy and Van Hollen for this comprehensive approach to addressing aggressive medical debt collection practices that push too many people in our country deeper into poverty, particularly people of color who already face unfair barriers to health and economic security," said Emily Stewart, executive director of Community Catalyst. "As an organization that won stronger consumer protections from aggressive non-profit hospital billing and collections practices in the Affordable Care Act, we strongly endorse their proposal to extend those requirements to nearly all health care providers. This will help to protect millions of people across America who are at risk of losing their jobs and the health insurance that goes with it. In the midst of a pandemic, collection actions should be used rarely and certainly only after health providers have worked with patients to identify coverage or other assistance programs."

"Senator Murphy and Senator Van Hollen's bill would protect us from some of the worst consequences of medical debt and would increase accountability for debt collectors, while backing up these protections with strong penalties for violating the law," said National Consumer Law Center attorney Jenifer Bosco.

The Strengthening Consumer Protections and Medical Debt Transparency Act would require that:

* HHS create a publicly available database of annual reporting from hospitals, freestanding facilities, and large provider practices with information about whether they use collection agents, the process for assigning debt to a collection agent, and the number of extraordinary medical debt cases under collections. HHS will maintain a public list of any health care entity that does not submit the required information each year.

* Medical debt interest rates should be capped at the annual rate set by 28 U.S.C.A. Sec. 1961 plus two points or 5 percentage points annual growth, whichever is lower, to protect patients from uncontrolled rate increases that multiply debts.

* Before debt can be sent into collections, health care entities should ensure that all insurance coverage appeals have been resolved and determine whether the patient qualifies for assistance.

* Health care entities, or their contracted debt collection agencies, shall not enter into extraordinary collection until 180 days after an initial bill is sent and the debtor's identity has been confirmed.

* Health care entities provide the patient with an itemized statement of the debt owed as well as detailed receipts of payments made within 30 days.

* A health care entity or its agent who fail to comply is liable to the patient for actual damages and up to $1,000. In the case of a class action suit, damages are the amount each plaintiff could have recovered, not to exceed $2 million. If the patient is successful, then attorney's fees and other costs also can be recovered.

* The Consumer Financial Protection Bureau (CFPB) biennially report on medical debt collections and review the public database for its application to the CFPB's risk supervision program.

Last month, the Senators introduced legislation to prevent health care providers from taking drastic steps to collect medical debt from COVID-19 positive patients. In May, Murphy and Van Hollen sent a letter to HHS Secretary Alex Azar urging him to take action to prevent hospitals from garnishing workers' wages as a means to collect medical debt and that HHS should not provide emergency relief funds to hospitals undertaking this practice on consumers.

Murphy previously worked to reform medical debt and hospitals billing practices that went into effect in 2003 when he served on the Joint Committee on Public Health in the Connecticut State Senate. When crating this legislation, Murphy held a series of roundtable discussions in Connecticut with health care advocates, doctors and patients.

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May 12, 2020

To: The Honorable Alex Azar, Secretary, U.S. Department of Health and Human Services, 200 Independence Avenue SW, Washington, D.C. 20201

Dear Secretary Azar:

We write to express serious concerns with ongoing instances of wage garnishment by hospitals in aggressive pursuit of medical debt collection during the COVID-19 pandemic. As you prepare to release further tranches of emergency funding to health care providers from the Public Health and Social Services Emergency Fund (PHSSEF), we request that you condition payment of these funds on a commitment by hospitals not to garnish wages as a means to collect medical debt during this public health emergency, regardless of whether the medical debt was incurred during the crisis.

Wage garnishment for the purposes of medical debt collection raises concerns in normal times. To carry out such aggressive behavior during a pandemic and economic downturn is egregious. On top of that, medical debt is more likely to affect patients with underlying health conditions, and disproportionately communities of color --the same communities being hit the hardest by the COVID-19 pandemic.

The harm inflicted upon patients by wage garnishment is disproportionate to its benefit. Existing research suggests that on average, garnishment cases constitute a small sliver of hospitals' annual gross revenue--as little as a tenth of a percent. Yet for patients, these bills can wipe out a substantial part of their paychecks, rendering them unable to meet basic needs like paying rent or buying groceries. Siphoning wages is a devastating blow to patients who are already grappling with tremendous financial instability. Rendering someone incapable of paying rent during a widespread stay-at-home order is a cruel catch-22.

Hospitals are crucial partners in the frontline efforts to treat Americans affected by COVID-19. We appreciate that the pandemic has placed significant demand and strain on our healthcare system. However, garnishing Americans' wages at this time offers little gain and tremendous harm in the face of a public health emergency and economic turmoil. Given that HHS has already prohibited surprise billing in its terms and conditions of receiving funds from the PHSSEF, we believe prohibiting wage garnishment is a reasonable addition that would protect struggling Americans from further financial hardship and stress. Entities benefiting from taxpayer-generated relief funds should not then turn around and garnish the wages of those very same taxpayers.

We appreciate your efforts to expeditiously distribute relief funding to critical hospitals and health care providers on the frontlines. Thank you in advance for your attention to this matter.

See signatories here: https://www.vanhollen.senate.gov/imo/media/doc/LETTER_HHS%20on%20Wage%20Garnishment%20and%20PHSSEF%205.12.20.pdf#page=1&zoom=auto,-99,798