Minnesota legislators push to end state collection of tax refunds for private hospital debt

Minnesota would stop col­lect­ing med­i­cal debt for pri­vate hos­pi­tals, un­der pro­po­sals at the Capitol this ses­sion.

The state has used its revenue re­cap­ture program to inter­cept cer­tain pay­ments to resi­dents, in­clud­ing state in­come tax or prop­er­ty tax re­funds, and di­vert the dol­lars to med­i­cal bills. A Star Tribune re­port found the state has col­lect­ed tens of mil­lions in re­cent years to help large pri­vate nonprofit hos­pi­tals — a role some legis­la­tors say it should stop play­ing.

"The i­de­a of HealthPartners using the state as a col­lec­tion a­gen­cy for peo­ple of mod­est and low means just seems like a to­tal­ly wrong thing," said Sen. Jim Abeler, R-Anoka, who is spon­sor­ing one of the meas­ures that would end the revenue re­cap­ture proc­ess for cer­tain hos­pi­tals.

The Department of Revenue's re­cap­ture program was ex­pand­ed more than two de­cades ago to help hos­pi­tals that were facing a fi­nan­cial bur­den from pro­vid­ing care to un­in­sured and under­insured pa­tients. How­ever, peo­ple with in­come be­low cer­tain pov­er­ty lev­els would not have their tax re­funds giv­en to a hos­pi­tal.

Dur­ing a com­mit­tee hear­ing earli­er this month, James Mc­Clean with Re­gions Hospital and HealthPartners out­lined a list of steps they take be­fore using revenue re­cap­ture, from of­fer­ing fi­nan­cial as­sist­ance while the pa­tient is in the hos­pi­tal to mail­ing at least four state­ments af­ter some­one is dis­charged and re­peat­ed­ly call­ing to try to set up a pay­ment plan. The re­cap­ture program also in­cludes an ap­peals proc­ess, he said.

"We be­lieve we have put many safe­guards in place to en­sure revenue re­cap­ture is used ap­pro­pri­ate­ly and will con­tin­ue to work to ad­dress those con­cerns," Mc­Clean said. He add­ed that los­ing the re­cap­ture op­tion with­out an­oth­er mech­a­nism to ad­dress un­com­pen­sat­ed care would be a ma­jor chal­lenge.

But Rep. Liz Reyer, DFL-Eagan, said she read about the use of tax re­funds "with a cer­tain a­mount of dis­be­lief and a cer­tain a­mount of out­rage."

"You put off get­ting your car fixed, you put off get­ting a roof, you put your kids' school clothes on cred­it cards and you fig­ure, 'OK, I'm going to have that tax re­turn.' And then you have med­i­cal debt take it away. I think it's fun­da­men­tal­ly wrong," Reyer said. "It's also a mis­use of the state's pow­er."

Reyer has pro­posed two bills in the House to end the prac­tice. She hopes one of them will be in­clud­ed in the House Tax Committee's broad budg­et and pol­icy pack­age and will be passed this ses­sion.

One bill would end the as­sist­ance only to pri­vate nonprofit hos­pi­tals that lease a build­ing from a coun­ty or city. Reyer said that in­cludes fa­cili­ties in the HealthPartners, Essentia Health and CentraCare sys­tems. The oth­er pro­pos­al would also stop the state from seizing dol­lars to help am­bu­lance serv­ice pro­vid­ers.

The state program col­lect­ed $21.4 mil­lion for Re­gions Hospital, which HealthPartners owns, be­tween 2014 and 2019, a Star Tribune an­aly­sis of Revenue Department data found. Am­bu­lance ser­vices also got mil­lions dur­ing that time frame.

Am­bu­lance ser­vices might need more sup­port than hos­pi­tals as they make the tran­si­tion away from using the revenue re­cap­ture program, Reyer said, but legis­la­tors are still work­ing through the de­tails.

Al­li­na Health said in a state­ment Wednes­day that its em­er­gen­cy med­i­cal ser­vices pro­vide care for pa­tients, re­gard­less of their a­bil­i­ty to pay. "The revenue re­cap­ture program is used as a last re­sort af­ter work­ing ex­ten­sive­ly with our pa­tients to help them over­come any fi­nan­cial bar­ri­ers they are ex­peri­enc­ing," the health sys­tem said.

Mean­while, or­gan­i­za­tions such as Health Policy Ad­vo­cates are push­ing legis­la­tors to make the change. John Kol­stad with the group said Min­ne­so­tans are hav­ing their tax re­funds tak­en with­out get­ting a chance to ar­gue their case in court and have a judge con­sider the full cir­cum­stances.

Sen. Me­lis­sa Wiklund, DFL-Bloomington, said hos­pi­tals and am­bu­lance ser­vices do need to col­lect debts. But they can use pay­ment plans and oth­er meth­ods that do not de­sta­bi­lize some­one's fi­nan­ces, said Wiklund, who is spon­sor­ing one of the bills and push­ing for a hear­ing in the Tax Committee. "They have oth­er ways to de­vel­op col­lec­tion plans with peo­ple that don't lead to this same ab­rupt re­cap­ture," she said.

Form­er staff writ­er Ma­ris­sa Evans con­tri­buted to this re­port.

Jes­sie Van Berkel • 651-925-5044