Federal Rules Do Not Bar Hospitals From Giving Discounts to the Uninsured, Bush Administration Says

In a "toughly worded response" to hospitals, HHS Secretary Tommy Thompson on Thursday said that federal regulations do not prevent hospitals from offering discounts to uninsured patients, the Wall Street Journal reports (Lagnado, Wall Street Journal, 2/20). In a letter sent to Thompson in December, the American Hospital Association asked HHS to change or clarify pricing schedule rules so that hospitals can give discounts to uninsured patients without worrying about violating Medicare rules. According to hospitals, Medicare regulations require them to keep a uniform price list for treatments and procedures for all patients (Kaiser Daily Health Policy Report, 12/17/03). Hospitals often bill the uninsured for "full charges," or the list prices that hospitals maintain for every item and procedure. Insurance companies and the Medicare and Medicaid programs often pay lower rates, the Journal reports. According to hospitals, Medicare policy requires "aggressive efforts to collect from all patients," including those who are uninsured. Hospitals also believed that Medicare policy did not allow hospitals to provide discounts to the uninsured. Medical bills are the second leading cause of personal bankruptcy, and hospitals have "come under fire" for what they charge and what tactics they use to collect unpaid bills, the Journal reports (Wall Street Journal, 2/20).

Thompson's Response and Guidelines
In a letter to AHA President Richard Davidson, Thompson said, "Nothing in the Medicare program rules or regulations prohibit such discounts" to the uninsured. Thompson also said that hospitals should "take action to assist the uninsured and underinsured, and therefore end the situation where, as you said in your own words, uninsured Americans and others of limited means are often billed and required to pay higher charges" (Denver Post, 2/20). The letter includes an accompanying document with a "road map for hospitals in the form of a question-and-answer dialogue," the Journal reports. One of the questions asks: "Are hospitals required to take low-income patients to court or seize their homes or send claims out to a collection agency when those patients don't pay their hospital bills?" The answer: "No. Nothing in the Medicare instructions requires the hospital to seize a patient's home, take them to court, or use a collection agency." It adds that hospitals are not required "to engage in any specific level of collection effort for Medicare or non-Medicare patients" (Wall Street Journal, 2/20). "Hospitals can provide discounts to uninsured and underinsured patients who cannot afford their hospital bills and to Medicare beneficiaries who cannot afford their Medicare cost-sharing obligations," Thompson said (Appleby, USA Today, 2/20). Dara Corrigan, acting principal deputy inspector general at HHS, said that hospitals could reduce or eliminate copayments and deductibles that would create financial hardship for a Medicare beneficiary. Corrigan said that hospitals can define "financial need" based on local costs of living and the beneficiary's income, assets and medical bills. She added that the hospital's criteria should be applied consistently to all patients. Corrigan said that while hospitals can advertise discounts available for uninsured patients, they cannot offer discounts "as part of any advertisement or solicitation" designed to attract Medicare beneficiaries or to generate business payable by Medicare or other federal health programs (Pear, New York Times, 2/20).

Hospital Reaction
Rick Wade, a spokesperson for AHA, said that Thompson's response answered only some of AHA's questions, the AP/Las Vegas Sun reports. "When a hospital sets a policy on the indigent, it will not accommodate every case that comes through a door," Wade said (Sherman, AP/Las Vegas Sun, 2/19). Melinda Hatton, AHA vice president, said, "It's still not entirely clear what hospitals can do to help the working poor," adding, "How much of a discount can they give to a family of four with income of more than $37,000 a year?" (New York Times, 2/20). Chip Kahn, president of the Federation of American Hospitals, said that Thompson's letter could be "a useful roadmap." He added that the "substantive guidance should help end confusion and enable hospitals to continue their efforts to address this problem on which we have a shared concern" (Dorschner, Miami Herald, 2/20). Laura Wegscheid, a spokesperson for Colorado-based Centura Health, said that hospitals are waiting for guidelines on how exactly they can provide discounts and financial assistance to uninsured patients who have annual incomes higher than the federal poverty level; the guidelines are due for release next year, the Post reports (Denver Post, 2/20).

Advocate Reaction
Elisabeth Benjamin, an attorney for the Legal Aid Society, said that Thompson's letter "finally puts to rest the hospitals' tired and inaccurate argument that the government made them charge uninsured and underinsured people these crazy inflated prices" (Wall Street Journal, 2/20). K.B. Forbes, executive director of the Council of United Latinos, said, "We are very pleased with Secretary Thompson's letter. It's now clear that hospitals can offer discounts to the uninsured, including working-class families who earn too much to qualify for charity care, but not enough to pay their medical bills" (New York Times, 2/20). James Tallon, president of the United Hospital Fund, said that Thompson's letter is a good "template" because "there was ample room for criticism of hospitals' behavior." However, he added that "hospitals were genuinely confused by the thicket of federal regulations" (Wall Street Journal, 2/20).