Lawmakers Push to Limit Wage Garnishment for Medical Debt Across Eight States

Lawmakers in at least eight states are advancing legislation aimed at restricting wage garnishment for unpaid medical bills. This movement, which spans states including Colorado, Florida, Hawaii, Indiana, Maine, Michigan, Ohio, and Washington, seeks to protect patients from financial ruin as healthcare costs continue to rise and federal debt protections diminish.

The latest efforts follow a concerning trend highlighted by a recent investigation conducted by KFF Health News, which revealed that courts in Colorado approve around 14,000 wage garnishment requests annually for medical debt. This practice is not limited to large urban hospitals; it also affects smaller rural facilities, physician groups, and public ambulance services. A troubling example from the investigation showed a family losing wages due to an ambulance company incorrectly billing them instead of Medicaid, leading to severe financial consequences including loss of electricity.

Wage garnishment allows creditors to reclaim debts by obtaining court permission to deduct payments directly from a debtor’s paycheck. This process can strip individuals of their ability to prioritize essential expenses, according to Lauren Jones, legal and policy director for the National Center for Access to Justice. While it is legal for creditors to garnish wages for medical debt in most states, new legislation aims to ban the practice entirely or limit it by exempting low-income earners from garnishment.

Efforts to reform wage garnishment laws are part of a broader initiative to address the burdens of medical debt on individuals and families. These measures include proposals to exclude medical debt from credit reports, prevent liens on homes, and cap interest rates for unpaid medical bills. However, debt collectors argue that such restrictions may hinder healthcare providers’ ability to maintain operations and provide necessary services.

Scott Purcell, chief executive of ACA International, an association representing credit and collection professionals, expressed concerns about the proposed legislation. He emphasized that the wage garnishment process includes multiple consumer protection measures and that the reforms could exacerbate existing challenges for healthcare providers, particularly in rural areas.

In Colorado, the proposed legislation would not only ban wage garnishment for medical debt but also limit bank garnishments and establish new rules for payment plans. Creditors would be required to verify whether uninsured patients qualify for public health insurance before pursuing collections. Additionally, the bill holds medical care providers liable for non-compliance, with penalties starting at $3,000.

Advocates for the legislation, including Dana Kennedy from the Denver-based Center for Health Progress, argue that access to healthcare should not lead to financial disaster. Kennedy pointed out that many individuals affected by wage garnishment are employed in low-wage jobs, and the legislation aims to alleviate their financial distress while ensuring healthcare providers receive compensation for their services.

Colorado state Senator Mike Weissman, a co-sponsor of the bill, highlighted the unique nature of medical debt compared to other forms of debt, noting that individuals often have no choice when it comes to medical care. Carolyn Carter, a senior attorney with the National Consumer Law Center, emphasized that broad policies that simplify access to protections are more likely to succeed.

While some lawmakers advocate for outright bans on wage garnishment, others, like Washington state Senator Marko Liias, are pursuing more moderate approaches. Liias is working on legislation that would exempt a larger portion of low-wage earnings from garnishment. Despite pushback from some industry representatives, Liias believes it is crucial to strike a balance between protecting patients and ensuring that healthcare providers can recover their costs.

The debate surrounding wage garnishment for medical debt continues to evolve, with advocates and opponents presenting compelling arguments. As states grapple with the implications of these proposed changes, the focus remains on finding a solution that safeguards both patients and healthcare providers.