South Carolina hospitals access legal loophole to use tax refunds for medical debt: 6 things to know

South Carolina hospitals are using a state law loophole to take millions from residents’ tax refunds for unpaid medical bills, according to The Post and Courier.

Six things to know:

1. The law used by hospitals was initially meant to help state and local governments settle debt and get back taxpayer dollars, the Courier states.

2. Now, hospitals are reportedly using the law to seize tax refunds from patients with overdue bills.

3. The state’s Setoff Debt collection program allows the South Carolina revenue department to help collect debt by garnishing residents’ tax refunds. This program, as well as another that collects residents’ pay, allows certain hospitals to have the revenue department collect debt if the hospital can show ties to state or county governments, according to the Courier. But the publication notes the ties are often weak or questionable.

4. By using the state law, health organizations reportedly took at least $92.9 million in more than 172,000 seizures to collect medical debt in 2017. The South Carolina Association of Counties, the state and a private lobbying group for counties, make additionaly money helping hospitals collect this medical debt.

5. Revenue department documents released to the Courier showed hospitals’ use of the Setoff program increased 18 percent between 2015 and 2017.

6. Revenue department director Hartley Powell denied there are  transparency concerns. He told the Courier the program helps government entities “better fund essential public services,” and disputed that private hospitals may access it. 

Access the full Courier report here.


More articles on healthcare finance: 

Washington legislature passes surprise-billing law
New York hospital seeks new designation to boost Medicare reimbursement
RCM tip of the day: Collaborate with operational stakeholders


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