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Colorado leads on medical debt protections, even as health care costs remain “out of control”

Lindsey Vance carried medical debt for nearly half her life.

The 41-year-old Denver resident said her debt began stacking up when she was around 19, when she stopped being covered under her parents’ health insurance and turned to the emergency room for health care related to injuries and illnesses.

“If I made enough money at the time, I would have, of course, paid my bills. I couldn’t afford to go see a doctor, and I certainly couldn’t afford to pay the medical bills when they came,” she said. “So I was in a situation for a long time where I was accruing medical debt but not able to pay it off.”

That debt prevented her from having a car, apartment or credit card in her name for most of her adult life, because it appeared on her credit report and worked against her loan application. The family’s cars are in her husband’s name, and her in-laws co-signed on their Colorado apartment. She is now both insured and in a better situation financially and was able to get her very first credit card a few months ago.

“But my credit has been absolutely terrible my entire adult life because of the medical debt,” she said.

A recently-enacted law aims to help the estimated 700,000 Coloradans like Vance with medical debt by removing it from consumer credit reports. The law is one of several policies Colorado lawmakers have advanced in recent years to lessen the burden of medical debt. Another recent law caps the allowable interest on the debt and aims to ensure transparency with consumers.

In conjunction with the state’s Hospital Discounted Care program, created in 2021 for uninsured and low-income patients, and other debt-related laws, experts say that Colorado is a leader among states when it comes to medical debt protection policies.

“Colorado is definitely at the forefront, especially with the recently enacted legislation,” said Maanasa Kona, an assistant research professor at Georgetown University’s Center on Health Insurance Reforms and author of a Commonwealth Fund report comparing states’ medical debt policies.

“It is some of the more ambitious actions we’ve seen states take,” she said.

Nationwide, about 100 million people have some form of health care debt, according to research by KFF Health News. The crisis is forcing millions of Americans to ration medical care, take on extra work and cut back on food, clothing and other essentials. Around Denver, medical debt is also exacerbating the city’s problem with housing affordability.

The trailblazing credit reporting law, House Bill 23-1126, was one of two medical debt bills passed during Colorado’s 2023 legislative session. It requires credit reporting agencies to remove the debt from consumer reports, limiting who can see it.

About 11% of Coloradans have medical debt in collections with a median of $693, according to data from the Urban Institute. Nationally, 13% of people have medical debt in collections. An Urban Institute analysis found that many consumers saw their credit score improve as medical debt gets removed.

Colorado was the first state to enact such a law, followed by New York. The federal Consumer Financial Protection Bureau is developing new regulations that would bar credit reporting for medical debt nationally.

Another 2023 law, Senate Bill 23-93, caps interest on medical debt at 3% per year, reducing it from 8%. The law also allows consumers to request documentation from a creditor or debt collector to ensure that the debt is accurate and stops debt collections if the consumer is in an appeals process.

“It’s hard to say what the impact will be, but I know from hearing testimony and seeing people talk about it, I’m really optimistic that it will make a change,” Sen. Lisa Cutter, a Littleton Democrat who ran the bill, said.

Colorado joins seven other states that limit interest.

A provision in SB-93 that would have required the original creditor to be named as a plaintiff in debt collection proceedings was stripped during its first committee hearing.

Thousands of Colorado patients from UCHealth are sued every year, with a third-party debt collector instead of the hospital often named as the plaintiff in the lawsuit, according to a 9News/Colorado Sun investigation done in partnership with the Colorado News Collaborative and KFF Health News for the “Diagnosis: Debt Colorado” series, which includes this story.

“That’s a huge piece that we’d like to tackle at some point,” Cutter said. “Transparency is the baseline. Nobody should argue about being transparent in how they deal with their debt and their consumers.”

Since the 2023 laws went into effect less than a year ago, it is difficult to gauge the impact they have had on patients’ ability to manage medical debt costs. It is something experts are keeping tabs on. And medical debt protections are often a Band-Aid for “out of control” health care prices, Kona said.

Still, advocates say the efforts last year are major wins.

Another crucial point in Colorado’s medical debt conversation is the Hospital Discounted Care program. It requires all hospitals to screen uninsured patients for the program and allows
patients to apply for financial assistance if they are at or below 250% of the federal poverty level. That is about $75,000 for a family of four.

This year, lawmakers are trying to update the discounted care program to make hospitals presumptive eligibility sites for Medicaid. That means a hospital could quickly screen a patient for Medicaid eligibility — such as by comparing their income to the federal poverty level or verifying enrollment in other needs-based programs like the Supplemental Nutrition Assistance Program — and have their immediate care covered before that Medicaid application is formally approved. It would cover the cost of that visit and, if the patient then gets on Medicaid, help prevent medical debt in the future, since the patient would have some level of insurance.

Policies that put more responsibility on hospitals and institutions to screen patients for benefits can be the most effective ones when it comes to medical debt mitigation, Kona said.

This and similar policy responses to medical debt have the potential to benefit thousands of residents across the state.

At the Capitol last year, Vance testified at both the House and Senate committee hearings for the credit reporting law, lending a voice for Coloradans struggling to come out on top of their medical debt.

“Despite my best efforts to make any sort of payment, it always came down to having to choose between paying down my medical debt and paying necessities like rent and utilities,” she told lawmakers. “This was my reality for many years.”

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