Millions of Washingtonians recently became eligible for free or discounted hospital care after an update to a state law went into effect last month, a significant step toward eliminating residents’ costly medical debts.
The original law, know as “charity care,” was passed in 1989 and requires hospitals to make financial assistance available for low-income patients to help with their out-of-pocket medical costs. Up until this year, however, the eligibility requirements were much more narrow, state Attorney General Bob Ferguson said in an interview.
“Medical debt is unfortunately a key driver for financial insecurity for many, many Washingtonians,” Ferguson said. “It became clear that our existing charity care laws were far too limited and simply did not include folks who, in my view, most certainly would be deserving of financial support on this type of debt.”
Under the former version of the law, Washingtonians within 200% of the federal poverty level were eligible for financial assistance, which is up to about $27,200 in annual income for a one-person household. For a four-person family, the limit was $55,500 in annual income.
As of July 1, all Washingtonians within 300% of the federal poverty level now qualify for charity care for their full out-of-pocket hospital bill, as long as care is considered “medically necessary.” Those within 400% of the federal poverty level are eligible for discounted care, which is up to about $54,360 for a one-person home or $111,000 for a family of four.
About 4 million people fall into those income groups in Washington, roughly half the state’s population.
In addition, the new law establishes two tiers of financial assistance — one for large health care systems with three or more hospitals (Tier 1, which account for about 80% of the state’s hospital beds) and another for smaller, independent hospitals (Tier 2).
At Tier 1 hospitals, about 3 million residents will have access to free hospital care, while another million will have access to discounted care. Tier 2 hospitals, which are often public hospital districts in rural counties, offer slightly smaller discounts for residents and aren’t required to offer discounts to those between 300% and 400% of the poverty level.
The classifications acknowledge that “not all hospitals are situated identically with their resources,” Ferguson said.
Here’s what else to know about the change.
Do I qualify for charity care if I have health insurance?
Yes. Charity care covers your out-of-pocket costs (like deductibles and copays) for all Washingtonians, whether they have public or private medical insurance, or are uninsured, said assistant attorney Audrey Udashen, who worked closely on the charity care legislation this year.
If you’re on Medicaid or Medicare or receive Social Security benefits, charity care will not impact your eligibility for those programs. Medicaid and Medicare will still cover their share, and charity care will apply to what remains.
Who pays for charity care procedures? Are hospitals reimbursed by the state?
Hospitals are not reimbursed for charity care. It’s an “obligation” of the hospitals and “comes out of the tradition of hospitals being these nonprofit entities that have large tax exemptions,” Udashen said.
“It’s more about the hospital providing this free care in exchange for their nonprofit status,” she said.
Does charity care only apply to hospital care, or does it also cover clinic visits?
Charity care applies to hospital care, but many clinics are owned and operated by hospital systems and often are also covered by their charity care policy. Still, Udashen recommended always asking your hospital to be sure.
Does it cover visits to the emergency room or outpatient procedures that are done at hospitals?
Charity care covers emergency room visits and any other scan, test or procedure done at a hospital. It might not cover bills from physicians or other providers not employed by a hospital.
Does charity care apply retroactively to past hospital bills?
Residents can apply for charity care for past bills. One exception, Udashen said, is if a collection agency has filed a lawsuit against a patient who hasn’t yet paid their hospital bill, leading to a court judgment against the patient. That situation is rare, though, she said.
Can any of my assets (if I own a home or have retirement accounts) disqualify me?
While there are some extremes, hospitals cannot consider most assets when assessing charity care eligibility, Ferguson said. Health systems can only consider assets if the patient’s income level is at 200% of the federal poverty guidelines or higher.
For those above 200% of the federal poverty rate, hospitals could consider some assets, but there are several exceptions — including equity in a primary residence, retirement plans, life insurance policies, the first $5,000 of money in a bank account and others.
“Asset consideration can’t be unreasonable or a barrier to consumers to actually getting charity care,” Udashen said. “It shouldn’t be a burdensome process.”
Hospitals are already struggling with workforce shortages and high supply because of inflation. Will expanded eligibility to charity care increase the financial burden on them?
Oregon passed a similar update to its charity care law in 2019 and, according to Ferguson, “What we heard back was all good.”
“No hospitals have closed down. No, there’s not some burden financially on hospitals that’s causing a financial crisis for any of them,” he said. “What we heard back is a system that works, and most importantly, is helping many Oregonians.”
Still, the Washington State Hospital Association has some concerns about smaller rural hospitals battling high costs and patient load, in addition to ongoing strains from the COVID-19 pandemic.
“We don’t know how large these impacts will be, but … they could be fairly large,” said Zosia Stanley, vice president and associate general counsel of the Washington State Hospital Association.
How will the state make sure hospitals are complying with this law?
Charity care can be a challenging area to regulate, Ferguson said. Because many Washingtonians aren’t aware of their right to charity care, they often don’t know when a hospital is violating related laws.
Still, patient complaints have led to at least three major lawsuits against hospital systems that weren’t complying, including one filed this year against Providence Health & Services where the system allegedly sent more than 54,000 patient accounts, totaling $70 million, to a debt collection agency even though it knew the patients were eligible for financial assistance. Providence has denied the allegations. Hospitals are legally required to inform patients of their eligibility for charity care.
“Making sure hospitals are following Washington’s charity care laws is extremely important to me,” Ferguson said. “And the fact that we’ve had to file multiple lawsuits against large, sophisticated systems indicates we’re not where we need to be.”
For more information about the new charity care law and how you can apply for coverage, visit the state attorney general’s website or the Washington State Hospital Association’s website.
