Gov. Tim Walz and DFL lawmakers want to reduce the pain of medical debt on Minnesotans by restricting collections and banning hospitals and clinics from denying non-emergency care to patients with substantial overdue bills.
Restrictions are needed to protect patients from suffering financial ruin on top of the severe or chronic diseases that necessitated their medical care, Walz said Friday at a Capitol news conference.
"Credit card debt to buy a television is one thing," he said. "Debt because you have a heart attack or get hit by a car or have an illness is an entirely different thing. And the idea that we are charging massive interest on that or reporting it to a credit bureau and we're destroying lives over it makes absolutely no sense."
Hospitals already limit their collection activities through a voluntary agreement with the state attorney general, but the legislation would make those limits permanent and expand them to clinics and outpatient facilities.
Proposals include eliminating interest on medical debt, preventing creditors from intercepting tax refunds from delinquent patients and relieving spouses from liability for their partners' overdue bills.
Minneapolis-based Allina Health stopped denying non-emergency care to patients with substantial unpaid debts after it faced public scrutiny. But other systems such as HealthPartners and Mayo Clinic have used the practice in limited circumstances. Minnesotans last summer came to the rescue of a pregnant woman in Glencoe, Minn., by donating money to prevent her from losing access to medical care because of unpaid bills.
The DFL proposals could present challenges for an increasingly vulnerable network of Minnesota hospitals and clinics, which is struggling with the costs of a nursing shortage and the boarding of patients who must remain in inpatient beds because there is no space for them in nursing homes or rehab facilities.
Hospital operators collectively wrote off $475 million as bad or unpaid patient debts in 2022, according to newly released financial data. While that represents less than 1% of what they charged patients, it deepens financial concerns when considering that 41 of 128 hospitals in Minnesota operated at a loss that year.
Lawmakers could soften the impact of the legislation by boosting the state's payment rates to doctors and restricting insurers' ability to deny coverage or pass more costs on to patients, said Dr. Laurel Ries, president of the Minnesota Medical Association, the trade group for the state's doctors.
"Too often, insurance coverage is insufficient and involves often impenetrable rules and processes that pose a barrier to coverage," Ries said.
Minnesota appears to have less of a problem with medical debts than other states. The Urban Institute estimates that 2% of adults in the state have medical debts in collections, compared with 13% of adults nationwide. However, that widely cited national figure is based on medical debts reported to credit rating agencies — and Minnesota hospitals don't report debts to those agencies under their agreement with the attorney general.
DFL lawmakers want to ban all hospitals and clinics from reporting debts to agencies. They argue that medical debts are different from consumer debts because they involve surgeries or treatments over which patients often have no choice. Walz called that practice "unconscionable" and supported the ban in the proposed legislation, titled the Medical Debt Fairness Act.
Lakeville resident Walt Myers said at the news conference that he supports the provision that would end spousal liability for medical debt. He said the unusual allowance under current Minnesota law saddled him with thousands of dollars in unpaid bills from his late wife's breast cancer treatment, taking months to resolve $135,000 in debts.
The legislation would have prevented that financial fight amid his grief, he said. "Unfortunately, I'm finding my story isn't that uncommon," Myers said.
The average medical debt lawsuit in Minnesota involved about $1,500, according to a review last fall of business-to-consumer cases filed since 2011. Attorney General Keith Ellison and the Minnesota State Bar Association revealed that finding, which suggests that the problem of medical debt goes beyond patients with extreme conditions such as cancer or major surgeries from traumatic accidents.
The report showed that many patients with unpaid debts can't afford routine medical expenses, even if they have insurance, because the deductibles and cost-sharing requirements can be too high.
"If you borrow money, you should pay it back," Ellison said at Friday's announcement. "We all agree on that, but we should also agree we shouldn't punish people for getting sick."
One concern is that medical debts keep Minnesotans from seeking other needed care, worsening their health and resulting in even more expensive emergency care and surgeries.
Lt. Gov. Peggy Flanagan said she recalled "feeling guilty" as a child when she became sick at a time when medical bills had driven her mother to file bankruptcy.
Medical providers sometimes write off debts entirely or sell them at pennies on the dollar to collection agencies, which then try to gain payment. A new option has emerged with RIP Medical Debt, a charitable organization that buys debts at reduced cost from providers and then cancels them.
The organization has erased nearly $31 million in medical debts for almost 33,000 Minnesotans.
Anne St. Martin of Inver Grove Heights spoke at the news conference in favor of a provision in the legislation that would spare people from medical debts caused by billing mistakes. She said such a mistake — a clinician's coding error — resulted in a $250,000 bill and disrupted the treatment of her 7-year-old son's rare and lifelong disease.
While care has been restored, St. Martin said, the bill is outstanding and her family has been threatened with wage garnishment and other collection efforts.
"We don't know how that will turn out," she said.