Maryland Breaks Ground With New Hospital Debt-Collection Measure

Maryland is poised to become the first state to require hospitals to report publicly on debt-collection lawsuits they file against their patients and to curtail wage garnishments for some who don’t pay their medical bills.

The Maryland legislature sent a bill Thursday to Gov. Larry Hogan (R) that consumer advocates say will push hospitals to offer free or reduced-cost care to more people who qualify. The legislation is a good first step, but more could’ve been done, backers say.

“This is going to be a big step toward highlighting who hospitals chose to sue and why we can do more,” Lindsey Muniak, a spokeswoman for End Medical Debt Maryland, said.

Lawmakers in several states and Congress are eyeing aggressive debt collecting by hospitals, some of which are nonprofits that get tax breaks for serving their communities. However, hospitals are powerful in states such as Maryland, where they’re among the largest employers and top campaign donors.

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Maryland Gov. Larry Hogan departs a news briefing in Annapolis on April 17, 2020.

The Maryland legislation would prohibit wage garnishments for medical debts of anyone who should have qualified for free or reduced-cost care but didn’t receive it. The measure also would ban liens on homes to collect medical debts. It would require hospitals to report annually on the total number of patients they sue to collect outstanding debts, and to provide demographic data about the patients.

The measure aims to curb the practice of hospitals trying to collect debts from low-income patients who should get free care under state law.

The Maryland Health Services Cost Review Commission reported in February that 60% of hospital charges that went unpaid in the state were attributed to patients earning less than twice the federal poverty level who should have received free care, indicating that hospitals are charging full freight instead of offering charity care.

Hospitals can write off uncollected debts, and large amounts of debt and uncompensated care can increase the rates they’re allowed to charge under Maryland’s unique hospital rate-setting system.

Bill Evolution

The original bill introduced by State Sen. Brian Feldman (D) included a ban on lawsuits to collect hospital debts under $1,000. After that and other provisions were stripped out, Republicans such as State Sen. Stephen Hershey signed on as sponsors. The measure passed both chambers of the legislature unanimously.

That support fueled expectations Hogan would sign the bill into law. Hogan’s office doesn’t comment on bills until they reach his desk, according to a spokesperson.

Lawmakers backing the changes say they wanted to take a measured approach that would ensure hospitals offer charity care to those who are eligible rather than banning some lawsuits entirely, which could stymie hospitals’ ability to collect unpaid bills.

Lawmakers on the Maryland House Health and Government Operations Committee “ultimately felt like that was opening a door for someone who could pay not to pay and we should not open that door,” Del. Bonnie Cullison (D), who helped steer the legislation, said in an interview Wednesday.

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“We’re really pleased Maryland is taking these first steps and it’s stronger than anywhere in the country, but at the same time we’re going to be pushing for additional protections next year,” Marceline White, executive director of the Maryland Consumer Rights Coalition, said in an interview. Her group still wants a ban on lawsuits for less than $1,000 in debt.

Hospital Influence

The Maryland Hospital Association initially opposed the bill, but withdrew its opposition after the changes were made. The group appreciated that lawmakers were able to “work to achieve a balanced approach that met our shared goal of supporting patients and preventing unintended adverse consequences,” said Nicole Stallings, the group’s senior vice president of government affairs and policy.

Hospitals are influential in Maryland, ranking among the top in state lobbying spending.

The Maryland Hospital Association spent more than $435,000 on lobbying last year, state records show. Johns Hopkins, the largest hospital system in the state, spent almost $580,000 lobbying last year. MedStar Health, a large not-for-profit health system, spent $335,000 on lobbying last year.

To contact the reporter on this story: Alex Ruoff in Washington at aruoff@bgov.com

To contact the editors responsible for this story: Robin Meszoly at rmeszoly@bgov.com; Sarah Babbage at sbabbage@bgov.com