Though NM outlawed the practice, hospitals are still suing folks with low incomes to collect debt

Even after New Mexico made it illegal for hospitals to send collectors after people with low incomes who owe them money or to sue patients to collect medical debt, a review of court records finds that hospitals or their collection agencies have filed more than 700 lawsuits trying to do exactly that.

Over 200,000 New Mexicans are uninsured, which makes them more likely to incur significant debt when they need medical care, said Nicolas Cordova, health care director at the Center on Law and Poverty.

The Consumer Financial Protection Bureau found that 17.94% of New Mexico’s population has medical debt, and the average amount owed is $2,692.

And about 40% of New Mexico’s nonprofit hospitals have uncollectible debt linked to patients who would probably qualify for those hospitals’ financial assistance programs, according to IRS data.

Lawmakers passed and Gov. Michelle Lujan Grisham signed the Patients’ Debt Collection Protection Act in 2021, which limits aggressive collection efforts like referring patients to private collection companies, taking them to court or reporting them to their creditors.

Even after the law went into effect, there have still been over 700 medical debt lawsuits filed, according to data presented to the Legislative Health and Human Services Committee on Tuesday.

The New Mexico Center on Law and Poverty reviewed court dockets and found these lawsuits are being filed mostly by Las Cruces Medical Center, Carlsbad Medical Center, the Credit Bureau of Farmington, Lea Regional Hospital and the Otero County Hospital Association.

Patients have filed two class-action lawsuits to enforce their rights under the new law, Cordova told the committee.

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When it was still a bill making its way through the Legislature, an earlier version of the Patients’ Debt Collection Protection Act contained language that would have prohibited hospitals from charging uninsured patients more than patients with insurance for the same services, but it was taken out of the bill before final passage, Cordova said.

The law also requires the state Human Services Department to collect information from hospitals showing how they use indigent care money given to them by state and county governments meant to cover medical bills that patients with low incomes can’t pay.

“That process has not begun,” Cordova said.

Disproportionate burden on the uninsured

Even though the Legislature passed the patients’ debt law, lawmakers have “not yet gone further to address hospital pricing at the outset,” writes Fred Hyde, an independent health finance consultant hired by the N.M. Center on Law and Poverty.

New Mexico hospitals frequently charged uninsured patients more than they charge private insurance carriers and government health plans for the same services, according to a report by Hyde that was commissioned by the Center on Law and Poverty.

When hospitals charge uninsured patients more for health care, this inevitably leads to medical debt, Hyde wrote, which is the leading cause of personal bankruptcy in the U.S.

Some hospitals charge rates similar to what Medicaid pays, while others charge “eight to 10 times that rate for the same service or procedure,” the report states.

“In general, uninsured patients are frequently charged more than commercial insurance carriers and government health plans for the same services in New Mexico’s hospitals,” Hyde’s research showed. “The charges are not uniform or predictable, and there is extraordinary variability between the charges of each hospital.”

Hyde looked at services provided by 43 hospitals in New Mexico:

• Heart procedure
• Removal of an appendix
• CT scan of the head or brain
• Chest X-ray
• Basic and comprehensive blood panels
• Heart test
• Emergency-room visits

The average payment by a private insurer for a CT scan of the head was about $961, while the average list price was nearly twice as high, around $1,868. But the payment from an uninsured person sometimes reached more than four times the price paid by a private insurer, Hyde found.

Part of the reason people’s medical debts are so high is because hospitals have historically used their “chargemaster” rates when they send a bill to uninsured people, Hyde wrote.

Hospitals automatically charge uninsured patients the full list prices from the chargemaster, while private insurance companies and government plans negotiate with hospitals for much lower bills, Hyde wrote.

Some hospitals offer discounts to uninsured patients. But the calculation they use to reach the “discounted” price frequently begins with the highest possible price, Hyde wrote.

“The discounted amounts charged to the uninsured almost always exceed the payments which hospitals have agreed to accept from commercial health insurers,” Hyde wrote. “As a result, a disproportionate burden of out-of-pocket payment for hospitals’ services falls on the uninsured or under-insured patient.”