Hospital Financial Assistance Shouldn’t Be ‘Charity Care’

Updated on May 14, 2024

America has a medical debt problem, and a key solution by another name might just work better.

Medical debt is by far the leading cause of bankruptcy in the U.S. All totaled, about a third of working Americans shoulder a whopping $200 billion in medical debt.

Many of us are prone toward a kind of guilt or shame when it comes to our health or our pocketbooks. But the term “medical debt” is a kind of misnomer. People don’t choose to go to the urgent care or emergency room the way you might choose to put a new purchase on a credit card or even take on student loans.

One of the more effective tools to preventing medical debt also has a major semantic problem, too. Who, after all, wants to sign up for something called “charity care”?

A powerful and underutilized tool in the fight against medical debt

Under the Affordable Care Act, nonprofit hospitals are required to offer free and discounted care to eligible patients. At some hospitals, families with incomes up to 600% of the Federal Poverty Level can receive significant discounts on their out-of-pocket medical expenses.

Presenting the eligibility criteria as a multiple of the poverty level furthers a harmful connotation. The fact is, even a family of four making $180,000 a year is eligible for financial assistance in some places.

But many don’t realize it. A recent survey of 2,000 American adults found that 53% were unaware of hospital financial assistance.

The term “charity care” does not appear in the ACA, but it has become a widely accepted shorthand. Recent investigations by The New York Times, The Wall Street Journal and others lean on the term “charity care”. State legislatures in Minnesota, Oregon and Washington state have codified the term in state laws.

It makes sense. “Financial assistance policies,” the term that does show up in the ACA, is so nonspecific that it borders on being meaningless. The term “financial assistance,” is used by many governments for policies and programs that provide many different kinds of support, including unemployment, housing and food relief. 

“Charity care” is more specific, but it is misleading, and I think it further discourages the very people these programs are meant to help from applying. In fact, one of the main reasons survey respondents said they haven’t applied for hospital financial assistance programs is because they didn’t want to accept “charity.”

But financial assistance isn’t charity. The financial assistance offered by hospitals isn’t a federally funded entitlement like SNAP (aka “food stamps”) or housing assistance (formerly known as Section 8). It’s not part of the federal budget, and accepting financial assistance at a hospital doesn’t mean someone more deserving doesn’t get it.

Nonprofit hospitals benefit from material tax advantages. In return, they offer free and discounted care to income eligible patients. If patients don’t take advantage of financial assistance and instead accrue more medical debt than necessary, the hospital is failing to deliver on its mission of serving the community.

Putting the “hospital” in “financial assistance”

My colleague, Nick McLaughlin, worked in the hospital billing and collections field for 12 years. He saw first-hand that most patients struggling with medical debt would have been eligible for hospital financial assistance, but never applied. 

So, Nick did a wonderfully American thing. He started a company to fix this problem and called it HFA, an acronym for hospital financial assistance.

Then in 2022, Nick and HFA joined Goodroot, a startup accelerator I founded for companies focused on access and affordability in healthcare. To mark this new chapter, he changed the name of the company to Breez Health.

It’s a catchier name, but I still like using “hospital financial assistance” when I explain what Breez does. It’s straightforward, clear and it doesn’t carry a self-sabotaging stigma the way “charity care” does.

In its abbreviated form, HFA sounds like a run-of-the-mill healthcare acronym. Everyone has heard of HMOs and HSAs. It rolls off the tongue for an administrator talking to a patient about billing: “Here’s our HFA application.”

HFA seems like the perfect term for the single most powerful tool to prevent medical debt. The HFA system still has a lot of kinks to sort out, and perhaps a better name will give momentum to innovators like Nick who are working to make it better.

Michael Waterbury
Mike Waterbury
CEO at Goodroot

Mike Waterbury is CEO of Goodroot, a community of companies reinventing healthcare one system at a time. With a shared mission of increasing affordability and access in healthcare, Goodroot provides business infrastructure to help visionary healthcare professionals launch their own companies to fix chronic problems in the system. Goodroot's community companies — AlignRx, Breez, CoeoRx, Empara, Emry Health, Nuwae, Penstock, RemedyOne and Sola — offer innovative services and strategic guidance for healthcare stakeholders such as employers, brokers, PBMs, health plans, third-party administrators, pharmaceutical manufacturers and hospitals.