South Carolina hospitals are using a loophole in state law to scoop millions of dollars a year from the pockets of the poorest of patients. It mostly takes place outside the courts and the public eye. A law originally written to help state and local governments collect debts is being used to seize tax refunds from people with past-due medical bills. The S.C. Department of Revenue does the legwork, and the cash flows straight into the coffers of some of the region’s largest health care companies. This cash funnel, known as the Setoff Debt Program, operated for years out of the public eye before Post and Courier reporter Mary Katherine Wildeman began pressing for documents and answers about its operation. State officials tried to block her at every turn, and she spent months digging into the secretive program. Among other things, she found:
· Hospitals quietly took about $93 million from residents’ tax refunds using the program in 2017, even though many had only tenuous claims to public status.
· The state and a private lobbying group for South Carolina’s counties make millions more helping hospitals collect these debts from people’s tax refunds.
· Over time, 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 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.
The article exposed a little-known mechanism that hospitals across the country use to collect debts, and one that threatens the already tenuous finances of some of South Carolina’s most vulnerable residents. What’s more, the program operates outside the court system, further stripping the poor and uninsured of due process as they try to argue their cases with few legal remedies available.