Even before the hospital bills started coming, Lori Duff and her family were living paycheck to paycheck. So when the debt collector called the Columbus, Ohio, mother and demanded $1,800 for the prenatal visits she'd had while pregnant with her third son, she panicked.
The collector claimed the local Catholic hospital Duff had gone to could garnish 25 percent of each of her paychecks to pay off the bill. She offered to make a $20 payment — all she could afford at the time — but the collector told her the minimum was $400 down. "I was like, 'I don't have that. You can have everything in my account right now. It's $1.25,'" Duff recalls.
Duff, 27, was likely eligible for free care under the Mount Carmel Health System's financial assistance policy, which offers medical care at no charge for patients earning less than 200 percent of the federal poverty level.
As a manager at an auto parts store, she earns about $25,000 a year. Husband Michael stays home with their three little boys, ages one, four and six. Her children are covered under Ohio's program for low-income kids, but both Duff and her husband are uninsured.
She assumed her prenatal care would be provided free, either through an emergency Medicaid option offered to pregnant women or because of the hospital policy. But then, a few months after Henry was born, she started getting the letters and phone calls from the debt collector.
"When people start harassing you and they start calling on a daily basis or every other day demanding money you don't have, I mean, it's hard." She worried that the hospital might try to seize her paychecks or even take her house.
While Ohio has a law that prevents foreclosures based on medical debt alone, it is legal for hospitals to garnish patient wages, attach bank accounts and get a lien on any future earnings, including from the sale of a house.
Duff is one of nearly 1,600 people Mount Carmel sued in county court between 2009 and 2011. Most of them were patients like Duff who did not pay their medical bills, though not all were poor.
Karen Geisler, vice president of patient financial services at Mount Carmel, says the hospital's actions are appropriate. Mount Carmel processes 5,000-7,000 charity care applications each month, she says, and approves 90 percent of completed applications for some sort of aid from the hospital or state.
Nonprofit hospitals, including Mount Carmel, pay no federal, state or local taxes, giving them a competitive edge over their for-profit counterparts. In return, nonprofits are expected to offer a community benefit, including free and discounted care for low-income patients.
But despite the requirement, a study by the Congressional Budget Office found that on average, not-for-profits provide only slightly more uncompensated care than for-profit hospitals.
The federal health law passed last year attempts to address the situation by setting new rules for how a nonprofit hospital must report its charity care and serve poor patients. The rules have already gone into effect but are not being actively enforced.
Few patients who are sued by hospitals seek legal assistance, according to Kathleen McGarvey, a lawyer at Columbus Legal Aid, which currently represents six patients being sued by Mount Carmel.
She notes says that in these types of cases, the hospital usually wins by default, and the patient is accountable for the entirety of the bill, even if there are errors or duplicate charges. "I think for a nonprofit hospital, whose job it is to provide this community care, that it's obscene that they're going after folks who are at 100 percent of the poverty level," McGarvey charges.
Mount Carmel's mission is to provide care to everyone, regardless of their ability to pay, the system's Geisler says. "In order to provide charity in the community — and we provide a lot and do a lot of good — we have to collect payment from those who can afford to pay us," she says.
For the past decade, Republican Sen. Chuck Grassley of Iowa, has been leading the charge on Capitol Hill to hold nonprofit hospitals more accountable. Their tax exemption carries "certain responsibilities, and one of them is to provide charitable care. I mean, that's why they're set up, right?" Grassley said in an interview.
Under the new rules, crafted by Grassley and Sen. Max Baucus, a Montana Democrat, nonprofit hospitals are required to publicize their financial assistance policies and are prohibited from charging higher rates to uninsured patients or taking extreme collections efforts against patients who may qualify for free care.
"Historically, we haven't had the consistent definitions and agreed-upon standards for reporting," says Rich Umbdenstock, president of the American Hospital Association. "Now we have those at the federal level and we believe that those need to be given a chance to work."
Meanwhile, some states are taking matters into their own hands. In the past year, Illinois has revoked the state tax exemption for three nonprofit hospitals that the state Department of Revenue determined were not doing their share of free care.
Meanwhile, Lori Duff and her husband remain uninsured and vulnerable to future collections actions. "It's crazy," Duff says. "It's a hospital bill. It's a doctor bill. Everybody needs care."
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About three-fifths of the nation's hospitals are nonprofit. That means they don't pay federal, state or local taxes. In return, they're expected to offer a benefit to their community, including free and discounted care for the poor. But critics say many hospitals aren't doing nearly enough.
Jenny Gold of our partner Kaiser Health News looks at the issue in Ohio. There, one nonprofit health system has been suing low-income patients who don't pay their bills.
JENNY GOLD, BYLINE: Lori Duff and her family live paycheck to paycheck in their modest home in Columbus, Ohio. Lori works as a manager at an auto parts store and she's the family's sole earner, pulling in about $25,000 a year. That's just below the federal poverty level for a family of five. She and her husband, a stay-at-home dad, have their hands full with a mortgage to pay and three very active little boys, ages one, four and six.
(SOUNDBITE OF CRYING BABY)
LORI DUFF: Well, here. Yours is done. You want to take it to the table?
UNIDENTIFIED CHILD: Yeah.
GOLD: The family can't afford health insurance, but when Lori got pregnant with her third son, Henry, she went for prenatal care at Mt. Carmel Health System, a local nonprofit Catholic hospital. Then, last summer, she started getting letters and phone calls from a debt collector, demanding $1,800 for the visits.
DUFF: It's hard to make bills meet. And then, when a doctor bill gets thrown in, you know, you try and work it in as best you can. But when people start harassing you and they call you, like, on a daily basis or every other day demanding money you don't have, I mean, it's hard.
GOLD: Especially since Lori would likely be eligible for free care under Mt. Carmel's financial assistance policy. She had even applied for and received charity care at another hospital nearby, with no trouble at all. But the debt collector kept calling.
DUFF: I was like I can make a $20 payment. And the guy on the phone told me that's not good enough. We need at least 400-and-some dollars down. And I'm like, well, I don't have that. You can have what I have in my account right now - it's $1.25.
GOLD: He said her paycheck could be garnished until she paid off the bill. And then, a few days later, he called to tell her that the hospital was suing her for the whole $1,800.
What's it like to get sued?
DUFF: Scary. There's really no other way to say it, but I've never been in this situation and it's hard. You know, I don't know if they can take my house that we've worked for so hard, or anything.
(SOUNDBITE OF WEEPING)
GOLD: Ohio actually has a law that prevents foreclosures based on medical debt alone. But it is legal for hospitals to garnish patient wages, attach bank accounts, and get a lien on any future earnings, including from the sale of a house. Between 2009 and 2011, Mt. Carmel sued nearly 1,600 people, almost all of them patients who didn't pay their bills, though not all would have qualified for financial assistance. That's a lot more lawsuits than the other hospitals nearby.
KATHLEEN MCGARVEY: The vast, vast majority of the medical debt cases that we get are from Mt. Carmel.
GOLD: That's Kathleen McGarvey, a lawyer at Columbus Legal Aid, which is currently representing six patients being sued by Mt. Carmel, including Lori Duff. McGarvey says all of them were eligible for free care. The patients now face bankruptcy, ruined credit scores and bills that are often higher than what insurers would pay.
Karen Geisler, who runs Mount Carmel's billing division, says the hospital isn't doing anything wrong.
KAREN GEISLER: In order to provide charity - and we provide a lot of charity and do a lot of good in the community - we have to collect payment from those who can afford to pay us. And, you know, at this point we had belief that these people could afford to pay it.
GOLD: Mount Carmel spends about 1.9 percent of its total expenses on charity care. That's close to the national average, which economists say is much less than the value of the tax breaks nonprofit hospitals receive. Mount Carmel gets about 60,000 financial assistance applications each year. And of those that are completed, Geisler says they approve more than 90 percent for some sort of aid from the hospital or state.
GEISLER: If there are people out there who deserve financial assistance but did not receive it, they either failed to apply for it or they failed to give us the information that we needed to confirm what they wrote on their application. We're making every effort to get people qualified for financial assistance with Mount Carmel.
GOLD: Lawsuits against low-income patients like Duff have attracted the attention of lawmakers across the country, including Republican Senator Chuck Grassley of Iowa. He says there's no point in hospitals going after patients who simply can't pay.
SENATOR CHUCK GRASSLEY: 'Cause you aren't going to get it out of them anyway. If they don't have it, you know, you can't get blood out of a turnip.
GOLD: Grassley has been leading the charge for years to hold nonprofit hospitals more accountable for their tax breaks, which are worth billions of dollars and give them an edge over their for-profit competition.
GRASSLEY: And that tax exemption that carries with it certain responsibilities. And one of them is to provide charitable care. I mean, that's why they're set up, right?
GOLD: Grassley helped get provisions in the 2010 federal health law that prevent nonprofit hospitals from taking extreme collections actions. The law also prohibits nonprofits from charging higher rates to uninsured patients.
Several states are taking matters into their own hands. Illinois recently revoked the tax exemptions of several nonprofit hospitals they determined didn't do enough charity care. But for Lori Duff in Ohio, who still owes $1,800, that's little comfort.
DUFF: I've never been to court for anything like this. Like, you know, it's crazy. It's a hospital bill. It's a doctor bill. Everybody needs care.
GOLD: The lawsuit against her is moving forward and there's no guarantee this will be her last time in court. While her three sons are eligible for Medicaid, Lori and her husband make just a few hundred dollars a year too much to qualify. So for now, they're still uninsured and in need of charity care.
For NPR News, I'm Jenny Gold. Transcript provided by NPR, Copyright National Public Radio.