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A bipartisan pair of state lawmakers has proposed a plan to rein in the ways health care providers in Ohio can collect on medical debts.
Their legislation, under committee review in the Ohio House, would prohibit providers from garnishing debtors’ wages. Garnishment is a legal term that refers to the process of judges allowing the providers to seize up to 25% of their former patients’ wages before they go out as paychecks.
House Bill 257 would also reduce from 8% to 3% the legal interest rate that runs on collection judgments and would prohibit health care providers from reporting unpaid medical debts to the agencies that establish people’s credit scores. Bad credit scores can limit access to loans and raise costs for borrowers.
In interviews, the sponsors – Rep. Jean Schmidt, a Cincinnati-area Republican, and Rep. Michele Grim, a Toledo Democrat – said medical debt isn’t like a car loan or credit card debt. Injuries and illnesses are usually unplanned, they said, and customers have little ability to price shop or weigh pros and cons before executing what are often expensive purchases for health needs.
“I think with wage garnishments and litigation, it’s just a very aggressive tactic. There are other ways that they can work with patients to get them to pay their medical bills,” Grim said. “I feel like [a hospital that garnishes wages] always assumes that patients don’t want to pay, but I think they do want to pay. Having medical debt is not anybody’s fault. It’s because we have a broken system.”
Schmidt, a marathon runner with health insurance, said a recent stress fracture left her with a $1,000 out-of-pocket bill before physical therapy.
She distinguished unforeseen, expensive medical events like that from things like excessive credit card debt where people’s conscious choices lead them into debt.
“What about the people on the margins who only have a few thousand in the bank account and are living paycheck to paycheck?” she said. “Nobody plans this. You don’t say, ‘Gee, I just think I’ll go have a stress fracture in my knee. That’s a lot of fun.’”
Under the bill, hospitals would still be able to sue patients over unpaid debts and apply pressure through other means, including repeated phone calls and liens. But it ends their ability to garnish wages, which prioritizes the medical bills over any number of competing costs like food and rent.
Passage would tack Ohio onto a growing list of states shielding consumers from the effects of medical debt. For instance, Maine, Colorado, Oregon, Vermont and others have recently passed legislation to prohibit providers from reporting medical debt to the credit agencies.
About 8% of American adults carry medical debt, according to researchers with KFF. Approximately 6% of adults (14 million people) in the U.S. owe more than $1,000, 2% (6 million people) owe more than $5,000 in medical debt, and 1% of adults (3 million people) in the U.S. owe more than $10,000 in medical debt.
It’s one of the leading drivers of bankruptcy and an outgrowth of a system of rising health care costs, premiums, and cost shares shifted onto patients.
One striking example of the practice comes from Logan County, an hour west of Columbus. There, in Bellefontaine, one small town hospital has sued more than 2,700 of its patients in the past two years alone for debts large and small. The hospital wins almost every case, usually against patients who rarely are represented by lawyers.
Signal Ohio analyzed court records showing how dramatically the lawsuits increased and talked to more than a dozen of the patients sued – some of them filed for bankruptcy. You can read that story here.
Debt collectors say garnishment is an important tool
The legislation has drawn public opposition from several law firms involved in the debt collection process.
Garnishment is a legitimate tool to get money from people who have it but “refuse” to pay their bills, said Alicia Paley, chief operating officer of Witkes Law Firm in Beachwood, which advertises services of collection calls, skip tracing, property liens and garnishments for its clients.
“Many of these employers operate on slim margins and rely on fair, enforceable repayment to survive,” she said. “This bill, if enacted, would accelerate closures, consolidate healthcare into fewer, larger players, and ultimately reduce access and increase costs for patients across Ohio.”
Chris Murphy, a collections attorney, said if the bill were enacted, hospitals would shift to a model of requiring cash deposits before providing care, which would be unpopular with patients.
Removing garnishments might even “encourage” those who have the money to delay or refuse medical payments, said Ray Dziubla, CEO of iTX Healthcare, a debt collector in Findlay, Ohio.
“This could lead to a culture of non-compliance, where patients prioritize other discretionary expenses over medical bills, knowing that providers have limited recourse,” he said. “Such behavior could strain healthcare systems, particularly for hospitals and clinics serving lower income communities, where unpaid bills already pose a significant challenge.”
Lawmakers say lenders need full credit histories
The bill sponsors say medical debt is a poor metric to analyze a person’s credit worthiness, given the emergency situations behind many such debts.
But two Republicans on the House Health Committee said they’re worried lenders would lack critical information when analyzing whether a person can pay back a loan.
Rep. Brian Stewart, a central Ohio Republican who leads the powerful House Finance Committee, voiced such views during a recent hearing. He said a significant amount of medical debt indicates “credit worthiness issues” – information that lenders should be entitled to.
Besides lenders, credit reports also “protect” the consumer, said Rep. Angie King, so they don’t take on bigger loans than they can pay back.
“My concern is that if it’s not reported to the credit reporting agencies, and somebody goes to get a new car or new home, that they’re artificially going to get more purchasing power and unable to make their payment, bruising their credit even more,” she said.
Most hospitals keep quiet
In public, the only hospital to testify on the bill is University of Cincinnati Health, a network of hospitals in Southwest Ohio. Medical debt, according to chief clinical officer Arthur Pancioli, is a significant barrier for poor people in need of health care.
The bill will “safeguard individuals in our community from the last effects of medical debt and aggressive collection tactics,” he said.
Other hospitals have registered to lobby on the bill (which doesn’t require them to reveal a supportive or opposing designation) but declined to speak publicly.
OhioHealth, a Central Ohio network with several collections lawsuits pending in county court, is following the bill but hasn’t taken a position and doesn’t plan to offer any testimony, according to spokesman Colin Yoder.
Nationwide Children’s Hospital said it’s following the bill but doesn’t engage in any conduct the legislation would prohibit, per spokeswoman Michelle Fong.
Ohio Hospital Association spokesman John Palmer said his organization, which represents hospitals around the state, hasn’t taken any formal position.
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