“A Byzantine Bureaucratic Process:” Castro, Warren Urge DOD to Fix Broken Billing System at Military Hospitals

"A Byzantine Bureaucratic Process:" Castro, Warren Urge DOD to Fix Broken Billing System at Military Hospitals

WASHINGTON - This week, Congressman Joaquin Castro (TX-20), Senator Elizabeth Warren (MA), and Congressman Greg Casar (TX-35) sent a letter urging the Department of Defense (DOD) to issue a final rule waiving medical costs for qualified civilian patients who receive care at military treatment facilities. The letter additionally urges the DOD to work with other federal agencies to prevent patients from incurring tax liabilities connected to discharged medical debt and simplify a complex billing process.

"In 2022, a constituent of Mr. Castro's was transported via ambulance to Brooke Army Medical Center (BAMC) after suffering from a stroke. After a two-month stay at BAMC, he was discharged and consequently received a medical bill for nearly $1,000,000. As a father who is solely dependent on Supplemental Security Income, the constituent had no ability to pay the DoD. Unfortunately, he was stuck navigating a byzantine bureaucratic process by himself unaware of any avenues for financial relief. In July 2023, the constituent asked Mr. Castro to help him resolve his medical bill," the lawmakers wrote.

"The process to waive his medical bill would not have been possible without the intervention of Mr. Castro's office, and even then, it involved a six-month-long process. In response to the request for a waiver, the Defense Health Agency (DHA) consulted with several federal agencies to confirm that DoD had the authority to waive civilians' medical debts, authority that was granted in plain language by section 716 of the NDAA. When the patient's bill was finally waived, the IRS considered the amount waived as income, and, as a result, he incurred a tax obligation of at least $300,000-an amount he cannot be reasonably expected to pay. We urge DHA to implement a simpler waiver and sliding scale discount fee process that will allow it to waive all or some of patients' bills at the time of treatment without incurring tax obligations," the lawmakers continued.

The full letter can be foundhere.

Background

Brooke Army Medical Center (BAMC) is one of two Level I Trauma Centers in San Antonio. The facility treats thousands of civilians annually under a special agreement with the Bexar County Hospital District designed to allow military providers the opportunity to practice battlefield medical skills through hands-on trauma care. Despite this agreement, BAMC's payment systems have not been optimized to work with civilian insurers and the hospital does not maintain a charity care program for indigent patients. As a result, civilian trauma patients in San Antonio have faced five-, six- and seven-figure medical bills after treatment by BAMC providers.

In response to these concerns, Congressman Castro and Senator Elizabeth Warren authored an amendment (Section 702) to the Fiscal Year (FY) 2021 National Defense Authorization Act to provide the DOD with the authority to waive civilian medical bills incurred at BAMC or other military treatment facilities (MTFs). Despite this authority, a July 2022 report from the nonpartisan Government Accountability Office (GAO) found that military hospitals do not "consistently use or communicate options for financial relief for civilian emergency patients." The report also found that the DOD consistently failed to track the debt incurred by civilians. To address these ongoing concerns, Congressman Castro also secured an additional amendment (Section 716) to the FY 2023 NDAA requiring the DHA to, at minimum, implement a modified payment plan based on a sliding-scale discount program for patients at risk of financial harm from the costs associated with their treatment at an MTF.

Currently, the DOD is offering limited debt relief to patients as it finalizes rulemaking to align with Congressman Castro's FY2023 amendment. However, as the letter details, patients who receive this debt relief have subsequently faced significant tax liabilities after their waived debt was treated as income by the Internal Revenue Service. In this week's letter, Castro, Warren, and Casar urge the DOD to address challenges stemming from the original medical debt and the subsequent tax liabilities.