Types of Financial Aid for Hospital Bills

Inability to pay vs. unwillingness to pay

To access hospital financial assistance or charity care you have to clearly communicate financial hardship in specific terms. Patient account representatives (“billers”) are always trying to discern the difference between those who are unable to pay and those who are unwilling to pay. The more certain they are that someone is unable to pay, the more likely they will set up payment plans, give discounts, and waive balances. The more certain they are that someone is unwilling to pay, the more likely the account will go to collections.

Not-for-profit hospitals have to provide charity medical care in the form of free care and write-offs or the IRS will penalize them for unpaid “back taxes”. And because so many physicians are becoming employees of these not-for-profit hospitals, the same rules are starting to apply for physician bills as well. They can and will do this, but they have to have some evidence of inability.

Five types of hospital financial assistance

These following five strategies are the most fundamental elements of hospital financial assistance and charity care programs. Depending on your situation, you may be eligible for a combination of these or all simultaneously. If you are genuinely experiencing hardship, these five strategies will help you demonstrate it in a rational manner to the provider. I do not condone lying or providing false information to try to get a break.

1) Payment plans

Can I make payments of $xx per month?

Payment plans are the simplest and easiest form of financial aid to get. Hospitals and healthcare providers will not charge you interest or penalties. It is highly frowned upon. You can usually get payment plans with or without insurance coverage. You can probably get a payment plan upon request if you ask for four months or less. If it is four months or more that you request, they will probably want to see you demonstrate hardship in the form of total medical costs or some measure of inability to pay for lack of personal income.

You can also lock in a payment plan early to avoid being sent to a collection agency. If you do get a payment plan setup, don’t miss a payment without calling in advance or risk breaking the implied contract. When you agree to a payment plan, there is an implied contract wherein the provider is waiving its right to collect payment immediately as long as you agree to make payments according to the agreed plan you discuss.

This is just semantics, but I don’t recommend generally asking, “Can I make monthly payments?” or asking the biller “What is the smallest payment I can make?” While the biller can be your friend, he or she is still incented to get the highest payments possible and to collect as much of your account balance as possible. I suggest that you propose the first dollar amount to them and pick a number that is comfortably low so that things could go wrong in your life and you can still make your monthly payment.

They may come back with a higher dollar number or shorter term, but that is okay, because you set the initial bar very low. If they take it, be very happy.

 2) Poverty

The Federal Poverty Level (FPL) is the most common proxy for financial aid consideration. Nearly all hospitals employ some variation of a sliding scale discount in which the discount increases as the patient’s income decreases relative to the FPL. Again, billers can be your friends, but because they’re incented to collect as much as they can, they will probably not advertise their charity care policies upfront. You will have to initiate this conversation yourself.

This is how they work:

Many hospitals and health providers employ a standard 10%-100% discount scale that fluctuates relative to the patient’s income up to 400% of the FPL. Someone earning less than 200% of the FPL might be eligible for a 100% discount while someone at less than 300% of the FPL might only be eligible for a 50% discount. If you make less than 400% of FPL, you might get 25% off charges. The great news is that, FPL is not a fixed number. The more dependents you have, the higher the FPL level is. If you talk to the right person, they will give you these discounts on this basis whether you have insurance or not. You will have to verify your income and dependents for them. They will need your most recent tax return and your last two pay stubs.

If you make less than 400% of FPL for your family size, you definitely should mention it to your biller. Also, I strongly recommend that you communicate this in terms of your adjusted gross income (AGI) after your payroll deductions.

3) Catastrophic medical episode

The previous strategy uses FPL to demonstrate a patient’s inability to pay. This strategy demonstrates inability to pay, by showing that a person’s medical bills will consume a significant portion of their annual income. This is where the medical expense table in the previous chapter comes in handy. You need to have a running total of everything you owe on your medical bills and what new expenses you expect to incur in the next 12 months. Again, if you talk to the right person, he or she will consider discounts whether you have insurance or not. Many hospitals will work out special plans to prevent medical expenses from ever exceeding 20%-25% of the patient/family’s annual adjusted gross income in a single year.

4) Employment status

If you are unemployed, you make less than 100% of FPL. Your medical bills are also going to be a significant portion of your income, because you have no income. You will be eligible for the highest level of charity care discount available.

5) Uninsured status

If you are uninsured, what is your uninsured or “self-pay” discount on charges? If you combine a standard 70% uninsured or “self-pay” discount with one of the previously mentioned poverty discounts and/or a catastrophic medical episode discounts, you will probably end up with a lower bill than a very well insured person.

Assessing your eligibility for provider-based financial assistance and charity care can be an effective way to alleviate the financial strain associated with a catastrophic medical episode. However, charity care should really be considered the last resort after all other strategies have been exhausted. Oftentimes commercial and public insurance health plans are not fully understood by their enrollees or benefits may not be utilized to their fullest. Medicare, Medicaid, SCHIP, and state high-risk pools should all be exhausted as options before applying for charity care.