Even though NM has banned the practice, hospitals are still suing for medical debt

Even after New Mexico hospitals were banned from sending collectors to low-income people who owe them money or suing patients to collect medical debts, a review of court records finds that hospitals or their collection agencies filed more than 700 lawsuits have to try to do just that.

About 200,000 New Mexicans are uninsured, making them more likely to incur significant debt if they need medical care, said Nicolas Cordova, director of health at the Center on Law and Poverty.

The Consumer Financial Protection Agency found that 17.94% of the New Mexico population has medical debt and the average amount owed is $2,692.

And about 40% of nonprofit hospitals in New Mexico have bad debts related to patients who would likely qualify for those hospitals’ financial assistance programs, according to to IRS data.

The legislature passed and Gov. Michelle Lujan Grisham signed it into law Patient Debt Protection Act in 2021, limiting aggressive collection efforts such as referring patients to private collection agencies, suing them in court, or reporting them to their creditors.

Even after the law went into effect, over 700 medical debt lawsuits were still being filed Data presented to the Legislative Health and Human Services Committee on Tuesday.

The New Mexico Center on Law and Poverty reviewed court records and found that these lawsuits are primarily being filed by Las Cruces Medical Center, Carlsbad Medical Center, the Credit Bureau of Farmington, Lea Regional Hospital and the Otero County Hospital Association.

Patients have filed two class-action lawsuits to enforce their rights under the new law, Cordova told the committee.

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When it was still a bill making its way through the legislature, an earlier version of the Patient Debt Collection Act contained language that would have prohibited hospitals from charging uninsured patients more than insured patients for the same services, but it was removed of the bill before final passage, Cordova said.

The law also requires the state Department of Human Services to collect information from hospitals showing how they use needy care funds made available to them by state and county governments to cover medical bills that low-income patients do not can pay.

“That process hasn’t started yet,” Cordova said.

Disproportionate burden on the uninsured

Although lawmakers passed the Patient Debt Act, lawmakers “haven’t gone any further to address hospital pricing from the start,” writes Fred Hyde, an independent healthcare finance consultant hired by the NM Center on Law and Poverty.

according to a Hospitals in New Mexico often charge uninsured patients more than private insurance carriers and state health plans for the same services report by Hyde commissioned by the Center on Law and Poverty.

When hospitals charge more for healthcare from uninsured patients, it inevitably leads to medical debt, Hyde wrote Main cause of personal bankruptcy in the USA

Some hospitals charge similar rates to Medicaid, while others charge “eight to 10 times that rate for the same service or procedure,” the report said.

“In general, uninsured patients are often billed more for the same services in New Mexico hospitals than commercial insurance carriers and state health plans,” Hyde’s research showed. “Fees are not uniform or predictable, and there are exceptional variations in fees between individual hospitals.”

Hyde examined the services of 43 hospitals in New Mexico:

  • cardiac procedure
  • Removal of an attachment
  • CT scan of the head or brain
  • chest x-ray
  • Simple and comprehensive blood tests
  • heart test
  • Visits to the emergency room

The average private insurer payment for a CT scan of the head was about $961, while the average list price was almost double that at about $1,868. But an uninsured person’s payment sometimes reached more than four times the price paid by a private insurer, Hyde noted.

Part of the reason people’s medical debt is so high is because hospitals have historically used their “chargemaster” rates when billing uninsured people, Hyde wrote.

Hospitals automatically charge uninsured patients the full fee master’s list prices, while private insurance companies and state plans negotiate with hospitals for much lower bills, Hyde wrote.

Some hospitals offer discounts to uninsured patients. But the calculation they use to arrive at the “discounted” price often starts with the highest possible price, Hyde wrote.

“The discounted amounts billed to the uninsured almost always exceed the payments hospitals have accepted from commercial health insurers,” Hyde wrote. “As a result, a disproportionate burden of out-of-pocket payment for hospital services falls on the uninsured or underinsured patient.”