Dear State Treasurer Folwell, State Auditor Wood, Deputy of Legal Affairs Estevez and Special Deputy Attorney General Sturgis:
The North Carolina Health Plan (NCHP) can take action to correct the failing of the state’s hospital organizations providing discounted or free care to uninsured and underinsured obligors of limited means.
The NCHP has the authority, indeed, the responsibility to:
Mandate the state’s hospital organizations amend their “Financial Assistance Policy” (FAP) to include an indigency policy, business practices and processes to advance providing the charitable patient care and community benefits as intended by tax-exempt (charitable) hospital organizations under Centers for Medicare & Medicaid Services’ (CMS’) policy and Internal Revenue Code (IRC) § 501(r).
CMS Policy:
Deciphering CMS’ Policy and Accounting Legalese
What is an indigency policy? It is means-testing uninsured and underinsured obligors as to their financial ability-to-pay the hospital organization’s charges and not be forced into “medical indigency.”
What is charity care? It is the value of medical expenses that exceed the obligor’s financial ability-to-pay the hospital organization’s charges, so as to not cause the obligor being rendered medically indigent.
What is medical indigency? It is when an obligor’s health insurance coverage, if any, does not provide full coverage for all their medical expenses and that their medical expenses, in relationship to their income, would make them indigent if they were forced to pay full charges for their medical expenses.
Under CMS policy uninsured and underinsured obligors of limited means are obligated to pay the hospital organization only an amount that does not exceed the obligor’s financial ability-to-pay, so as to not cause the obligor being rendered medically indigent — the obligors paying only an amount they can afford. Any charges (medical expenses) exceeding an obligor’s financial ability-to-pay is “charity care” and should be treated as such for accounting purposes, and from a morality standpoint, to protect obligors from being rendered “medically indigent.” The NCHP has an obligation to consider: is continuing to allow our state’s hospital organizations to render medically indigent (take everything from) 70% or more of North Carolinians in the best interest of our fellow North Carolinians? Keep in mind it is not a matter of if our fellow North Carolinians will be rendered medically indigent but when, as it is a lifetime arc. The right and just action is clear.
Under CMS policy there is no such thing as “medical debt” – let me repeat the facts (the truth). Any hospital organization’s charges (medical expenses) exceeding an obligor’s financial ability-to-pay, so as to not cause the obligor being rendered medically indigent is “charity care.” Simply stated, obligors of limited means do not owe the hospital organization any amount they cannot afford. CMS’ policy is the embodiment of North Carolinians’ moral compass.
CMS’ policy was promulgated, February 19, 2004. The NCHP has a financial and moral responsibility to address the financial and clinical carnage the state’s hospital organizations have wrought upon North Carolinians over the soon to be past eighteen years. The facts are irrefutable: “nearly 70% of individuals filing for personal bankruptcy cite medical debt as the reason.” How many obligors just endured? How many North Carolinians of limited means did not seek care as a result of the state’s hospital organizations’ failing to comply with CMS’ policy?
Secretary Tommy Thompson (R), U.S. Department of Health & Human Services (HHS)
In an exchange of letters, February 19, 2004, Secretary Tommy Thompson provided guidance to Richard J. Davidson, President, American Hospital Association, (AHA) “to take action to assist the uninsured and underinsured.”
With this guidance as a tool, I strongly encourage you to work with AHA member hospitals to take action to assist the uninsured and underinsured and therefore, end the situation where, as you said in your own words, “uninsured Americans and others of limited means are often billed and required to pay higher charges.”
Secretary Tommy Thompson asserted:
Your letter suggests that HHS regulations require hospitals to bill all patients using the same schedule of charges and suggests that as a result, the uninsured are forced to pay “full price” for their care. That suggestion is not correct and certainly does not accurately reflect my policy. The advice you have been given regarding this issue is not consistent with my understanding of Medicare’s billing rules. To be sure that there will be no further confusion on this matter, at my direction, the Centers for Medicare & Medicaid Services and the Office of Inspector General have prepared summaries of our policy that hospitals can use to assist the uninsured and underinsured. This guidance shows that hospitals can provide discounts to uninsured and underinsured patients who cannot afford their hospital bills and to Medicare beneficiaries who cannot afford their Medicare cost-sharing obligations. Nothing in the Medicare program rules or regulations prohibit such discounts. … (Emphasis added)
Centers for Medicare & Medicaid Services summary:
Questions On Charges for the Uninsured
Q1: Can a hospital waive collection of charges to an indigent, uninsured individual?
A1: Yes. Nothing in the Centers for Medicare & Medicaid Services’ (CMS’) regulations, Provider Reimbursement Manual, or Program Instructions prohibit a hospital from waiving collection of charges to any patients, Medicare or non-Medicare, including low-income, uninsured or medically indigent individuals, if it is done as part of the hospital’s indigency policy. By “indigency policy” we mean a policy developed and utilized by a hospital to determine patients’ financial ability to pay for services. By “medically indigent,” we mean patients whose health insurance coverage, if any, does not provide full coverage for all of their medical expenses and that their medical expenses, in relationship to their income, would make them indigent if they were forced to pay full charges for their medical expenses. (Emphasis added)
In addition to CMS’ policy, the Office of Inspector General (OIG) advises that nothing in that agency’s rules or regulations under the Federal anti-kickback statute prohibits hospitals from waiving collection of charges to uninsured patients of limited means, so long as the waiver is not linked in any manner to the generation of business payable by a federal health care program – a highly unlikely circumstance.
CMS: Definition (Policy) for Charity Care (Financial Assistance)
Indigency Policy – Means-test uninsured and underinsured obligors as to their financial ability-to-pay the hospital organization’s charges and not be forced into “medical indigency.”
Charity Care – The value of medical expenses that exceed the obligor’s financial ability-to-pay the hospital organization’s charges so as to not cause the obligor being rendered medically indigent
Medically Indigent – Obligors whose health insurance coverage, if any, does not provide full coverage for all of their medical expenses and that their medical expenses, in relationship to their income, would make them indigent if they were forced to pay full charges for their medical expenses
Internal Revenue Code § 501(r)
Direct the hospital organizations to treat all state beneficiaries’ as qualified for financial assistance and waive all out-of-pocket until the hospital organization has implemented an indigency policy and is able to determine a beneficiary (obligor) can afford the entirety of the out-of-pocket and not be rendered medically indigent.
Direct the administrator of the NCHP (Blue Cross Blue Shield) to reimburse the hospital organizations using Medicare rates for all beneficiaries’ claims until the hospital organization has amended its FAP, business practices and processes.
Prescribed Accounting Practices: Internal Revenue Code § 501(r)(5)
“(5) LIMITATION ON CHARGES. — An organization meets the requirements of this paragraph if the organization—
“(A) limits amounts charged for emergency or other medically necessary care provided to individuals eligible for assistance under the financial assistance policy described in paragraph (4)(A) to not more than the lowest amounts charged to individuals who have insurance covering such care, and (Emphasis added)
“(B) prohibits the use of gross charges.
Internal Revenue Service (IRS) Technical Explanation for IRC § 501(r)(5)
Each hospital facility is permitted to bill for emergency or other medically necessary care provided to individuals who qualify for financial assistance under the facility’s financial assistance policy no more than the amounts generally billed to individuals who have insurance covering such care. A hospital facility may not use gross charges (i.e., “chargemaster” rates) when billing individuals who qualify for financial assistance. It is intended that amount billed to those who qualify for financial assistance may be based on either the best, or an average of the three best, negotiated commercial rates, or Medicare rates. (Emphasis added) (Prescribed Accounting Practice)
The lowest amounts charged to individuals who have insurance covering such care are Medicare rates 99.99% or greater of the time.
The economic impact on the State of North Carolina (as a self-funding entity) will be a reduction in the cost of health care benefits of an estimated 40% – in dollar terms $1.2 billion annually – based upon the current reported spending of $3 billion.
State beneficiaries, as obligors, will benefit from improved access to care and paying out-of-pocket only an amount they can afford for their entire family’s care. Eliminated are any concerns a family members’ medical expenses could render the beneficiary, as obligor, medically indigent.
All North Carolinians will benefit from improved access to care, improved affordability, a reduction in spending on health care of an estimated 40 percent, I do not have the data to determine the dollar amount but it will be substantial, being generally healthier, and longer life expectations as a result of the NCHP mandating the state’s hospital organizations amend their FAP to include an indigency policy, business practices and processes to advance providing the charitable patient care and community benefits as intended by tax-exempt (charitable) hospital organizations under CMS’ policy and IRC § 501(r).
NCHP Mandates
- The hospital organization’s independent auditor shall attest annually the organization’s FAP, business practices and processes do indeed advance providing the charitable patient care and community benefits it is required to provide as intended by its special tax status.
- “Financial Assistance Eligibility Screening – The state’s hospital organizations shall engage an independent third-party credit expert to determine all uninsured and underinsured obligors’ “financial ability-to-pay the hospital organization’s charges so as to not be rendered “medically indigent” at admission
- The hospital organization shall provide to uninsured and underinsured obligors, at admission, a copy of its FAP. The hospital organization shall review the FAP with the obligor – honestly, forthrightly, and in good faith disclosing any financial assistance to which the obligor may be entitled. Obligors of limited means will cease being rendered medically indigent and the hospital organization will be fulfilling its charitable obligation, acting altruistically – unselfishly, concerned for, or devoted to the welfare of others – complying with CMS policy and the legislative intent of IRC § 501(r). The obligor would affirm receipt of the FAP, and the hospital organization disclosed the maximum out-of-pocket obligation, if any, to the hospital. The obligor’s copy would be affirmed by the hospital representative reviewing the FAP and out-of-pocket obligation if any.
I would welcome any opportunity to address your questions.
Thank you in advance for your work on behalf of all North Carolinians, stay healthy & best regards,
/S/
Roger Berliner
Advocate
Vision of a New Way
1063 Snowdon Ct
Asheboro, NC 27203
336-672-1230 Office
336-460-0330 Cell
roger.berliner@visionofanewway.org
www.visionofanewway.org