The Chief Judge of the Court of Appeals and the State of New York, Hon. Rowan D. Wilson, held a statewide public hearing on September 18, 2023, to evaluate the continuing unmet civil legal services needs in New York and to assess the level of resources necessary to meet those needs. NYHealth submitted the following testimony on protecting New Yorkers from medical debt:
To the Honorable Chief Judge Wilson, Chief Administrative Judge Zayas, Justices of the Appellate Division, and esteemed members of the New York State judicial community, my name is David Sandman, Ph.D., President and CEO of the New York Health Foundation (NYHealth). I appreciate the opportunity to provide testimony on protecting New Yorkers from medical debt, the vital role of civil legal services in doing so, and further necessary reforms.
NYHealth is a private, independent, statewide foundation dedicated to improving the health of all New Yorkers, especially people of color and others who have been historically marginalized. Protecting New Yorkers from medical debt has been a signature area of attention.
NYHealth and our grantees and partners have galvanized policy changes that resulted in hard-won consumer protections. I encourage members of the Courts and judicial community to explore the work of these organizations, including the Volunteer Lawyers Project of Central New York’s (VLPCNY) direct legal assistance and education; the End Medical Debt in New York organizing campaign spearheaded by the Public Policy and Education Fund; the Community Service Society of New York’s (CSS) patient storytelling initiative and medical debt lawsuit research; and the Health Care for All New York Coalition’s advocacy for consumer protections.
Medical Debt is a Crushing Burden for New Yorkers
Medical debt has sometimes been described as a “uniquely American injustice.”[1] No one should go into medical debt or financial ruin because of illness, injury, or disease. Yet, medical debt is the most common form of consumer debt and the leading cause of personal bankruptcy in the United States.[2],[3] A 2022 report by the Consumer Financial Protection Bureau (CFPB) found that Americans have $88 billion in medical debt in collections.[4] This is not just a crisis for those who are uninsured; another CFPB report found that 4 million adults ages 65 and older had unpaid medical bills, even though 98% had health insurance coverage.[5]
Medical debt threatens financial security and prevents individuals from building credit, securing housing and employment, and affording food and medical care. A recent survey found that more than half of New Yorkers struggle to pay medical bills.[6] Based on credit reports as of February 2022, an estimated 740,000 New Yorkers were put into collections over medical bills; nearly half of them owed more than $500.[7] This means that nearly half of New Yorkers with medical debt will still have medical debt appear on their credit reports, following a change in credit reporting practices by the three major credit reporting agencies to exclude medical debts below $500 on credit reports.[8]
To collect medical debt, more than 53,000 lawsuits were filed against patients by hospitals across New York State between 2015 and 2020, including 4,000 during the height of the COVID-19 pandemic. [9],[10] CSS analyses of civil court cases in all counties of New York State found that some judgments resulted in property liens or wage garnishment. Liens were placed on individuals’ homes in nearly 5,000 judgments in just two years, and wages were garnished more than 1,600 times by five hospitals alone.[11],[12] These extreme collection practices occurred disproportionately in low-income communities.
Medical Debt Disproportionately Harms Marginalized New Yorkers
The Urban Institute, with NYHealth’s support, analyzed a representative sample of credit reports to create a deeper understanding of the impact of medical debt on New Yorkers. The analysis uncovered widespread disparities in medical debt by region, race/ethnicity, income, and other factors throughout New York State.[13] The shares of consumers with medical debt ranged from 3% on Long Island and 4% in New York City to more than 10% in the Southern Tier, North Country, Mohawk Valley, and Central New York.
The highest rates of medical debt within regions were typically found in communities of color and lower income communities. For instance, in Central New York, 28% of patients in communities of color had medical debt in collections, compared with 12% in predominantly white communities. Communities of color also often owed medical debt in greater amounts. In the Capital District, for example, communities of color had a median medical debt of $899—two times the median amount in predominantly white communities in the region ($448).
New York State Has Advanced Consumer Protections from Medical Debt
New York State has been a national leader with policies that protect consumers from unfair practices related to medical debt. Consumer protections secured in recent years include:
- Reducing the statute of limitations for medical debt lawsuits from six to three years ((N.Y.C.P.L.R. §213-d (2020));
- Lowering maximum interest rates on consumer debt (including medical debt) from nine to two percent ((N.Y.C.P.L.R. §5004 (2021));
- Prohibiting liens and wage garnishment as means of medical debt collection ((N.Y.C.P.L.R. §§ 5201; 5231 (2022));
- Banning hospital facility fees for preventive care and requiring advance notice to consumers for instances in which fees will be charged ((N.Y. Pub. Health L. §2830 (2022));
- Requiring hospitals to use a uniform application to make it easier for patients to apply for financial assistance for medical bills ((N.Y. Pub. Health L. §2807-k(9) (2023)); and
- Closing a loophole in the State’s surprise billing law to cover emergency services (N.Y. Fin. Servs. L §606).
In June 2023, both houses of the New York State legislature passed bills (S4907A/A6275A) to prohibit credit agencies from including medical debt of any amount on credit reports. The bills await Governor Hochul’s signature; New York would be the second state, after Colorado, to enact such a policy.[14]
Greater Support for Civil Legal Services Will Help New Yorkers Avail Themselves of Newly Secured Consumer Protections
These laudable policies will realize their full potential on the ground. To make the most of this progress, New York should continue and expand support for civil legal services organizations. People burdened by medical debt require help to avail themselves of new consumer protections.
VLPCNY illustrates the importance of such services. As the largest provider of pro bono legal services in Central New York, it has developed a specialization in medical debt and has an attorney with dedicated expertise in medical debt. As examples of its impact, VLPCNY has:
- Assisted clients in disputing medical debt collections of approximately $90,000.
- Provided on-site legal education and assistance at local patient town halls.
- Conducted trainings reaching nearly 150 consumers, legal professionals and students, health and human service professionals, and financial counselors throughout Central New York regarding consumers’ legal rights and recent changes in State law.
- Created plain-language client educational materials on topics including answering a judgment; understanding prohibited collection practices and maximum judgment amounts; understanding medical debt credit reporting practices; and disputing bills and seeking financial assistance.
- Educated State policymakers about the real-life issues New Yorkers face when dealing with medical debt.
Enhanced support will enable civil legal services groups to conduct education and advocacy that supports legal professionals, judges, and policymakers in enforcing new protections and advancing additional protections.
Further Reforms Are Needed
New York has led the way on consumer protections from medical debt, but the work is far from complete. The Courts play a central role in ensuring that the new consumer protections are enforced when presiding over suits brought against patients. The Courts and the State should also consider procedural reforms, including:
- Requiring that the summons or initial filing from a hospital contains a statement that the hospital has screened the patient for eligibility for hospital financial assistance and provided that information to the patient prior to filing suit.
- Ensuring defendants understand the proceedings and their rights. For instance, the Courts could promulgate a plain-language summons (as well as additional notice prior to default) that provides clear and understandable information about the proceedings and lists available resources for legal and other assistance.
- Creating a specialized part to preside over medical debt proceedings in a centralized docket.
- Improving documentation of medical debt cases to monitor trends.
- Restricting legal action from being brought against patients for medical debt, as three other states have done. [15]
Thank you for the opportunity to provide testimony on progress and unmet needs in protecting consumers from medical debt and the vital role of civil legal services. If you have additional questions, please reach out to Ali Foti, program officer, at foti@nyhealthfoundation.org or (212) 584-5659.
[1] RIP Medical Debt, “RIP Medical Debt,” https://ripmedicaldebt.org/about/, accessed September 2023.
[2] Consumer Financial Protection Bureau. (2022). “Medical Debt Burden in the United States”. https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.
[3] Himmelstein, DU.; Lawless, R.D.; Thorne, D.; Foohey, P; Woolhandler, S. (2019). Medical Bankruptcy: Still Common Despite the Affordable Care Act. American Journal of Public Health. 109(3), 431–433. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6366487/.
[4] Consumer Financial Protection Bureau, “Medical Debt Burden in the United States”. https://files.consumerfinance.gov/f/documents/cfpb_medical-debt-burden-in-the-united-states_report_2022-03.pdf.
[5] Consumer Financial Protection Bureau, “Medical Billing and Collections Among Older Americans,” https://www.consumerfinance.gov/data-research/research-reports/issue-spotlight-medical-billing-and-collections-among-older-americans/full-report/.
[6] Community Service Society, “Financial Hardship, Avoiding Care: Results from a Statewide Survey,” https://www.cssny.org/news/entry/financial-hardship-avoiding-care-healthcare-affordability-survey, accessed September 2023.
[7] Urban Institute, “Medical Debt in New York State and Its Unequal Burden across Communities,” https://nyhealthfoundation.org/resource/medical-debt-in-nys-and-unequal-burden-across-communities-report/, accessed September 2023.
[8] Consumer Financial Protection Bureau, “Consumer Credit and the Removal of Medical Collections from Credit Reports,” https://www.consumerfinance.gov/data-research/research-reports/consumer-credit-and-the-removal-of-medical-collections-from-credit-reports/, accessed September 2023.
[9] Community Service Society, “Discharged into Debt: New York’s Nonprofit Hospitals are Suring Patients,” https://www.cssny.org/publications/entry/discharged-into-debt, accessed September 2023.
[10] Community Service Society, “Discharged into Debt: A Pandemic Update.” https://www.cssny.org/publications/entry/discharged-into-debt-a-pandemic-update, accessed September 2023.
[11] Community Service Society, “Discharged into Debt: Nonprofit Hospitals File Liens on Patients’ Homes,” https://www.cssny.org/publications/entry/discharged-into-debt-nonprofit-hospitals-file-liens-on-patients-homes, accessed September 2023.
[12] Community Service Society, “Discharged into Debt: New York’s Nonprofit Hospitals Garnish Patients’ Wages,” https://www.cssny.org/publications/entry/discharged-into-debt-new-yorks-nonprofit-hospitals-garnish-patients-wages, accessed September 2023.
[13] Urban Institute, “Medical Debt in New York State and Its Unequal Burden across Communities,” https://nyhealthfoundation.org/resource/medical-debt-in-nys-and-unequal-burden-across-communities-report/, accessed September 2023.
[14] Kona M; Raimugia V. “State Protections Against Medical Debt: A Look at Policies Across the U.S.,” Commonwealth Fund, https://www.commonwealthfund.org/publications/fund-reports/2023/sep/state-protections-medical-debt-policies-across-us, accessed September 2023.
[15] Kona M; Raimugia V. “State Protections Against Medical Debt: A Look at Policies Across the U.S.,” Commonwealth Fund, https://www.commonwealthfund.org/publications/fund-reports/2023/sep/state-protections-medical-debt-policies-across-us, accessed September 2023.
