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Health care reform; a help or a hinder for those with debt?

One provision of the recent health care reform law recently passed by Congress under the Affordable Care Act may help citizens of New Jersey who are already struggling to pay their debts. The new rules would bar tax-exempt, nonprofit, charitable hospitals from using aggressive collection tactics on the poorest patients who are unable to pay their medical debt.

The new provisions will apply to nearly 60 percent of the country’s medical facilities and greatly benefit patients already struggling with paying their mortgage or rent, paying off liens and trying to forgo declaring personal bankruptcy. The new law would prohibit not-for-profit hospitals from reporting delinquent bills to any credit reporting agencies. When that happens, an individual’s credit scores get lowered and they are penalized with rippling effects of higher interest rates on credit cards, mortgages and other loans.

According to the new provisions, here are some of the things that tax-exempt hospitals may not be allowed to do in the future to patients receiving financial assistance:

  • Send negative information to credit reporting agencies
  • Put a lien on a patient’s property
  • Initiate foreclosure proceedings
  • Seize bank accounts or garnish wages

The new rules also insist that tax-exempt hospitals provide free or reduced-cost medical care to patients on a sliding-scale fee based on patient income. Unfortunately, the American Hospital Association does not particularly like the new proposed rules and intends on responding during this fall’s public comment period. The AHA feels that the provisions are too specific and do not allow non-profit hospitals to serve their individual communities in unique ways.

Source:, “IRS to Tax-Exempt Hospitals: Go Easier on Medical Debt Collection,” Connie Prater, July 5, 2012

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