Maine Passes Amendment on Medical Debt

On April 22, 2024, Maine became the most recent state to enact legislation aimed at limiting the collection of medical debt. The law, An Act to Prohibit Unfair Practices Related to the Collection of Medical Debt, amends Maine’s Fair Debt Collection Practices Act and concerns fees and interest, a litigation exemption, and the definition of medical debt. The full bill can be found here and goes into effect on August 9, 2024.

Unfair Practices and False or Misleading Representations

One of the main changes to the collection of medical debt is the prohibition on charging interest or fees. The amendment states that it is an unfair practice to charge any interest on debt or fee for collecting debt “that the debt collector knows is medical debt.” Further, implying that a fee or interest may be charged will be viewed as a false or misleading representation.

It will also be considered an unfair practice for a collector to pursue litigation against a consumer without first providing notice to the consumer “that litigation may not be pursued when the debt collector or collection agency knows the consumer’s household income is not more than 300% of the federal poverty guidelines[.]” A collector or agency must wait 30 days for a consumer to provide this evidence before proceeding to litigation.

Medical Debt Definition

The act provides the following definition for “Medical Debt”:

“Medical debt” means debt arising from health care services, including dental services, or health care goods, including products, devices, durable medical equipment and prescription drugs. "Medical debt" does not include debt arising from services provided by a veterinarian; debt charged to a credit card unless the credit card is issued under an open-end or closed-end credit plan offered solely for the payment of health care services; debt charged to a home equity or general purpose line of credit; or secured debt.

insideARM Perspective:

The glass half-full view of this amendment is that, while it presents a number of obstacles for an already difficult type of debt collection, it could be worse. The definition it put forward for “medical debt” importantly excludes credit cards that aren’t specifically for health care services, the bill does not prohibit credit reporting medical debt, and does not inhibit the sale of medical debt.

However, that silver lining still surrounds a dark cloud. The amendment makes collecting medical debt less viable by prohibiting interest and fees, creates new violations of the statue, and requires collectors to determine whether litigation can be pursued by sending notice to and receiving evidence from consumers concerning their household income. The latter alone will require changes to collection letters, new procedures, and employee training.

It is ironic that while doctors are taught to find and address the root cause of an ailment, lawmakers continue to focus only on the symptom that is medical debt collection. Not only will this approach fail to cure rising medical costs, in the long run it may harm the consumers it aims to protect in the form of fewer healthcare options, increased costs, and declining quality of care.