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Law lets some hospitals seize tax refunds

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Via AP Business

CHARLESTON, S.C. (AP) — A South Carolina law originally written to help state and local governments collect debts is being used by some state hospitals to seize tax refunds from people with past-due medical bills.

A report on the practice in Sunday’s Post and Courier says much of the money flows to some of the region’s largest health care companies. The newspaper reported that such health organizations took at least $92.9 million in more than 172,000 seizures to pay off past-due medical bills in 2017. It also noted the burden the program can place on lower-income people with medical debts.

These little-known mechanisms, the Setoff Debt Program and another that collects citizens’ wages, allows select hospitals to use the Revenue Department as their debt collector if it can show ties to state or county governments.

The report says those ties, however, are often tenuous. It says private companies have come to dominate this program, which was intended to help governments settle overdue bills and recoup taxpayer dollars. In fact, money collected by the hospital systems now dwarfs what local governments collect.

Patients foot the bill for that work, with as much as a $50 fee tacked onto their debt.

Hartley Powell, director of the Revenue Department said the Setoff Debt program helps government entities “better fund essential public services.”

Hospitals that don’t qualify for the program say it gives their competitors an unfair advantage.

Patients often aren’t aware the program even exists until their tax refund check goes missing and they find themselves trying to navigate a complicated system with little recourse for debtors.

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Medical bills are the largest drivers of bankruptcy and debt in South Carolina, according to research by the Urban Institute. About a third of the state’s population under 65 has past-due medical bills.

When dialysis patient Paul Jackson, 62, of Elgin had to go to The Regional Medical Center in Orangeburg to see a specialist, the bill totaled almost $4,000.

He went to the hospital’s billing office to tell them he couldn’t afford the bill, and he said he was assured it would be taken care of. But the hospital still sent his debt to the Department of Revenue, he said, hoping to seize both his tax refund and his wages. Jackson, who is on Medicare and Social Security Disability, panicked.

“It shocked the devil out of me,” he said.

Defenders of the program say it’s a needed last resort for some hospitals. But use of the Setoff Debt Program extends far beyond small hospitals. The Post and Courier found the biggest beneficiaries are companies with thin government ties whose executives bring in six- or seven-figure salaries.

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Information from: The Post and Courier, http://www.postandcourier.com


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