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New Washington Mandate Heavily Reduces Health Care Costs

(The Center Square) – About half of Washingtonians will have zero or heavily discounted out-of-pocket costs for hospital care in the state starting Friday.

That reduction in cost is mandated by the state but not funded by taxpayer dollars. While lower-income people will benefit, some fear it could be the last straw for smaller rural hospitals.

Lawmakers amended Washington’s Charity Care Act this year to extend discounted hospital care to about 1 million additional residents and mandate zero out-of-pocket cost for another million who already qualified for discounted rates.

“No Washingtonian should be bankrupted by a trip to the emergency room,” Rep. Tarra Simmons, D-Bremerton, a sponsor of the bill, said in a statement. “I am proud to have worked with the Attorney General to update and standardize Washington’s charity care law. Four million Washingtonians will now be eligible for free or reduced out-of-pocket hospital costs making our healthcare system fairer and more equitable.”

Senate Minority Leader John Braun, R-Centralia, who opposed the bill, told The Center Square, “The money doesn’t come from nowhere. It will come from reduced services, or it risks being the last straw for rural hospitals, which operate on the slimmest of margins and are still reeling from the pandemic.”

“The bill was well intentioned,” Braun added, “but bad timing for critical organizations in our communities who are trying to get back on their feet.”

Elizabeth Hovde of the Washington Policy Center told The Center Square, “I believe [the law] will make health care more expensive for all. Safety nets for people in need are important but creating wider safety nets isn’t wise.”

Americans spend an average of $5,000 a year on out-of-pocket health care costs, according to the Bureau of Labor Statistics, and 56% have had medical debt referred for collection, according to Debt.com

The amended law categorizes discount rates hospitals must offer into two tiers. Tier 1 is for large health care systems, which includes 50 hospitals. Tier 2 is for smaller, independent hospitals.

Discounts or waivers for out-of-pocket costs are determined based on the patient’s household income compared with the poverty level established by the federal government. Currently, that is $13,590 annually for an individual.

Starting Friday, Tier 1 hospitals may not charge out-of-pocket costs to individuals or families with income up to 300% the federal poverty level.

As an example, that means that a patient in a family of four with an income up to $83,250 would have zero out-of-pocket hospital costs at a Tier 1 hospital. A family of four with income up to $111,000 would receive a discount of 50% or 75% on out-of-pocket costs, depending on income.

For Tier 2 hospitals, no out-of-pocket charge may be made for individuals or families with income up to 200% of the federal poverty level.

So a family of four with an income up to $55,500 would have zero out-of-pocket costs at a Tier 2 hospital, and a family of four with income up to $83,250 must be offered a discount of 50% or 75% on out-of-pocket costs, depending on income.

The Fiscal Note that accompanied HB 1616 estimates the change will reduce the income of University of Washington hospitals by more than $11 million a year.

Braun also expressed concern on the impact of the law on the health insurance market. “It may encourage people to increase the deductible on their insurance because they know they won’t have to pay [out-of-pocket costs],” Braun said. “It may lead to market distortion.”

The Center Square requested but did not immediately receive comments from three other Tier 1 hospital systems in Washington.