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Income Levels of Bad-Debt and Free-Care Patients in Massachusetts Hospitals

Most Massachusetts hospital patients who do not pay their medical bills are low-income adults who may qualify for public health insurance. According to a recent study published in the July/August issue of Health Affairs and supported in part by The Commonwealth Fund, hospitals could improve access to care for many low-income people if they did a better job of helping them enroll in Medicaid, the Child Health Insurance Program, or other state insurance programs. Higher enrollments could also reduce hospitals' financial burdens.

The study, “Income Levels of Bad-Debt and Free-Care Patients in Massachusetts Hospitals,” by Joel S. Weissman, Paul Dryfoos, and Katharine London, examined more than 350,000 bad-debt and free-care claims at seven Massachusetts hospitals in 1996. The authors found that most patients had annual incomes below the federal poverty level, presumably making them eligible for either public health insurance programs or hospital-based free care.

The analysis is part of a study of the state's system for reimbursing hospitals through a pool of funds for a portion of the cost of uncompensated care provided to qualified patients. Three types of care are eligible for reimbursement: full free care for people earning below 200 percent of the federal poverty level, or $15,600 for a family of four; partial free care for people earning from 200 to 400 percent of poverty; and emergency care provided to uninsured patients who did not fill out an application for free care and who defaulted on their bills. Bad debt for nonemergency services, however, is ineligible for reimbursement. Using data collected by the Massachusetts Division of Health Care Finance and Policy, the authors found that 84 percent of free-care cases, 78 percent of emergency bad-debt cases, and 64 percent of nonemergent bad-debt cases involved patients with incomes below the federal poverty level.

Despite distributing about $330 million from its uncompensated care pool in 1996, Massachusetts still experienced a shortfall of about $148 million. The pool's deficit could shrink, however, if hospitals identified poor nonemergent bad-debt patients and enrolled them in state health insurance programs.

While many hospitals may have difficulty identifying patients' incomes accurately and encouraging the use of subsidized care, the authors note that these obstacles could be overcome to some extent by instituting better intake procedures and offering financial counseling to patients.

Facts and Figures

  • Massachusetts is one of the few states to use an uncompensated care pool to reimburse hospitals for treating uninsured patients.
  • Only 1 percent of free care, 4 percent of emergency bad debt, and 6 percent of nonemergent bad debt in Massachusetts was attributed to patients with incomes above 400 percent of the poverty line.
  • In 1996, Massachusetts hospitals incurred nearly $85 million in nonemergent bad debt for patients with incomes below 200 percent of the poverty level.

Publication Details



J. S. Weissman, P. Dryfoos, and K. London, "Income Levels of Bad-Debt and Free-Care Patients in Massachusetts Hospitals," Health Affairs, July/Aug. 1999 18(4):156––66.