Medical Debt and Seniors: How Consumer Law Can Help

Credit is an important money management tool for both young and older consumers. Yet the elderly, particularly older women, may find it difficult to get credit.

Americans are living longer, in part due to dramatic advances in medical care. One of the costs of longer life expectancies is that someone has to pay for this medical care. While access to quality medical care is essential for seniors and should be a universal right, it can leave them saddled with unmanageable medical debt. Consumer law remedies are critical in helping seniors avoid financial ruin due to overwhelming medical bills.

Medical debt issues are critical for many older Americans, especially low- and moderate-income seniors. One out of seven older Americans has reported that paying medical bills was either "very difficult" or used up all their savings.1 While many do have access to health insurance to pay for the bills, there are still gaps in the systems that burden seniors with substantial health care debt. Advocates representing elder clients with large medical bills should know that they have a range of powerful consumer tools at their disposal. There are a number of legal and non-legal strategies, including:

• Informal advocacy and negotiation.
• Finding outside sources of funds to pay the medical debt.
• Debt prioritization strategies.
• Bankruptcy.
• Potential affirmative claims under federal and state fair debt collection practices acts, state consumer protection acts, and other state laws.
• If the client is sued over a medical debt, raising consumer-related defenses.

This Consumer Concerns provides a quick overview of some of these strategies. It summarizes information available in the National Consumer Law Center's legal practice package entitled "In Sickness and In Debt: Using Consumer Law to Help Elders Facing Overwhelming Medical Bills." (2001). To order a copy of this publication, use the order form at the end of this Consumer Concerns, or call the National Consumer Law Center at 617-542-9595.

A. STRATEGIES FOR DEALING WITH MEDICAL BILLS BEFORE A CLIENT IS SUED

There are several ways to assist seniors facing medical debt who are not yet facing collections lawsuits, including

1. Informal Advocacy/Negotiation

Negotiating with hospitals or medical providers is an underutilized but often effective strategy in dealing with medical debt. Even a pre-litigation request to a hospital or medical provider for a reduction in the amount allegedly owed can lead to surprisingly good results. Hospital and providers' willingness to reduce bills is largely due to a phenomenon in health care pricing called "cost-shifting." Cost-shifting results when hospitals and other medical providers concede huge discounts to third-party payers such as HMOs and Medicare/Medicaid. Because of these discounts, the providers attempt to shift many of their costs onto the shoulders of "self-payers" (i.e., the uninsured or underinsured.)

The shocking consequence is that a medical provider/creditor may charge a low income, uninsured patient two or three times what it accepts as payment from private insurers. Practitioners should find out whether a medical creditor is engaged in cost-shifting, and if so, what discounts it is giving to various payers. This knowledge can be used to attempt to extract concessions for clients. )

Another avenue for informal advocacy is to use any appeals processes available to the client. For example, Medicare beneficiaries are statutorily entitled to an appeal process, whether they are in original Medicare or a Medicare HMO.2 Many states also have a managed care ombuds office to resolve disputes over HMO coverage. In addition, many HMOs have their own internal patient appeals processes.)

2. Find Other Sources To Pay The Bill)

Another effective method to deal with medical debt is to find someone else to pay for it. Be sure that your elderly client applies for any assistance programs to which she is entitled. This may include government or private programs, such as:)

• Insurance
• Medicaid
• Medicare Savings Programs (Qualified Medicare Beneficiary, Specified Low-Income Medicare Beneficiary and Qualified Individual Programs)
• Pharmacy Assistance Programs
• Charity Or "Free Care" Eligibility
• Other Charity Programs

3. Counseling Your Client About Whether And When To Pay Medical Bills

It is important when counseling clients who have large medical bills to look at their overall financial pictures. Sometimes clients simply cannot afford to pay medical bills and all their other bills. In that case, it is important to make sure that clients do not forego payment of higher priority bills, such as mortgages or car loans, in order to pay medical bills. Medical bills are unsecured debt, and as such usually should not take priority over secured debt or essential expenses such as food and utilities. However, the priority of a medical debt does depend on each individual client's circumstances and may need to take non-financial factors into account, such as ability to obtain future care from a certain facility to which the client owes a debt.)

Clients should understand that they should never move medical bills up in priority because of debt collection harassment. Advise clients against converting unsecured debt into secured debt by, for example, taking out a second mortgage to pay for medical bills. More information about how to prioritize bill payment is available in NCLC's publication Surviving Debt (3rd ed. 1999), available by calling NCLC's publication department at (617) 542-9595.)

4. Bankruptcy

Bankruptcy can be an important method to address overwhelming medical debt. A recent, well-publicized study showed that about one-third of personal bankruptcies involve significant medical debt, and the financial consequences of medical problems are responsible for over 45% of bankruptcies in the U.S.3 Extensive information about bankruptcy practice is available in National Consumer Law Center, Consumer Bankruptcy Law and Practice (6th ed. 2000) and in Surviving Debt.)

5. Affirmative claims

Sometimes a client will have affirmative claims against a creditor or collection agency collecting on a medical debt. Affirmative claims may arise from the manner in which the client's agreement to pay the medical bills was obtained or from overreaching collection methods. An affirmative lawsuit might involve claims under:)

Federal Fair Debt Collection Practices Act (FDCPA). The FDCPA provides a useful remedy if your client is being harassed by a third-party debt collector over medical bills. In addition to prohibiting harassment and deceptive collection practices, the FDCPA includes restrictions on how and when a debt collector is permitted to communicate with a consumer. State Fair Debt Collection Statutes. The most suitable remedies for health collection harassment are often state remedies. Most states have their own debt collection statutes. Many of these state statutes apply to both creditors and collection agencies, and thus would apply to collection activities conducted by a hospital or other medical provider. )

State UDAP Statutes. State unfair or deceptive acts or practices statutes (UDAP) are often the most powerful remedies for overreaching collection behavior, especially by medical creditors. Every state and the District of Columbia has one of these statutes, which are consumer protections acts of broad applicability. UDAP statutes have many advantages, because they can be used to challenge a wide range of abusive behavior that may or may not violate another state or federal law. In addition, state UDAP statutes often proscribe unfair or deceptive debt collection tactics. Many UDAP statutes allow private actions for violations of other state or federal laws. Other State And Common Law Remedies. There are a number of other state and common law remedies applicable to medical debt collection, such as: )

- the tort of intentional infliction of emotional distress - invasion of privacy - limitations on collection fees - unconscionability B. IF YOUR CLIENT HAS BEEN SUED)

Practitioners defending consumers sued over medical debt have a number of viable defenses. Aggressive advocacy can often result in very favorable outcomes. Medical debt collectors are accustomed to obtaining default judgments, and are not used to being forced to put on a case. Thus, they often cannot meet their burden of proof. Practitioners should not be discouraged into thinking that nothing can be done for a client faced with catastrophic medical bills.)

A medical bill collections plaintiff may sue under various theories, each with different elements and different burdens of proof. The burdens of proof may also differ from state to state. For a summary of the theories used by medical creditors/collectors and potential defenses with respect to those theories, see NCLC's publication, "In Sickness and In Debt: Using Consumer Law to Help Elders Facing Overwhelming Medical Bills." (2001).)