REGIONAL- Gov. Tim Walz joined Attorney General Keith Ellison and others last week for a ceremonial signing of the Debt Fairness Act, an act that promises to bring significant relief to Minnesota families struggling with medical debt.
The new law reforms medical debt collection, wage garnishment, and bankruptcy, including banning automatic transfer of medical debt to one’s spouse, banning the reporting of medical debt to credit bureaus, and banning the denial of necessary medical care over unpaid bills
Walz officially signed the legislation as part of a larger omnibus bill in May, but Monday’s ceremony brought together the bill’s authors, Sen. Liz Boldon, DFL-Rochester, and Rep. Liz Reyer, DFL-Eagan, along with a group of Minnesotans affected by medical debt to formally celebrate the landmark legislation.
“Life-saving cancer treatments or a trip to the emergency room shouldn’t cause a tanked credit score or a lifetime of debt,” Walz said. “Thanks to the work of the Attorney General, legislators, and Minnesotans who’ve shared their stories, these reforms will help Minnesotans get the care they need, manage their medical debt, and feel protected in their most vulnerable moments.”
Ellison, who testified in the Legislature during deliberations on the bill, heralded a new day in the way medical debt is handled in the state.
“With the passage and signing today of the Debt Fairness Act, we have a fairer, more dignified, and more just system for repaying debt than we did before,” Ellison said. “We all agree that if you borrow money, you should pay it back. We also all agree that we shouldn’t punish people for getting sick. We also agree that a debt-collection system that makes it harder for people to pay back what they owe does nobody any good. And we also agree that debt collection shouldn’t create more debt. There is more work to do and we’re not done yet — but today, Minnesotans facing debt, including medical debt, can rest easier in the knowledge that the law provides them with more protections than it did before.”
During committee hearings, Reyer noted a study showing that nearly 60 percent of people with medical debt have chosen to forego needed medical care due to cost. A statement provided to the House committee by the legal advocacy group Cancer Legal Care highlighted the challenges of medical debt for cancer patients:
• 42 percent of newly-diagnosed people over 50 will lose their life savings within two years of diagnosis.
• Cancer patients are, on average, 2.5 times more likely to file bankruptcy than those without cancer. Furthermore, cancer survivors who file for bankruptcy are 80 percent more likely to die than cancer patients who do not.
• 62 percent of personal bankruptcies filed are due in part to significant medical debt. Yet, of these bankruptcy filers, 78 percent had health insurance.
• 79 percent of oncology care providers are concerned with their cancer patients refusing treatment because of financial worries, and 49 percent have had a cancer patient refuse treatment because of a financial concern.
From 2003-2006, more than two million cancer survivors in the United States did not get one or more needed medical service because of financial concerns.
Key provisions related to medical debt in the Debt Fairness Act that take effect on Oct. 1, 2024, include:
• Spousal liability – Medical debt will no longer automatically transfer to a patient’s spouse. Starting Oct. 1, 2024, a spouse will not be personally liable for a patient’s medical debt. It is uncertain whether the law will apply to debt incurred before or only after the effective date. Creditors can still pursue the patient or their estate for debt collection.
• Medically necessary care– Medical providers cannot withhold necessary care from patients due to unpaid bills. This applies to both new and outstanding medical debt. Providers may require patients to enter into reasonable payment plans before receiving care.
• Billing disputes – Providers and health plans must follow a process for patients to dispute billing errors. Upon notification of a billing error, the provider or plan must review and correct any mistakes. During the review, billing for disputed charges is prohibited. Providers must notify patients of the review outcome within 30 days.
• Credit reporting – Medical providers can no longer report medical debt to credit bureaus, which will protect patients’ credit ratings from being affected by medical debt.
• Debt collection practices– Unethical debt collection practices have been curtailed.
• Transparency in debt collection– Medical providers are required to publish their debt collection practices, ensuring patients are informed about how and when recovery of medical debt may be pursued.
• Attorney’s fees – Patients who successfully defend against medical debt lawsuits will be awarded attorney’s fees.
The act also makes additional debt reforms, including:
• Establishing automatic income-based wage garnishment levels, ranging from 10 to 25 percent, rather than the flat 25 percent garnishment cap that previously existed.
• Extending Minnesota’s wage garnishment protections to independent contractors and everyone living and working in Minnesota.