Hochul’s budget would stop Upstate hospital from suing thousands of poor patients each year

Upstate Hospital

Upstate Medical University in Syracuse has sued more than 4,000 patients over unpaid medical bills since the coronavirus pandemic began in 2020, court records show.Michael Greenlar | mgreenlar@syr

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Albany, NY -- Gov. Kathy Hochul is planning to strike down a decades-old policy that compels state-owned hospitals, including Upstate Medical University in Syracuse, to sue thousands of residents each year over medical debt.

The governor’s proposal comes after a Syracuse.com | The Post-Standard investigation last month exposed how state hospitals were responsible for nearly 75% of medical debt lawsuits filed by hospitals statewide in 2022. It’s a system that is rarely effective, preys upon the poor and runs counter to what many hospitals across the country do.

Before scrapping the state policy, however, Hochul wants the legislature to pass a replacement during the budget process. Her proposal would ban any hospital in the state from suing low- and middle-income patients over medical debt, a governor’s spokesman said.

Once the replacement is in place, Hochul would use her executive power to align the state hospitals’ lawsuit mandate to the new law. The timeframe for ending the current flow of lawsuits remains to be determined.

Hochul’s proposal would prohibit all hospitals -- state-owned or otherwise -- from suing anyone with an income under 400% of the poverty line. That’s $58,320 for a single person or $120,000 for a family of four.

Experts say that the vast majority of people who get sued over hospital bills are actually poor or middle class, genuinely unable to pay their debts. After all, medical care is typically a necessity, not a choice.

The proposal would not prevent hospitals from pursuing debt collections outside of court. That means that those with medical debt can still be hounded by debt collectors. However, Hochul recently signed legislation keeping medical debt off consumer credit reports, removing a barrier for people seeking a new job, house or consumer loan.

Her latest proposal does, though, extend the time to 180 days before hospitals can send unpaid bills into collections.

It also would prevent hospitals from selling the debt to third parties. That prevents debt collection companies from buying the debt in bundles and continuing aggressive collection efforts even longer.

The proposal would allow Good Samaritans to buy debt in order to forgive it, like the non-profit RIP Medical Debt does.

Hochul’s proposal would also allow people between 300% and 400% of the poverty line to qualify for financial aid on a sliding scale. And it would open financial aid to uninsured people who have medical costs greater than 10% of their gross annual income.

The changes are part of the Democrat’s $233 billion budget proposal, which she presented in Albany today. Lawmakers and the governor have until the end of March to negotiate a final spending deal; the state’s fiscal year starts April 1.

Hochul’s proposal also would make a major change to how a patient’s income is determined.

Before now, poor people often had to prove their low income to qualify for free care or financial aid. For example, Upstate University Hospital in Syracuse said that patients who filled out the proper forms were eligible for financial aid. Those who did not prove their inability to pay could be sued simply for not following the application process.

The new law would require the hospital to do its homework on the patient. After doing so, the hospital’s chief financial officer would have to file a sworn statement attesting that the patient’s income was not below 400% of the poverty line, the governor’s spokesman said. Hospitals that didn’t comply could risk losing millions in state aid funneled to hospitals who serve indigent patients.

Other provisions of the proposed law include:

  • Prohibiting hospitals from denying care anticipated to be medically necessary to patients with unpaid medical bills
  • Capping interest on medical debt at 2% per year
  • Capping monthly payment plans at 5% of a patient’s gross monthly income (down from 10% currently)

Court records show that state-run Upstate Medical University, which operates Upstate University and Community hospitals, has sued more than 4,000 patients since the coronavirus pandemic in 2020, while its private competitors in the city have not sued anyone since then, a syracuse.com | The Post-Standard investigation found last month.

In many cases, the patients are on limited incomes and are unable to pay the charges or even challenge the lawsuits. Nevertheless, the default judgments the state-run hospitals obtain against them can haunt the patients for years, making it difficult for them to obtain a mortgage, rent a home or obtain a job, and it can allow the state to intercept their tax refunds.

Other hospitals have curbed the lawsuits on their own.

Syracuse’s two private hospitals, St. Joseph’s Hospital Health Center and Crouse Hospital, haven’t sued anyone in nearly three years. The state’s largest healthcare system, Northwell Health, stopped suing people altogether during the pandemic.

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