Presumptive eligibility: A promising solution to medical debt

Medical debt solutions are in the news again, as the Consumer Financial Protection Bureau recently moved to ban medical debts from being included on credit reports. This policy change could protect the millions of Americans with medical debt from further economic harm due to low credit scores.

However, policymakers are also looking for upstream solutions to prevent medical debt debt before it starts. One of the most promising solutions is something called “presumptive eligibility.” Here’s what makes this idea exciting, and why organizations in the medical debt space are adding it to their policy agendas.

What is presumptive eligibility?

Nonprofit hospitals have to have a financial assistance policy that outlines who is eligible for free or discounted care. Generally patients are required to apply for assistance, a process that can be very long and require reporting sensitive information like household income, assets, expenses, and more. The administrative burden of applying for assistance can hinder eligible patients from applying and receiving assistance.

That’s where presumptive eligibility comes in. Rather than require a patient to apply for assistance to be approved, hospitals can make it their policy to automatically approve certain patients for assistance based on their income, use of other means-tested programs, unhoused status, or other characteristics. In these cases, hospitals “presume” that certain patients are eligible for assistance and automatically apply care discounts.

Some states already have policies around presumptive eligibility for financial assistance that hospitals have to follow. For example, Illinois requires urban hospitals to make patients automatically eligible for assistance if they participate in Supplemental Nutrition Assistance Program (SNAP), Women, Infants and Children Nutrition Program (WIC), and some other government programs. Similarly, Maryland requires hospitals to automatically approve patients for assistance if they receive benefits for social service programs. And Oregon’s 2023 legislation requires hospitals to screen all patients for financial assistance and apply discounts automatically if patients are uninsured, covered by Medicaid, or owe at least $500.

Why it works

A big reason presumptive eligibility works is because it’s automated, removing the “hassle factors” that can stop people from applying. Automation has been proven as a powerful tool in behavioral science. For example, participation in 401(k) retirement plans in the U.S. increased from 47% to 93% of workers contributing when automatic enrollment became standard. Presumptive eligibility also has the potential to get around barriers that hospitals may erect to make it harder for patients to access assistance.

A word of caution

As artificial intelligence (AI) tools have grown more popular, hospitals are increasingly using AI to automate their billing and collections policies. According to a study commissioned by Change Healthcare, 65% of hospitals in their sample use AI for revenue cycle management, with eligibility and benefits being a popular AI function. These tools allow hospitals to pull credit scores and other financial data about patients to screen them for financial assistance.

However, these tools can also be used for the opposite effect—to squeeze as much money out of patients as possible. Among hospitals using AI for revenue cycle management, 62% are using AI for purposes of “patient payment estimation” purposes, according to Change Healthcare. Rather than use financial data to make patients eligible for assistance, some hospitals are using AI to predict which patients will pay their bill and how much, ostensibly to try and get as much money out of them as possible.

As AI tools are poised to become ubiquitous in the hospital billing space, we should encourage hospitals to use them for good (to implement presumptive eligibility and increase access to assistance) rather than just to increase their bottom line.