A California law limiting how much hospitals can charge the uninsured likely resulted in lower bills for many patients – and free care for most of the state’s poorest uninsured residents, according to a study published today in the journal Health Affairs.

While some hospitals around the country have  voluntarily agreed to reduce how much they charge the uninsured, the California law, passed in 2006, requires hospitals to draw up financial assistance policies. The law also prohibits hospitals from charging higher rates to uninsured patients who earn less than 350 percent of the federal poverty level,  or less than $40,215 for an individual this year, than those paid by Medicare patients.  The same rule applies to those whose annual medical expenses exceed 10 percent of their income.

Unlike some other state rules – and the federal health law – the California legislation is “specific and it actually sets a cap,” said study author Glenn Melnick, a health care finance professor at the University of Southern California.

The law, was passed following a spate of national media coverage – and some lawsuits – about the plight of uninsured patients who were charged amounts far higher than what insurers, or the government, would pay for the same services. Many patients found themselves in collections, or had their wages garnished to cover the costs.

Medicare reimbursement is far less than hospitals’ list prices, which few people actually pay, mainly because insurers and government health programs negotiate deep discounts.  Medicare data released last month shows that those list prices for in-patient services vary widely, sometimes even among hospitals in the same city, and can be 10 or even 20 times more than what Medicare pays.

Melnick’s study found that 81 percent of the state’s hospitals reported compliance with the law, setting in-patient charges at or below Medicare rates for people up to 350 percent of the poverty level.  Although the law did not require free care, his study found that 97 percent of hospitals offered it to uninsured people whose income was at or below 100 percent of the federal poverty level, about $11,490 this year. That meant nearly 4 million, or 61 percent, of California’s uninsured had access to free care, Melnick said.

The federal health law requires nonprofit hospitals to give discounts to people who qualify for their financial assistance programs — charging them no more than they would for people with insurance.

Melnick’s paper says the California law is more effective because it applies to all hospitals, and  mandates a cap on the rates they can be asked to pay.

“Many millions of Americans will remain exposed to the prospect of paying full billed charges, both during and after full implemention of the Affordable Care Act,” the paper concludes.