Nursing homes and debt collectors are charging and suing family members and friends of long-term care residents, demanding payments for debts those people do not legally owe, consumer advocates and federal regulators allege.
Some nursing home admission agreements include provisions that attempt to make caregivers or other third parties personally responsible for paying for the resident’s care, the Consumer Financial Protection Bureau said in a new report examining the facilities’ debt collection practices. Under federal law, nursing homes participating in Medicare and Medicaid cannot make these provisions a condition of admission or continued stay in the facility. But some nursing homes hire debt collectors to collect residents’ unpaid bills — which can run into the hundreds of thousands of dollars — from third parties under those invalid provisions, regulators said.
Family members and friends who are subjected to these actions are often ignorant of the law and do not have the resources to respond to litigation, resulting in judgments against them. Some caregivers targeted for payments to care for a loved one have had their wages garnished and even lost their homes, the CFPB reported.
When debt collectors attempt to collect bad debts and provide information about those debts to credit bureaus, they may be violating federal credit collection and reporting laws, the CFPB and the Centers for Medicare and Medicaid warned in a joint letter to nursing homes and debt collectors Thursday.
Medical debt “is a very big pain point across the board, and we’re particularly concerned that medical debt on credit reports is often inaccurate,” CFPB Director Rohit Chopra told MarketWatch in an interview Thursday. Referring to the large numbers of nursing home residents who died during the pandemic, he said, their carers could now in some cases be “subject to potentially illegal debt collection”.
After age 65, more than a quarter of adults will need home care at some point, according to federal estimates. The average annual cost of a private room in a nursing home was more than $100,000 in 2021, according to Genworth Financial GNW,
which provides long-term care insurance. Most adults do not have long-term care insurance, and Medicare provides only limited home care coverage. For lower-income residents who exhaust their resources, Medicaid can pay for nursing home care, but the application process is often time-consuming. Gaps in the various types of coverage can lead to huge bills.
A person who has legal access to the resident’s income or resources, such as through a financial power of attorney, can be asked to sign an agreement to provide payments to the facility from those permanent resources, said Toby Edelman, senior attorney at the nonprofit. Medicare Support Center. But outside of such scenarios, he said, clauses purporting to hold third parties liable “are not enforceable provisions.”
In response to the CFPB’s report, the nursing home industry trade group American Healthcare Association/National Center for Assisted Living said, “we have not heard of our members doing this and we do not believe it is a widespread practice. However, we support efforts to stop inappropriate practices.” Scott Purcell, CEO of debt collection industry group ACA International, said in a statement that the group’s members “have robust compliance management systems in place that consider contractual and legal obligations when working with reputable creditors.” The group is not aware of a pattern of abuse in nursing home debt collection practices, he said.
Several people who spoke at a CFPB mock hearing Thursday described being dragged into long, arduous legal battles over debts they didn’t owe. Chris Ferris said a nursing home pursued him over his mother’s debt “even though I was never involved and never had access to her money”. Breaking down in tears, she said, “the hell they put me through, I will never see justice.”
Most of the nursing home lawsuits against third parties reviewed by the CFPB involved allegations that the resident’s money had been intentionally misappropriated, hidden or stolen — often using boilerplate language and without details to support the claims, the bureau said in its report. This raises the possibility that the claims have no justification and are “a coercive technique,” the Bureau said.
In some cases, nursing homes and debt collectors “fabricate claims of fraudulent conveyance” or transfer money to avoid debt, New York State Attorney Emma Catherin said at a CFPB hearing Thursday. “The debt collection law firms and nursing homes we’ve seen have engaged in an extensive and systemic deceptive debt collection scheme to squeeze money from hundreds of consumers who don’t owe it.”
The CFPB report did not address another legal issue that can sometimes trap families in nursing home debt: more than half of states have “filial responsibility” laws, which can be used to hold adult children responsible for unpaid medical bills of their parents. Typically, those laws don’t allow a third party, such as a nursing home, to sue for unpaid debt — but an adult child caring for one parent, for example, could sue siblings for contributions to the cost of care, Kathryn said. Pearson, professor of law at Penn State Dickinson Law.
Pennsylvania, however, is a state that allows caregivers to file child support cases against adult children or parents, Pearson said. And in 2019, the Pennsylvania Supreme Court ruled that the state’s adoption support law applied to a foster care facility’s claim against out-of-state parents for care provided in Pennsylvania to their adult son.