State Lawmakers Seek Other Ways to Reduce Health Care Cost; Limiting Interest on Debt and Exec Pay

With universal health coverage efforts limited by state budget deficits and movement on the federal level, some state lawmakers have introduced legislation aimed at boosting charity care and limiting executive pay. One state bill specifically targets interest charged on medical debt, which could impact the healthcare accounts receivable management industry.

The bills were introduced in the last month, and now that federal lawmakers have approved additional funding for Medicaid assistant to the states, more initiatives to promote health care efficiencies and assist consumers with health care cost may be on the horizon, said one state legislature expert.

Rhode Island representatives in both the house and senate introduced bills in recent weeks to limit executive pay for top executives at not-for-profit hospitals. Meanwhile, Maryland lawmakers appear set to require hospitals to provide free care to low-income residents and standardize the amount of interest and fees charged to delinquent patient bills.

If the Maryland bill is passed, which appears likely, the law would have a greater impact on self-pay bad debt and collection practices in that state. Senate Bill 776 seeks to mandate free care for Maryland residents at or below 150 percent of the federal poverty level and reduce costs for some other low-income residents. The state’s Health Services Cost Review Commission, however, is recommending hospitals be required to offer free care to all residents at or below 200 percent of the federal poverty level. The commission also wants to standardize the interest and penalties hospitals add to delinquent patient bills.

The Maryland Hospital Association has not opposed the commission’s recommendation, said Nancy Fiedler, the association’s senior vice present for communications. However, she said raising the FPL threshold to 200 percent to qualify more people for free care would collectively cost hospitals an additional $59 million a year. She said the hospital association is concerned the extra costs would strain the resources of some hospitals, particularly those whose patient population are primarily low-income.

“There are four counties and the city of Baltimore, which have median income levels below the 200 FPL, which means a significant number of individuals would qualify,” she said.

While Maryland hospitals are reimbursed a larger percentage of its uncompensated care cost under a special waiver that passes the cost onto insured patients, Fiedler said the association fears those with health insurance now may not be able to afford it if the FPL is increased to 200 percent to make more Marylanders eligible for free care.

Nonetheless, the MHA favors standardizing charity care practices across the state, as well as the interests and fees added to delinquent patient bills because charity care and delinquent patient bill fees vary widely throughout the state, Fiedler said.

“I have every expectation that something will pass,” she said. “It’s supported by the health secretary, governor and chairman of the committees.”

The Rhode Island bills to limit executive pay also appear to have strong support. Ed Quinlan, president of the Hospital Association of Rhode Island (HARI), told insideARM that the association didn’t know lawmakers there planned to introduce the bills or that the proposal to limit executive pay had support in both branches from lawmakers Quinlan called “serious legislators.”

“It prompts a serious response and discussion,” he said of the bills. Quinlan said lawmakers should question and examine how executive pay is established because public resources account for a significant amount of hospitals’ revenue. Consequently, hospitals should be prepared to respond to questions proposed, but he opposes regulating executive pay. Quinlan said he is not aware of any other states that regulate executive pay, and doing so in Rhode Island would limit executive recruitment and retention.

Todd Nelson, technical director for HFMA, said the IRS’ rebuttal presumption rules already address the issue on executive compensation for all non-profits. He suggested that legislating executive pay could create other problems for hospitals and lawmakers down the road.

“From our perspective (not-for-profit) hospitals should follow the rules for presumption as written by the IRS. Other legislation that conflicts with that is not necessary. It creates another set of rules that could be in conflict with those and creates confusion for everyone,” Nelson said.

Richard Cauchi, spokesman for National Conference of State Legislatures, said a lot of lawmakers postponed tackling health care reform issues in there state until they knew what federal funding would be available to help with the Medicaid and education programs. Now that they know, he expects many will begin to turn their attentions back towards health care efficiency and cost containment.