Medical Debt Relief Act of 2026.

Added Section 15464 to the Government Code establishing the Medical Debt Relief Act of 2026, which creates a state-run program to acquire and cancel medical debt for eligible low-income Californians. This transforms the bill from a technical cleanup into a major new public program.

The original technical amendments to Section 1367 (Knox-Keene Act) are retained but renumbered as Section 3. The changes remain nonsubstantive: fixing duplicated words, removing an outdated date reference ('On and after January 1, 2002'), and minor grammatical corrections.

Defines 'eligible recipient' as a California resident who has incurred medical debt from a providing health institution, is unable to repay, and either has federal adjusted gross income at or below 400 percent of the federal poverty line OR whose debt exceeds 5 percent of their adjusted gross income.

Appropriates $2,500,000 from the General Fund into a newly created California Medical Debt Relief Program Account within the California Health Facilities Financing Authority Fund. Vote threshold changed from majority to two-thirds due to the appropriation.

Requires hospitals to meet multiple conditions before selling patient debt to a debt buyer: patient must be found ineligible for financial assistance or unresponsive for 180 days, debt buyer must agree not to resell (except to originating hospital or tax-exempt organization), no interest or fees may be charged, and the debt buyer must be licensed by the Department of Financial Protection and Innovation.

Prohibits hospitals, collection agencies, and debt buyers from reporting adverse information to consumer credit reporting agencies or commencing civil action against a patient before 180 days after initial billing.

Requires hospitals to send patients a detailed notice before assigning a bill to collections or selling the debt, including dates of service, name of the entity receiving the debt, how to obtain an itemized bill, health coverage information on record, a charity care application, and dates of prior financial assistance notices.

Requires that extended payment plans offered by hospitals to low-income patients be interest-free. A plan may only be declared inoperative after 90 consecutive days of missed payments, and only after the hospital makes a reasonable attempt to contact the patient and offers an opportunity to renegotiate.

Prohibits wage garnishment and liens on real property for patients eligible under a hospital's charity care or discount payment policies. For non-affiliated collection entities, wage garnishment is only permitted by court order upon noticed motion with a declaration of the patient's ability to pay.

Defines 'providing health institution' as cities/counties, district hospitals, private nonprofit corporations or associations, LLCs whose sole member is a nonprofit, and entities under common control or affiliation with any of these. Only debt from these institutions qualifies for the relief program.

Requires the authority to provide an annual report to the Legislature and Governor by January 1 of each year starting January 1, 2028, covering contracts with coordinators, cost of debt purchased, amount canceled, benefits to recipients, and account balance.

Specifies that discharge of medical debt under the program does not result in taxable income for the eligible recipient for state income tax purposes, removing a potential barrier to participation.

All amendments to Section 1367 of the Health and Safety Code (Knox-Keene Health Care Service Plan Act) are removed. The previous version made technical, nonsubstantive changes to health care service plan requirements that are no longer part of this bill.

Hospitals must now report outstanding medical debt data to HCAI under Section 128740, including debt amount, bill adjustments, source of coverage, whether charity care or discount was provided, demographic data, ZIP Code, and whether the debt led to litigation or wage garnishment.

The authority must enter into an interagency agreement with the Department of Health Care Access and Information (HCAI) to implement the program, making HCAI a formal partner in administration.

A stakeholder advisory group must be convened by July 1, 2027, with no more than 17 voting members, no more than 50 percent from providing health institutions, and representation from state departments, consumers, organized labor, county agencies, insurers, providers, and health facilities. The group must develop recommendations on program criteria, reporting, and data sources by January 1, 2028.

Before canceling debt, the medical debt relief coordinator must determine whether the eligible recipient was eligible for charity care or discount under Section 127405. If eligible and the hospital still holds the debt, the coordinator must notify the hospital to apply existing financial assistance first, then cancel only the remaining balance.

The authority must maintain a public internet website containing program information, details on other available financial relief programs (including hospital financial assistance), and copies of annual reports.

The definition of 'providing health institution' is expanded from a closed list of entities that operate a health facility to an open-ended list ('includes, but is not limited to') of entities that operate a health facility or provide health care. New categories added include general acute care hospitals, acute psychiatric hospitals, special hospitals, and providers as defined in Section 127500.2.

A new definition is added for 'Department' meaning the Department of Health Care Access and Information, formalizing HCAI's role in the statute.

Funding language changed from 'All moneys in the account are hereby appropriated to the authority' to 'All moneys in the account shall be available, upon appropriation by the Legislature.' This means future funds in the account will require a new legislative appropriation before being spent, rather than being automatically available.

Annual reporting requirements are expanded to include: identifying providing health institutions, data collected under the new Section 128740 hospital reporting requirement, and aggregate demographic data about eligible recipients including source of coverage, ZIP Code, debt amount, and whether charity care or discount was applied.