Medicare May Still Be On the Hook for Healthcare Bad Debt Sent to Collection Agencies

The point is: SOMEONE is going to pay these healthcare debts.

At issue is whether or not healthcare providers can “be reimbursed for Medicare beneficiaries’ bad debts even after sending them to a collection agency.”

It comes down to the definition of “uncollectible.” Can a Medicare beneficiary’s debt be considered uncollectible if it has been referred to a collection agency? George Washington University Hospital says, “Yes, that debt should be considered uncollectible” — probably because if it were collectible, the hospital wouldn’t be sending that debt to a collection agency. So they took their “Yes” to court.

Medicare, though, sees it differently: “Because costs for services provided to Medicare patients cannot be shifted onto non-Medicare patients, providers can collect payment for beneficiaries’ bad debts from the Medicare program under certain circumstances. However, the Centers for Medicare & Medicaid Services said that bad debts sent to a collection agency are automatically presumed to be collectible, and therefore are not reimbursable from Medicare coffers.”

History turned out to be on the side of the hospitals in the courtroom of Judge Gladys Kessler of the U.S. District Court for the District of Columbia: “The hospitals argued that bad debts sent to an agency were not considered automatically collectible prior to 1987. Therefore, any CMS decision to the contrary would break a moratorium imposed by Congress preventing any change in CMS bad debt policies from those in effect as of Aug. 1, 1987.”

What will this mean? Well, more than likely it will mean an appeal by CMS. But for healthcare providers, it means a higher likelihood of getting that bad debt paid and off its books.