Hospital Charity Care: 3 Rights Nobody Tells You

The bill arrives with a payment plan, a phone number, and a due date. It does not arrive with a sentence explaining that federal law may require the hospital that sent it to erase it. That sentence exists, in a document called a financial assistance policy, and the fact that you have never seen it is the whole story of hospital charity care in the United States.

About six in ten community hospitals are nonprofit. They pay no federal income tax, no property tax in most jurisdictions, and no sales tax on what they buy. In return, Congress asked for one thing: care for the people who cannot pay. You are entitled to three specific rights under that bargain. Here is what each one means when you are holding a bill.

What does the law require of nonprofit hospitals?

Section 501(r), added to the tax code by the Affordable Care Act in 2010, sets three obligations that matter to you as a patient.

First, the hospital must have a written financial assistance policy, publicize it, and give you a plain-language summary. The policy has to state who qualifies, what discount they get, and how to apply. A hospital that hides the policy risks its tax exemption, which is the one penalty a hospital board fears.

Second, the hospital cannot charge a patient who qualifies for assistance more than the amounts it bills insured patients. The list price, called the chargemaster rate, is off the table for you. If you are eligible, the ceiling on your bill is what an insurer would have paid, and the floor is often zero.

Third, the hospital cannot take extraordinary collection actions, meaning lawsuits, wage garnishment, liens, or reporting to credit bureaus, until it has made reasonable efforts to find out whether you qualify. Federal rules set a 120-day quiet period after the first post-discharge bill and a 240-day window in which you can apply. A hospital that sues you on day 90 broke the rule.

Who qualifies for hospital charity care?

The law leaves the income lines to each hospital, and the lines vary more than you would expect for a legal obligation.

The usual pattern: free care for households at or below about 200% of the federal poverty level, and discounted care up to 300% or 400%. At 2024 poverty guidelines, 200% is roughly $30,000 for one person and about $62,000 for a family of four. A family of four earning $90,000 to $125,000 can still qualify for a reduced bill at hospitals that stretch to 400%.

Figures rounded from 2024 HHS poverty guidelines for the 48 contiguous states. Each hospital sets its own thresholds.

Some hospitals also offer "catastrophic" assistance for patients above the income lines whose bill exceeds a set share of annual income, often 20% or 30%. A $40,000 surgery bill on a $100,000 salary can qualify at those hospitals even though $100,000 is well above 400% of poverty for a single person.

Several states put floors under the federal rule. Washington requires free care up to 300% of poverty at large hospital systems. Oregon requires free care up to 200% and sliding discounts to 400%. California requires assistance for patients up to 400% of poverty at all hospitals, for-profit included. Illinois, Colorado, Maryland, New Jersey, and others have their own standards. If you live in one of these states, the hospital's policy cannot be stingier than the state law.

Why does almost nobody use it?

Because the hospital's revenue cycle is built to collect, and charity care sits at the end of a pipeline designed to make you pay before you reach it.

KFF Health News, the Lown Institute, and several state attorneys general have documented hospitals that sued patients who qualified for free care, sold eligible accounts to collectors, or routed applications through call centers that never called back. Federal rules require notice of the policy on bills and in emergency departments. In practice the notice is a paragraph at the bottom of page three, printed in a font size chosen by a lawyer.

The nonprofit Dollar For, which helps patients apply, reports that most people it screens as eligible had no idea the program existed, and that hospitals often fail to provide assistance to patients who qualify. KFF's analysis of hospital cost reports found the median nonprofit hospital spent about 1.4% of operating expenses on charity care in 2020, with wide variation: some systems spent several times that share, and others spent a fraction of a percent while sitting on billions in reserves.

A few systems now run presumptive eligibility, screening every patient against credit and income data and writing off bills without an application. Most still wait for a form. The form is the barrier, and the barrier is the point.

How do you apply for hospital charity care?

Assume you qualify until the hospital proves otherwise, and put every request in writing.

Search the hospital's name plus "financial assistance policy" and download the full document, not the summary. Note the income thresholds, the look-back period, and whether the hospital screens on income alone or also on assets. Then request an itemized bill and check it for errors, because a wrong code inflates the number you are asking to have forgiven.

Fill out the application with the documents it names, usually recent pay stubs or a tax return. If you have no income, most policies accept a signed statement. Send it by a method that leaves a record. If the account has already gone to a collector, apply anyway and cite the 240-day window; the hospital is responsible for pulling the account back if you qualify.

If the hospital denies you, ask for the denial in writing with the reason. A denial over a missing document is routine and fixable. Denials that contradict the hospital's own posted policy are a complaint to the state attorney general, and attorneys general in Washington and Minnesota, among others, have forced refunds on that basis.

If the hospital is for-profit, 501(r) does not apply, and you are in a negotiation over a medical bill rather than an application for a right. Ask for the cash price, the Medicare rate, and a zero-interest plan, in that order.

What happens to the debt if you were eligible all along?

It should never have been debt.

Under 501(r), a hospital that finds you eligible after billing you must refund any payments above what you owed under the policy and reverse any collection action it took. Debt that was cancelled through financial assistance should not appear on your credit report as owed; if it does, dispute it with the bureau and the hospital. The broader forgiveness landscape, including charities that buy and erase old bills, is covered in what medical debt forgiveness means.

None of this reaches the people who never applied. They are a large share of the roughly 100 million Americans KFF counts as carrying medical debt, and a large share of the households that medical debt pushes into anxiety and skipped care. The program that could have helped them was funded, written into law, and posted on a website they never visited.

A right that only works if you already know about it

Charity care is the deal the public struck with nonprofit hospitals: $37 billion a year in tax breaks, in exchange for treating people who cannot pay. Hospitals took the tax breaks. Delivery of the other half depends on whether a patient in the worst week of her life happens to find a PDF.

That design is not an accident of paperwork. A hospital that advertised its free care would give away more of it, and revenue departments are measured on collections. The federal rule asks for a policy, not for outreach, and hospitals give exactly what the rule asks. Meanwhile the patients who qualify earn under $62,000 for a family of four, in a country where the federal minimum wage has sat at $7.25 an hour since 2009, which is why so many of them qualify in the first place. The scale of the debt that results is the subject of medical debt in America, and the reason a hospital bill can bankrupt a working family belongs with every other cost that outran a paycheck.