Subscribe Donate
Home | Newsroom | Miscellaneous | Should Sickness Lead to Bankruptcy? Help Us Protect Californians from Medical Debt

Should Sickness Lead to Bankruptcy? Help Us Protect Californians from Medical Debt

By Linda Nguy

Joy turned to concern shortly after Humberto Cruz and his wife welcomed their firstborn child into the world in 2010. Their baby required emergency services and an extended hospital stay at Queen of the Valley Hospital  in West Covina, California. 

What happened to the Cruz family next is a problem only California lawmakers can solve. 

The tough lessons began when Cruz learned his employer’s insurance coverage failed to add his newborn to his insurance coverage. He later learned the hospital failed to mention available financial assistance, forcing Cruz to shoulder all of the nearly $20,000 bill. 

Cruz’s former employer never corrected its mistake and Cruz was soon laid off from his job. When he was unable to take time off his new job to answer a bill collector’s court summons, the collection agency won a default judgment against him, later placing a levy on his bank account and a lien against his family home. 

Life events eventually led Cruz to sell his home. The agency seized $17,000 from the sale. When Cruz purchased a new home in 2016, the collection agency placed another lien on that home. Cruz eventually settled and paid off the judgment with credit cards and savings. The 12-year ordeal cost Cruz almost $23,000, leaving him emotionally spent, financially drained and uncertain about his family’s future.

Hospital debt constitutes more than 70% of medical debt, and hospital bills can be much larger than other types of medical bills, according to 2023 research by the Urban Institute. And a California Health Care Foundation survey found more than a third (38%) of Californians report owing medical debt, with Black, Latino/x, and low-income people among the most burdened.

Despite qualifying for financial assistance, patients still receive large medical bills from hospitals. Nonprofit hospitals, in particular, do not meet their community benefit obligations, according to a recent Lown Institute Fair Share Spending study.

In 2007, the Hospital Fair Pricing Act determined hospitals in California must provide charity and discounted care to patients who receive hospital care and are uninsured or underinsured. Subsequent updates, including requirements for emergency physicians and debt collectors, raising income eligibility for financial assistance, and improving oversight and enforcement have expanded patient protections, but more must be done. Home liens like those placed on Cruz’s family home by hospital debt collectors should be prohibited. 

We and our allies have successfully challenged certain hospital practices in court. Since Western Center and Consumer Law Center, Inc. settled their case against Santa Clara Valley Healthcare last year for alleged violations of hospital financial assistance laws, Santa Clara County has written off $1.48 million in patient debt and refunded more than $304,000 to patients. But more needs to be done statewide to ensure patients are not saddled with unaffordable hospital bills.

Since the Hospital Fair Pricing Act’s passage in 2016, California’s uninsured rate has been reduced by more than half with the passage of the Affordable Care Act, which expanded Medi-Cal and created Covered California, as well as other Medi-Cal expansions. These policies have relieved much of the burden on hospitals to cover the cost of uninsured care. 

Now, more than ever, hospitals can and should provide greater financial assistance to relieve the harmful impacts of medical debt.

Californians who want to get involved can start by contacting their Assemblymember to support AB 2297, the bill to modernize the Hospital Fair Pricing Act. It does so by:

  • Prohibiting the use of lien on homes to collect unpaid medical bills from financially eligible patients
    • For many Californians, their homes are their greatest asset, and often the main way that families build generational wealth
    • However, a loophole allows debt collectors to place liens on patients’ homes to collect unpaid hospital bills
    • Home liens should be completely prohibited in the collection of unpaid hospital bills from financially qualified patients
  • Clarifying hospitals must review financial assistance eligibility at any time
    • While the law requires hospitals to process applications at any time, many hospitals impose arbitrary deadlines – allowing hospitals to disqualify eligible patients from financial assistance to expedite collections
    • The Department of Health Care Access and Information interprets this provision of the law to prohibit deadlines for applications, which should finally be made clear in the statute
  • Eliminating the consideration of assets from charity care eligibility
    • The Medi-Cal program recently eliminated the consideration of assets, and other states are looking to bar assets as well. California’s hospital financial assistance rules should follow suit

As Assemblymember Friedman, author of AB 2297, shared at the April 9 Assembly Health Committee Hearing: “I believe in a country [and state] as wealthy as . . . California, the whole concept of medical bankruptcy and medical debt  . . . is really unacceptable. It’s an abomination. . . .The fact that we are taking people’s homes and property or putting a lien on their home just because they want to get treatment for a sickness is something that shouldn’t happen.”

To learn more about the Hospital Fair Pricing Act, read our fact sheet here. For more information about WCLP resources, click here, and to follow the progress of our recent and past legislative initiatives, please visit our newsletter page here.