BILL ANALYSIS
AB 774
Page 1
Date of Hearing: April 20, 2005
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Judy Chu, Chair
AB 774 (Chan) - As Introduced: February 18, 2005
Policy Committee: HealthVote:10-4
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires each hospital to develop a policy specifying
how the hospital will determine the financial liability for
services rendered to patients who have incomes of less than 400%
of the federal poverty level (at or below $64,360 for a family
of 3), and requires the hospital to grant an allowance that
effectively caps the patient's financial liability to the
highest amount the hospital would receive from Medicare,
Medicaid or worker's compensation. Specifically, this bill:
1)Requires each hospital, for financially qualified patients
(patients with incomes less than 400% FPL who are either
uninsured or underinsured, a patient's whose co-payments,
deductibles, medical or hospital bills exceed 5% of the
patient's annual income), to specify in its policy how the
hospital will determine and apply allowances for services
provided to financially qualified patients. The allowance
must, at a minimum, be equal to the difference between the
charge for the services set forth in the hospital's
established charge schedule and the greater of the payment the
hospital would receive from the Medicare Program, the Medicaid
Program, or workers' compensation.
2)Requires each hospital to provide patients with oral and
written notice of the hospital's policy for financially
qualified and uninsured patients at the time of admission and
discharge. Requires the notice to also be provided to
patients who receive emergency or outpatient care and who may
be billed for that care, but who were not admitted. Requires
AB 774
Page 2
the notice to be in the language spoken by the patient, and
requires all written correspondence to the patient to be
language-appropriate.
FISCAL EFFECT
1)One-time special fund cost (Health Data Fund) to the Office of
Statewide Health Planning and Development (OSHPD) of $106,000
beginning in 2005-06, and on-going special fund costs of
approximately $375,000.
2)Indeterminate but significant on-going GF costs to University
of California hospitals and to state-funded health care
programs, likely in the tens of millions of dollars annually.
By limiting the amount hospitals can charge certain self-pay
patients and delaying referral to collection, these costs
could be shifted to other payers, including the State of
California, which purchases coverage for state employees and
retirees through CalPERS, and pays for half to one-third of
the costs of the over 7 million individuals enrolled in the
Medi-Cal and Healthy Families Programs. The actual fiscal
impact of this bill upon the state as a purchaser and to UC
hospitals is unknown.
SUMMARY CONTINUED
3)Requires notice of the hospital's policy for financially
qualified and self-pay patients to be clearly and
conspicuously posted in various locations in the hospital.
4)Requires each hospital to submit to OSHPD a copy of the
application for financially qualified patients used by the
hospital, including the charity care section of that
application.
AB 774
Page 3
5)Requires a hospital, if a hospital bills a patient who has not
provided proof of coverage by a third party at the time the
care is provided or upon discharge, as a part of that billing,
to provide the patient with a clear and conspicuous notice
that includes a statement of charges for services rendered by
the hospital, a request that the patient inform the hospital
if the patient has health insurance coverage, a statement that
if the consumer does not have health insurance coverage, that
they may be eligible for Medicare, Healthy Families, Medi-Cal,
California Childrens' Services Program, or charity care.
6)Limits, for at least 180 days after discharge or after the
final day service is provided, a hospital, its assignee,
collection agency, or billing service to specified debt
collection activities. Prohibits using wage garnishment or a
lien on a primary residence as a means of debt collection from
a financially qualified patient.
7)Requires, prior to commencing collection activities against a
patient, the hospital, any assignee of the hospital, or other
owner of the patient debt, including a collection agency, to
provide the patient with a clear and conspicuous written
notice containing a plain language summary of the patient's
rights under this bill, the Rosenthal Fair Debt Collection
Practices Act and the federal Fair Debt Collection Practices
Act.
8)Requires each hospital to provide to OSHPD a copy of its
self-pay policy, eligibility procedures, review process, and
procedure for determining self-pay pricing. This information
must be provided at least biennially on January 1st, or when a
significant change is made. OSHPD must make this information
available to the public.
COMMENTS
1)Purpose . This bill is sponsored by Health Access California,
which contends this bill is intended to curb the common
practice of hospitals charging three to 10 times what
insurance companies and government programs would pay for
AB 774
Page 4
exactly the same service. Health Access contends that this
bill creates consumer and financial protections so that
uninsured and underinsured families can get the hospital care
they need without facing financial ruin. According to the
author, there is no current law regarding the prices that
uninsured and underinsured consumers pay for health care.
This bill would require hospitals to charge the uninsured and
people with high medical costs who make below 400% FPL prices
that are no more than the highest reimbursement paid by
Medicare, Medi-Cal or workers' compensation. The author
continues that this bill protects consumers by giving them 180
days during which payment disputes get sorted out before hard
collection activity begins, and by requiring hospitals to post
and disseminate notices so that consumers, both insured and
uninsured, know what options are available to them.
2)Background . Uninsured patients generally face the highest
charges for hospital services, usually far in excess of the
rates paid by insurers and public programs such as Medicaid
and Medicare. Neither state nor federal law limit the amount
uninsured patients can be charged.
The Board of Trustees of the California Hospital Association
(CHA) adopted Voluntary Principles and Guidelines for
Assisting Low-Income Uninsured Patients on February 6, 2004.
These guidelines, among other provisions: (a) establish
financial eligibility at 300% of the FPL ($47,010 for a family
of 3 in 2004); (b) suggest hospitals should limit expected
payments to amounts that do not exceed the payment the
hospital would receive from Medicare, other government
sponsored health programs, or as otherwise deemed appropriate
by the hospital; (c) require posted notices in visible
locations regarding the availability of financial assistance;
(d) require communication in the primary languages of
patients; and (e) recommend development of standards and scope
of practices to be used by collection agencies. CHA committed
to full compliance of these guidelines by the end of 2004.
3)Opposition . The Alliance of Catholic Health Care (ACHC)
writes that although this bill incorporates many of the
provisions of the voluntary guidelines, they believe that
those guidelines allow for tailoring in the way hospitals
establish policies for providing free and/or discounted care
AB 774
Page 5
to uninsured patients, to account for the variation in patient
population and resources among hospitals. ACHC believes that
each hospital must be given the discretion to carefully
determine whether they can afford to go beyond the 300% level
required under the voluntary guidelines. CHA argues this bill
imposes rigid and punitive requirements on hospitals to
provide free care without addressing any of the underlying
factors that created the growing problem of the uninsured in
the first place.
The University of California (UC) argues this bill creates a new
public benefit for a sizable population who may have some
ability to pay for services rendered or otherwise afford
health insurance coverage. UC contends it has an established
commitment to provide free care and payment assistance to a
disproportionate share of the state's uninsured patients, and
that subjecting UC academic medical centers to additional
requirements threatens their ability to continue to provide
that care.
4)Previous Legislation . AB 232 (Chan), which failed on the
Senate floor last year, was substantially similar to this
bill. AB 232 would have required each hospital to develop a
self-pay policy specifying how the hospital determines charges
to be paid by self-pay patients, as defined, and would have
limited those charges for patients below specified income
levels. The bill also would have established limits on
billing and collection activities of hospitals and their
agents.
SB 379 (Ortiz) would have required every hospital to have a
charity care policy and to provide that policy to patients and
would have required OSHPD to develop a uniform charity care
application to be used by all hospitals. The Governor
Schwarzenegger vetoed the bill, stating that "the voluntary
guidelines must be given time to be implemented and reviewed"
and that it was his expectation that "all hospitals in the
state uphold their important commitment to the voluntary
guidelines and that they are applied evenly, consistently and
without hesitation."
5)Related Legislation . SB 24 (Ortiz) would require hospitals to
develop and provide notice of charity care and reduced payment
AB 774
Page 6
policies, would require hospitals' charity care and reduced
payment policies to limit charges to patients with incomes
below 400% FPL, and would require hospitals to limit their
collection activities for the first 150 days following the
date of discharge or service.
Analysis Prepared by : Scott Bain / APPR. / (916) 319-2081