Gov. Tim Walz and DFL lawmakers want to reduce the pain of medical debt on Minnesotans by restricting collections and banning hospitals and clinics from denying non-emergency care to patients with substantial overdue bills.

Restrictions are needed to protect patients from suffering financial ruin on top of the severe or chronic diseases that necessitated their medical care, Walz said in a Capitol press conference Friday.

"Credit card debt to buy a television is one thing," Walz said. "Debt because you have a heart attack or get hit by a car or have an illness is an entirely different thing. And the idea that we are charging massive interest on that or reporting it to a credit bureau and we're destroying lives over it makes absolutely no sense."

Hospitals already limit their collection activities through a voluntary agreement with the state Attorney General, but the legislation would make those limits permanent and expand them to clinics and outpatient facilities. Proposals include reducing interest on medical debts to 0%, preventing creditors from intercepting tax refunds from delinquent patients and relieving spouses from liability for their partners' overdue bills.

Minneapolis-based Allina Health ended its practice of denying non-emergency care to patients with substantial unpaid debts after it faced public scrutiny, but other systems such as HealthPartners and Mayo Clinic have used it in limited circumstances. Minnesotans came to the rescue last summer of a pregnant woman in Glencoe, Minn., donating money to prevent her from losing access to local medical care because of unpaid bills.

The proposals could present challenges for an increasingly vulnerable network of hospitals and clinics in Minnesota, which is struggling with the costs of a nursing shortage and the boarding of patients who get stuck in inpatient beds because there is no space for them in nursing homes or rehab facilities.

Hospital operators collectively wrote off $475 million as bad or unpaid patient debts in 2022, according to newly released financial data. While that represents less than 1% of what they charged patients, it deepens financial concerns when considering that 41 of 128 hospitals in Minnesota operated at a loss that year.

Lawmakers could soften the impact of the legislation by boosting the state's payment rates to doctors and restricting insurers' ability to deny coverage or pass more costs on to patients, said Dr. Laurel Ries, president of the Minnesota Medical Association, the trade group for the state's doctors. "Too often, insurance coverage is insufficient and involves often impenetrable rules and processes that pose a barrier to coverage."

Minnesota appears to have less of a problem with medical debts than other states, with the Urban Institute estimating that 2% of Minnesota adults have medical debts in collections, compared to 13% of adults nationwide. However, that widely-cited national figure is based on medical debts reported to credit rating agencies — and Minnesota hospitals don't report debts to those agencies under their agreement with the attorney general.

DFL lawmakers want to ban all hospitals and clinics from reporting debts to agencies, arguing that medical debts are different from consumer debts because they involve surgeries or treatments over which patients often have no choice. Walz called that practice "unconscionable" and supported the ban in the legislation, titled the Medical Debt Fairness Act.

Walt Myers, of Lakeville, supported the provision that would prevent spousal liability for medical debt, having experienced this unusual allowance in Minnesota law that saddled him with thousands of dollars in unpaid bills from his late wife's breast cancer treatment. It took months and stress to resolve $135,000 in debts, he said at the news conference. The legislation would have prevented that financial fight amid his grief.

"Unfortunately, I'm finding my story isn't that uncommon," he said.

The average medical debt lawsuit in Minnesota involved about $1,500, according to a review last fall of business-to-consumer cases filed since 2011. Attorney General Keith Ellison and the Minnesota State Bar Association revealed that finding, which suggests that the problem of medical debt goes beyond patients with extreme conditions such as cancer or major surgeries from traumatic accidents.

Many patients with unpaid debts can't afford routine medical expenses, even if they have insurance, because the deductibles and cost-sharing requirements can be unaffordable, the report showed.

"If you borrow money, you should pay it back," Ellison said at Friday's announcement. "We all agree on that, but we should also agree we shouldn't punish people for getting sick."

One concern is that medical debts prompt Minnesotans to refrain from other forms of medical care they need, worsening their health and resulting in even more expensive emergency care and surgeries over time. Lt. Gov. Peggy Flanagan said she recalled as a child "feeling guilty" when she got sick at a time when medical bills drove her mother to file bankruptcy.

Medical providers sometimes write off debts entirely, or sell them at pennies on the dollar to collection agencies that then try to gain payment. A new option has emerged with RIP Medical Debt, a charitable organization that purchases debts at reduced cost from providers and then cancels them.

The organization has erased nearly $31 million in medical debts for almost 33,000 Minnesotans.

Anne St. Martin, of Inver Grove Heights, spoke at the press conference in favor of a provision in the legislation that would spare people from medical debts resulting from billing mistakes, such as a clinician's coding error that resulted in a $250,000 bill and disrupted the treatment of her 7-year-old son's rare and lifelong disease. While care has been restored, the bill is outstanding and her family has been threatened with wage garnishment and other collection efforts, she said.

"We don't know how that will turn out," she said.