July 5, 2012; Source: Fox Business

If at any time in your life you’ve ever received a call from an aggressive tax collector about an unpaid hospital bill, you’ll know the importance of the new rules for nonprofit hospitals regarding debt collection.

This is one of the several elements of the Patient Protection and Affordable Care Act that recently won a reprieve from the U.S. Supreme Court. Prior to the ACA, if you didn’t pay your hospital bill, you might be counted as part of the hospital’s charity care expenses, but that rarely stopped the hospitals from chasing debtors with debt collection calls and threats of liens, wage garnishments, seized bank accounts, and legal action.

You might have been surprised to learn that the bad debt at the hospital turned up on your credit score, lowering your score and consequently increasing what you might have to pay on credit cards and mortgages. You might not have even known that the hospital had a charity care provision, much less have had any sense of what it contained and whether your specific circumstances would have qualified.

Now, with the ACA, the IRS has established not only a requirement that nonprofit hospitals spell out their charity care policies, but also a prohibition against hospitals using very aggressive debt collection tactics against low-income non-payers. Now, patients can be told about the hospital’s charity care policies so that in the midst of a medical situation, they don’t have to worry about the consequences of their inability to pay.

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Don’t think that health care insurance means free health care. It doesn’t. For most people, there are deductibles to pay and procedures that might not be fully covered in any case. For others, such as undocumented immigrants, there is no health care coverage under the ACA. Despite health care reform, health care in the U.S. still won’t be free.

The trade association for both nonprofit and for-profit hospitals, the American Hospital Association, thinks that the ACA regulations are unnecessary, overly prescriptive, and could “discourage hospitals’ innovations and best practices.” The past practices of hospitals with charity care and debt collection make the AHA’s argument difficult to trust. If you or your nonprofit have had experience dealing with the charity care and debt collection practices of nonprofit hospitals, you might be well advised to look at the IRS’s draft regs [PDF] and make comments. The window for your input closes September 24.—Rick Cohen