New Jersey residents faced with medical bills they cannot afford to pay would obtain some respite under newly proposed legislation.

A-4335, would require  medical providers to wait at least 90 days after the initial billing date before they sic a debt collector or lawyer on a patient.

And before they could refer an unpaid bill to be collected, via a court proceeding or otherwise, they would have to give the patient the chance to pay the outstanding balance via monthly installments. The payment  amounts would have to be “reasonable and affordable” and not exceed 15 % of the patient’s income, which the patient would have to substantiate with documentation.

As long as a patient in such a plan was “compliant” with it, the doctor, hospital or other provider could not turn to a debt collector or lawyer. Compliance would not require a perfect payment record but only 11 scheduled payments within a 12-month period. In other words, it would take more than one strike to knock you out of the installment plan.

But you would not be able to just ignore the missed payment either. You would have to contact the provider with a strategy to make up the missed amount within a year.

The balance of the debt, including any interest owed,  would be erased—or, in the words of the legislation, “fully discharged”– entirely if the patient died or became totally and permanently disabled.

A total but temporary disability, on the other hand, would defer repayment from the time a health care professional certified its existence until a health care professional likewise certified its end.

The sponsors are Joann Downey and Eric Houghtaling, both Monmouth Democrats.

On introducing A-4335 on August 27, Downey called it “a win for concerned patients across New Jersey,” adding “No longer will residents have to fear paying exorbitant medical bills in an expedited fashion; they will be able to make payments that make financial sense for them.”

The bill has been referred to the Assembly Consumer Affairs Committee.

The proposed measure is especially necessary and welcome at a time when the substantial gains in health coverage achieved under the Affordable Care Act (aka Obamacare) are being steadily chipped away by the Trump Administration and Republican majority that seems determined to leave Americans without needed medical care.

At the same time, the Trump Administration has been working to dismantle the Consumer Financial Protection Bureau, a federal agency whose mission of  protecting consumers from abusive financial practices encompasses consumer debt.

Back in 2014, before those efforts began, the CFPB released a report about the impact of medical debt on credit scores. Some of the findings were:

  1. 43 million Americans had overdue medical debt on their credit reports.
  2. Half of all overdue debt on credit reports is from medical debt.
  3. One out of five credit reports contains overdue medical debt.
  4. 15 million consumers have only medical debt on their credit reports
  5. The average reported medical debt is $579, versus $1,000 for non-medical items.
  6. Medical debt differs from other types in that consumers are often temporarily responsible for the whole bill until insurance works it out and can become responsible for it because of billing issues between medical providers and insurers.
  7. Many consumers do not even know they owe medical debt until they get a call from the collections agency or they discover it on their credit report.

Surprisingly, at least to me, a study of medical debt published on July 25 of this year in Health Affairs, found that younger people are more likely to be targeted for collection of medical debt than older ones.  According to the article abstract, the “average size of medical debt decreased nearly 40 percent from patients age twenty-seven to sixty-four, with increases in health insurance coverage and incomes likely playing important mediating roles.”


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