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Governor Signs Bill Prohibiting Wage Garnishment and Home Liens to Satisfy Medical Debt

Governor Hochul signed legislation last week prohibiting hospitals, nursing homes, and health care professionals from collecting on judgments in medical debt actions by placing a lien on the debtor's primary residence or garnishing their wages. The Governor noted that more than 50,000 New Yorkers have been sued for medical debt over the past five years. The bill arose out of a national movement to protect consumers from unfair medical debt collection practices and alleviate the effects of medical debt on their financial stability.

Although LeadingAge NY recognizes the positive intentions behind the legislation, the association advocated for a veto, in light of the differences between hospital and nursing home financing and Medicaid coverage. Unlike hospital patients, nursing home residents may qualify for Medicaid even if they have substantial income. As a result, most nursing home care (nearly 75 percent) in New York is reimbursed by Medicaid. However, nursing home residents are expected by the state and federal governments to contribute to the cost of their care by paying the nursing home their excess income, known as the net available monthly income (NAMI) amount. Nursing home reimbursement from Medicaid is, in turn, reduced by the expected NAMI payments from residents. If nursing homes are unable to collect the NAMI, they must still provide the same care to the residents at the reduced Medicaid rate. Unlike hospitals, they do not have access to an indigent care pool to subsidize unpaid debts.

The legislation prevents nursing homes from enforcing judgments in actions to collect NAMI payments and private pay debts through garnishment of wages or liens on homes. LeadingAge NY noted in its letter to the Governor that nursing home debt collection cases often arise because the person who controls the resident's funds is taking the resident’s money for his or her own benefit and refusing to pay for the resident’s care – not because the resident does not want to, or cannot afford to, pay these expenses. Without the ability to enforce judgments for NAMI and for private pay debts, nursing homes will lack the resources necessary to deliver high-quality care, while affluent New Yorkers receive nursing home care free of charge.

Unfortunately, these arguments proved unpersuasive to the Governor. LeadingAge NY will advocate for the inclusion of amendments to this statute in the Governor's Executive Budget.

The new law is effective immediately.

Contact: Karen Lipson, klipson@leadingageny.org