This section sets forth the availability of different types of free care and the requirements for eligibility. It creates a general right to any or all of the following: Full Free Care, Partial Free Care, and Medical Hardship Assistance.

This section contains the eligibility criteria for the three forms of financial assistance: full free care, partial free care, and medical hardship assistance. It recognizes the fact that the cost of hospital care is prohibitive even for some middle-income families. The financial eligibility criteria are intended as floors only. Drafters should ensure that financial eligibility criteria are realistic in relation to the cost of living in their jurisdiction. The Federal Poverty Guidelines (FPG) are the same in each of the 48 contiguous states and the District of Columbia despite the fact that there are substantial variations in the cost of living among the states.

It is important to note that the eligibility criteria utilized here are pegged to family income rather than the size of the hospital bill. Some hospitals provide financial assistance to patients by reducing their hospital bills a certain percentage, or by reducing the bill to the lowest rate the hospital has negotiated with managed care providers. The difficulty with this approach is that it may still result in an unreasonably high bill for an uninsured or underinsured person. In a 2003 study of Chicago hospital rates, uninsured patients were charged $12,240 per hospital stay on average. The comparable cost for a patient covered by a managed care organization was $4,930. The typical uninsured person has an income that is under 200% FPG; or less than $20,420 for a family of one. Using the Chicago data, if the hospital offers to reduce the bill of an uninsured person with an income under 200% FPG to the lowest rate it charges any customer, the individual would still owe almost $5,000. In contrast, that individual would be entitled to full free care under this Act.

The Act uses the terms “Cost” and “Charge” in both the billing and reporting context. Patients who are eligible for financial assistance are to be billed at cost for any out-of-pocket financial responsibility. “Cost” is the amount of money a hospital has to spend to provide a service or supply. In contrast, a “Charge” is the price the hospital sets for a particular service or supply. The charge is the hospital’s “list” - or “sticker” – price. Inevitably, the hospital charge for a particular service or set of services is higher than the hospital’s cost.  

There are no legal constraints on how high hospitals set their charges. People who have no insurance are assessed the full, charged rate for supplies or services. Private third-party payers are able to negotiate discounts because they can guarantee hospitals a steady flow of patients. The federal and state governments – which set Medicare and Medicaid rates, respectively – can pretty much tell hospitals how much they will pay them. In contrast, the uninsured don’t have anyone negotiating on their behalf, so they end up being charged the highest rates. 

Finally, the Act defines “Medically Necessary Services” broadly to ensure that free care is not limited to a subset of services provided by the hospital, such as emergency or outpatient services. The definition includes prescription drugs because they have assumed such a central – and critical – role in modern medical treatment. A potential issue, however, is that patients will still be responsible for the cost of services that are provided in the hospital but not billed for, by, or through the hospital. Where this is the case, hospitals should be encouraged to use their influence (e.g., the granting of staff privileges, selective contracting with suppliers, etc.) to persuade these other providers to adopt the same free care policies that hospitals are subject to.

Full free care is available to patients who are residents of the state where the law is enacted and whose family income is equal to or less than 200% of FPG. It is also available to non-state residents in the same income range who receive urgent care or emergency care as defined by the Act. Eligibility for full free care is based solely on family income. There is no asset test for either full or partial free care because research suggests people in these income brackets have very limited assets. To require documentation would be administratively burdensome for the hospital with very little, if any, pay off.

Partial free care is available to patients who are residents of the state where the law is enacted and whose family income ranges from 201% to 400% of FPG. Like full free care, partial free care is available to non-state residents whose family income is in the 201-400% FPG range and who receive urgent care or emergency care. Eligibility for partial free care is based solely on family income. For reasons described above, there is no asset test.

In contrast to eligibility for full free care though, an individual who qualifies for partial free care is required to pay a deductible. The deductible amount suggested here is 20% of the difference between the patient’s family income and 200% of FPG. The following example illustrates how the deductible is arrived at: 

A family of three has an annual family income of $35,000.

Two hundred percent of the Federal Poverty Guidelines (FPG) for a family of three is $34,340.

$35,000 (family income) - $34,340 (200% FPG for a family of 3) = $660

$660 x 20% = $132 annual family deductible

Once the family in the example above has incurred hospital expenses that exceed $132, it is eligible for free care. Families who are eligible for partial free care are liable for only one deductible per year. Thus even if there are multiple hospitalizations, the family is responsible for satisfying the deductible amount only once on an annual basis. Families may satisfy the deductible if they have incurred medical expenses from providers other than the hospital in the same calendar year, but it is their responsibility to document those expenses. Hospitals are not prohibited from initiating collection actions in connection with the deductible.

Medical hardship assistance is available to patients who do not qualify for full or partial free care. This category of relief is targeted to families with incomes above 400% of FPG who’ve incurred medical bills in amounts that threaten family financial stability. To qualify for medical hardship assistance, family medical bills must exceed 25% of family income for the calendar year, and family assets must be insufficient to cover the amount. Thus, in contrast to eligibility requirements for full or partial free care, an asset test is used in determining eligibility for medical hardship assistance. This is because there’s a greater likelihood that other assets are available at the higher income levels that trigger eligibility for medical hardship assistance. In order, however, to ensure that a family is left with some cushion, certain assets are excluded. For example, the primary home and primary motor vehicle are excluded. Burial contracts and a certain amount of life insurance and retirement assets are excluded.  Finally, there is a general exclusion for $4,000 of other assets for an individual, $6,000 for a two-person family, and $1,500 of other assets for each additional family member.

Eligibility is determined through a two-step process. First, the hospital determines whether medical bills exceed 25% of family income.  If they do, then family assets – with some exclusions -- are evaluated. If available assets cover the “gap” between a family’s medical bills and 25% of family income, then medical hardship assistance is not available.  If a gap remains, then medical hardship assistance is available to the extent of the gap.

Just as there is a deductible for families that qualify for partial free care, there is a medical hardship assistance contribution.  The medical hardship contribution is equal to 25% of the patient’s family income plus any available assets. The family is not required to pay hospital expenses beyond this amount. The following example illustrates the eligibility determination process for medical hardship assistance:

Mr. and Mrs. Smith and their 10-year old son do not have health insurance.  Mrs. Smith has breast cancer.

The family income is $70,000, which is above 400% FPG (or $68,680).

Medical bills for Mrs. Smith’s treatment during the calendar year are $20,000.

Do medical bills exceed 25% of family income?  Yes -- $70,000 x 25% = $17,500.

Excess medical expenses = $2,500 ($20,000 - $17,500 = $2,500)

Are there available assets? Yes -- $8,000 in the son’s college savings account.

Are any of those savings excluded in the calculation? Yes.  The law excludes $7,500 of the $8,000.

Available assets = $500.

Do available assets ($500) exceed the excess medical expenses ($2,500)? No.

The family is eligible for medical hardship assistance of $2,500. 

This section is intended to provide some degree of financial protection to families that are ineligible for any category of free care but who nevertheless are faced with substantial hospital bills. It provides that families with incomes up to 500% of FPG shall be billed by the hospital at cost, not at the hospital's charges. This provision addresses the often substantial difference between hospital costs and hospital charges that is described above. An alternative to billing at cost might be to bill at the lowest rate charged by the hospital to public and private purchasers, although this rate could be higher than the hospital's cost. Eligibility for this favorable billing treatment is capped because there may be uninsured or underinsured people who have substantial resources who can afford to pay charges.

This section outlines the process hospitals must use to identify those eligible for free care.

When a patient presents for hospital care and either requests free care or otherwise indicates that he or she is uninsured or underinsured, the hospital must screen the person to see if he or she either qualifies for – or is already enrolled in -- any type of public or private coverage program. This section places an affirmative duty on the hospital to identify other potential coverage sources once it has any information that a patient may require assistance. Both recent media coverage and the experience of community members who participated in monitoring local hospitals suggest that hospitals often don’t do any sort of screening. The result has been that many uninsured and underinsured people don’t find out they may be eligible for assistance until they are well into --- or even after -- the collection process. And sometimes it turns out that an individual is already enrolled in a coverage program although he or she may not realize that.

If the hospital determines that a patient may be eligible for some other coverage program, it is required to encourage the patient to apply, and it is required to assist the patient in the application process.  However a refusal on the part of a patient to apply for another coverage program does not disqualify the person from applying for – or receiving – free care if otherwise eligible. This is because people sometimes have legitimate concerns (e.g. immigration status, privacy concerns related to domestic violence, etc.) about the application process for government programs.

A goal of the Act is to make the free care application process uniform across all hospitals. An important aspect of that is to require hospitals to use a standard application form developed by the administering agency. And because of rapidly changing demographics, it is important that the application form be available in languages that are spoken by substantial numbers of people in the state. It is more efficient for the state agency to undertake this task than for each individual hospital to do so.

The administering agency is also responsible for specifying the forms of documentation that applicants need to verify state residency, income, and, for purposes of medical hardship assistance, family assets. The Act provides, however, that documentation requirements shall not function as a barrier to free care.  Thus when no other documentation is available, the agency shall require hospitals to accept affidavits from the applicant.  In addition, applicants for free care are not required to provide social security numbers. This provision is included to ensure that undocumented immigrants are not deterred from seeking necessary medical care. The section requires hospitals to make free care eligibility determinations no more than 14 days after they receive a completed application.   The time frame reflects an attempt to balance the administrative demands on hospitals with the need of the patient to know that he or she has a safety net. Once a person or family is approved for free care, eligibility extends for one year from the effective date, unless there are changes to family income or insurance status which would make the person or family ineligible.

The purpose of this section is to preserve the right of hospitals to pursue payment for their services where appropriate, while at the same time protecting health care consumers from certain types of collection practices.

A “collection action” is defined broadly to include any activity undertaken by a hospital, an agent of a hospital, or a purchaser of patient accounts. In some cases hospitals have claimed that they had no control over certain collection tactics because they were undertaken by outside attorneys retained by the hospital, or by outside collection agencies to which the hospital sold the account. The Act’s broad definition of collection activity makes it clear that a hospital can’t evade accountability in that way.

The financial consequences of some hospital billing and collection practices on individuals and families have been well-documented. This section sets minimum standards for hospital collection policies, and it requires that each hospital make its policy available to the public. It also requires hospitals to ensure that the same collection policy standards are adopted by any entity the hospital contracts with, sells an account to, or otherwise utilizes in the collection process.

Some of the media stories on hospital collection practices suggest that hospital leadership often is unaware of the types of collection activities its own facilities are engaged in. This section of the Act is intended to address that information gap by requiring governing board participation in some collection-related matters. This ensures accountability at the highest levels of hospital leadership and governance. For example, hospital governing boards are required to review and approve collection policies as well as the hiring of outside collection agents. In addition, the governing board's express approval is required for some of the more financially harmful types of collection actions. They include: any action to place a lien on or foreclose on property, any wage garnishment, and any attachment of a bank account or other personal property belonging to the patient or the person who is responsible for a patient's bill.

This section also requires that notices of collection actions be provided in languages that are spoken by significant numbers of people who live within the hospital’s service area. It is important to ensure that non-English speaking individuals and families who owe a hospital money are aware of what is happening and are able to seek financial assistance or negotiate a reasonable payment plan before the collection process has gone too far.

The section exempts from collection actions individuals who are eligible for government assistance or free care, and those who have pending applications for the same. And if a collection action is initiated and the person subsequently is found to be eligible for free care, the hospital is required to refund any money the individual may already have paid. It must also take immediate steps to correct any adverse information reported to a credit rating agency.

Finally, this section addresses bill payment plans. A persistent problem reported by those who owe hospitals money is pressure from the hospital to enter into payment arrangements that are unrealistic in light of income and expenses. Often this pressure is applied before the hospital has made any determination regarding eligibility for financial assistance. Sometimes, however, it is applied after eligibility is clear. This section provides that a hospital may offer payment plans only after it has determined that an individual is not eligible for free care. It also requires hospitals to enter into reasonable payment arrangements; i.e. arrangements that take into account the patient’s income and other financial obligations. Interest rates on payment plans are limited to 3% per annum or the Consumer Price Index, whichever is lower. The limit on interest rates reflects the fact that medical bills are a special type of consumer debt. Generally, people get sick or need medical treatment through no fault of their own. They should not be charged exorbitant interest rates for debts they don’t undertake voluntarily. Finally, hospitals are required to provide general information on the difference between the interest rate it charges in connection with a payment plan and the rate charged by credit care companies and banks that finance consumer debt.Hospitals increasingly are encouraging people to put their hospital bills on their credit cards. The hospital receives its payment promptly, but the consumer sees his or her medical debt expand very quickly. This provision is intended to let consumers make informed decisions with respect to bill payment method.

This section specifies a patient's rights and corresponding responsibilities in connection with requests for financial assistance.

While patients have a right to expect certain hospital actions, there also are reciprocal responsibilities which reflect, in part, the need to ensure that free care resources are targeted appropriately. For example, it is the patient’s responsibility to provide all necessary documentation and to inform the hospital of any change in income or coverage status.

This section provides a mechanisms for appealing a hospital's decision to deny financial assistance.

An appeal process is necessary because the consequences of medical debt can be devastating to individual and family well-being. In this two step process, the first forum is the Department. Complaints need to be in writing, and hospital responses must also be in writing. The Department has the authority – based on the information provided to it by the parties – to uphold, reverse, or modify a hospital decision on a free care application. If either party is unhappy with the Department’s determination, it can appeal the decision to court through the state’s administrative procedures act.

The goal of this section is to ensure not only that patients have meaningful opportunities at multiple points along the admission, treatment, billing and collection continuum to learn about and apply for free care but also that the information is available to the public at large.

Two persistent problems identified by community organizations that monitored local hospitals are (1) the failure of hospitals to publicize the availability of free care, and (2) the failure of hospitals to train staff to provide information and assistance with respect to the hospital's free care policies and procedures. Finally, this section also requires hospitals to publicize the availability of free care within the broader community. Because research suggests that some people avoid seeking care altogether if they think they will incur medical debt, it is important to publicize the availability of free care outside of the hospital since some people may never make it through the hospital doors in the first place.

This section requires regular training on free care policies to those members of the hospital staff who interact with patients in the admission and billing process.

As noted above, the experiences of community organizations that monitor local hospitals suggest that some hospital staffers are unaware of the details of their hospital’s free care policy and procedures, or are not even aware that their hospital has a free care policy. As a result, people accessing hospital services might be miscategorized as ineligible for free care. Additionally, upon receiving this incorrect information, some eligible people might avoid seeking care altogether so that they will not incur medical debt.

This section requires hospitals to report certain data to the agency that administers the Free Care Act.

The data reported by hospitals allow the agency to assess individual hospital compliance with the Act. They also allow the agency to identify any patterns in hospital action on free care applications that might suggest the existence of inappropriate barriers or improper diversion of uninsured and underinsured patients. Moreover, the data will allow for meaningful comparisons of the provision of free care among hospitals.  For example, it requires hospitals to differentiate between free care and bad debt and to report both of those figures at cost – as opposed to charges. It also requires them to report the sum of their net patient service revenue plus investment income. When the Department compares the amount of free care provided to this latter figure and reports the data as it is required to do in the section on regulatory oversight, it will be possible for the public to get a sense of each hospital’s free care performance relative to its revenue. This will allow for an “apples to apples” comparison among hospitals.

Bad debt should be distinguished – and reported separately – from free care. Bad debt is money owed for hospital services that the hospital expects to receive but which are never paid, typically after collection efforts have been made. A persistent difficulty in assessing hospital free care performance has been the hospital industry practice of combining free care and bad debt and reporting it as uncompensated care. This figure is then used as a proxy for hospital commitment to the underserved. In fact, most bad debt results from unpaid insurance claims rather than bills owed by individuals, so the uncompensated care figure may more accurately gauge the inefficiency of a hospital’s collection efforts with regard to third-party payers. More to the point, though, is that if the amount owed by an individual is characterized as bad debt, collection activities will follow.  

In contrast to bad debt, free care is care that an individual qualifies for based on institutional or statutory eligibility standards. The hospital does not bill patients when it determines they meet the eligibility standards.

The reporting requirements are also intended to elicit information from hospitals on the amount of funds they receive – or otherwise have access to – for the purpose of subsidizing their free care expenses.Specifically, hospitals are required to report the amount of funds they receive through the federal Medicare and Medicaid “disproportionate share hospital” programs, which are programs that provide additional funds to hospitals that serve significant numbers of low-income patients. Hospitals are also required to report information on the amount of philanthropic funds – called “hospital bed funds” in some places – that are earmarked to defray the hospital expenses of patients who don't have the resources to pay their hospital bills.

Finally, the data provided by hospitals has valuable ancillary uses. It could, for example, inform policymakers about the health access environment in the state.If free care expenses are significant, it might suggest that the state’s Medicaid program is too limited, or that there are insufficient primary care sites.

This section outlines the duties of the agency charged with administration and enforcement of the Act.

A critical issue identified through the free care monitoring work and by other advocates is the lack of easily interpreted public information on hospital free care performance. Thus in addition to ensuring overall compliance with the Act, a critical agency function is to issue an annual report that specifies the amount of free care provided in the prior year by each hospital, in a way that allows for the comparison among hospitals described above. With the exception of a few states that impose community benefit reporting requirements, hospitals typically have not been compelled to provide free care information in a manner or format that is easy for the public to make sense of. This section addresses that critical shortcoming. A potential result of making this information publicly available is the establishment of a dialogue between the hospitals and their communities on free care and other local health access concerns. This kind of engagement offers the opportunity for each side to identify issues of importance and concern, and provides a mechanism for the groups to work together toward solutions that are mutually beneficial.

Hospitals generally are required to report both free care and bad debt at cost. This is intended to ensure that the data is not inflated, which could result in a misleading picture of hospital commitment to the underserved.

Finally, although the Act assigns oversight responsibility to the department of health (“the Department”) or its equivalent, a drafter should determine whether this is the appropriate agency within his or her own state’s government agency structure.

This section provides the agency with powers to impose penalties on a hospital for failure to comply with the provisions of the Act.

This section provides the administering agency with some clout in ensuring hospital compliance with the Act's provisions. If a hospital refuses to comply with provisions of the Act, the administering agency may impose a monetary penalty of not less than $1,000 for each failure to comply.

This section provides a remedy to individuals and families that suffer harm as a result of a hospital’s failure to comply with a provision of the Act.

There is substantial documentation of the harm – both medical and financial -- that low- and moderate income individuals and families can suffer when free care is not readily available. This section is intended to serve as an additional incentive for hospital compliance with the Act as well as a form of redress for individuals who suffer harm that is attributable to non-compliance.