New Illinois Law Could Benefit Medical Debt Recoveries for State Hospitals

While federal lawmakers and advocacy groups battle next year over the best way to reform the nation’s health care system, many of Illinois’ uninsured residents will take comfort in knowing that an unexpected hospital bill doesn’t have to leave them financially crippled.

Thanks to a new state law known as the Hospital Uninsured Patient Discount Act, come January some Illinois hospitals will begin capping out of pocket payments at 35 percent above the cost of care for uninsured patients. Uninsured urban residents with an annual household income of up to 600 percent of the federal poverty level (FPL) will be eligible for the discount, as will rural residents with an annual household income up to 300 percent of (FPL).  Maximum payments to a hospital in a single year will be capped at 25 percent of annual gross income.   

By default, the new law will likely slash the amount of bad debt expense Illinois hospitals report or slow the rate of bad debt growth in the state, said Jeff Schaub, senior director of Fitch Ratings public finance health care group. That’s because uninsured patients, who account for the majority of hospital’s bad debt expense, could face sharply lower bill balances. The psychological boost of a lower bill could improve the hospital’s medical debt recoveries, he said.

Bettina French, the Illinois Hospital Association’s director of communications, agreed.  “Its adds some dignity to the plight of the uninsured that they’re not getting stuck with a bill they can’t pay at all,” French said.
 
Ironically, the law was almost derailed when Illinois Governor Rod Blagojevich amended the bill to raise the FPL levels that qualify for the discount. (“Illinois’ Effort to Limit Uninsured Health Care Expenses Halted by Governor’s Amendments,” Sept.  16). State lawmakers in both chambers, however, unanimously overrode Blagojevich’s amendments.  

Although a handful of states allow access to insurance discount pricing, no other state law goes as far in limiting hospital charges and annual patient payment caps, said Laura Tobler, health care policy expert with the National Conference of State Legislatures.

The Illinois law will help an uninsured family of four with an annual household of up to $127,000, the IHA said. And it requires all hospitals to offer the discount by April 1.

IHA spokesman Danny Chun, said the law, however, only applies to hospitals, not preventative care at a doctor’s office.   

“(The law) is not going to solve the uninsured problem in Illinois,” Chun said “But if someone is hesitant to go to the emergency room because they couldn’t afford the bill, now they have some certainty about what to expect to pay.”

Although Chun called Illinois’ new legislation groundbreaking, he’s not expecting it will be copied nationally by lawmakers looking to reform the health care system.
 
“While the Illinois law is a landmark law, it’s incremental,” Chun said. “These guys (on Capitol Hill) are talking about big changes, major reform.”