California sent a mentally ill man to a state hospital and charged him nearly $770,000

The department’s practice of billing patients exorbitant amounts after they are discharged from its care goes back decades, advocates and lawyers say. Such billing has been required under state law since 1967 and allowed since the 1930s. The practice has persisted even as the state has passed laws in recent years that prohibit other government agencies from charging vulnerable populations exorbitant fees. For example, people leaving prisons and jails no longer have to pay for many of the costs of their incarceration.

“Here is (the Department of State Hospitals) quietly taking hundreds of thousands of dollars from our absolute most, most vulnerable clients with the least ability to make any kind of payment,” said Rachel Draznin-Nagy, Khan’s public defender in Contra Costa County. “I am so outraged by it.”

California has five state mental hospitals that care for more than 5,500 patients, the vast majority of whom come from the criminal justice system. Most have been charged or convicted of crimes related to their serious mental illnesses; some, like Khan, are ill enough to be found not guilty by reason of insanity. Medi-Cal does not insure people who stay in state hospitals.

After they are released months or years later, few of these patients have the financial means to pay the enormous bills, Draznin-Nagy and other public defenders said.

The Department of State Hospitals declined to make anyone available to speak with CalMatters about the fee collection program. But in an unsigned email, department representatives said it “recognizes the stress and anxiety individuals may experience when receiving financial notifications.”

They pointed to statutes “that require (the department) to collect the costs of care provided in state hospitals.” To be reimbursed by Medicare, they said, state agencies must bill patients for the costs of care when such billing is required by state law.

In May, thanks to recent changes in the law, the department launched a new financial assistance program that allows it to forgive some or all of a patient’s debt. But public defenders say many of their clients don’t have the resources to fill out the paperwork needed to enroll in the program in a timely manner.

The evening before publication, the ministry announced that it had completely forgiven the debt of the first applicant.

Data from a 2022 report to the Legislature showed the department collected $418,861 from an undisclosed number of former patients between January 2018 and September 2021. The report also noted the department filed six lawsuits seeking collection during that time. It did not write off, reduce or cancel any patient debts during that period. The department did not provide more recent data to CalMatters. Its current budget is $3.4 billion (PDF).

In their email, department representatives said they have not sent former patients to collection agencies or garnished wages. But if patients have not made efforts to pay their bills or reached out about making payment arrangements, disputing their bill or applying for the financial assistance program, the department can forward a request to the Franchise Tax Board to collect unclaimed property, funds or tax returns to offset the cost of care.

‘Shocking’ hospital bills

In recent years, advocates and lawyers have convinced legislators to repeal other policies that require fees to be charged to vulnerable groups, often low-income people of color.

In 2018, California led the nation in abolishing punishment for juvenile offenders.

In 2022, the state stopped collecting fees for the costs incurred by people in prison.

Stephanie Campos-Bui, a Berkeley law professor who is involved in those efforts, said the size of Department of State Hospitals bills like the one Khan received is “shocking.” Part of what led to changes in the law banning the collection of other types of fees is that the cost to the state often outweighs any revenue such fees might generate, she said.

“If we really think it’s in our interest as a society to put these people in government hospitals, then that should be done by the general fund, the taxpayers, and not by the people who are involuntarily committed to these institutions,” she said.

Joseph Gocke, a Yolo County public defender, said one of his clients received a bill for $81,491 in 2022 after spending months in a state hospital.

“We went to court. We fought it. Unfortunately, we lost,” he said.

Some of the case law allowing the department to collect such fees dates back to the 1950s and early 1960s, he said. It even predates the right to an attorney, which was established in 1963.

“It’s bizarre that this is still allowed, because these are clients of ours who by law also have to go to the state hospital for treatment,” he said. “And then to give them a bill for something that they didn’t choose to do seems fundamentally unfair.”

Elizabeth Madsen, a Placer County public defender, requested an itemized bill for a client in 2020 after he was found incompetent to stand trial and sent to a state hospital. The Department of State Hospitals, the bill showed, charged him $520 a day for his three-month stay. State officials sent multiple bills to his parents, collecting a total of $51,945, including the per diem rate and the cost of medications and vaccines.

Madsen said it was the only bill she knew of any of her clients receiving over the years, leading her and other public defenders to believe that such billing is uneven. She said representatives from state hospitals told her they send such bills all the time.

The email from the Department of State Hospitals earlier this month noted that “upon admission of an individual to the state hospital, the hospital’s Trust Office informs the patient of his/her liability for care, support and maintenance in a state facility.”

‘I will basically be in debt for the rest of my life’

Khan doesn’t remember anyone telling him he would have to foot the bill for so much money. He was struggling with a new diagnosis of schizophrenia and his life was turned upside down at the time: “I had other things on my mind,” he said.

If hospital staff had explained to him how much debt he was in, he said, he might have chosen to just go to prison — even though he feels the treatment he received at the state hospital ultimately helped him immensely.

“I mean, $760,000, I’m basically in debt for the rest of my life,” he said recently, sitting in a conference room in downtown Martinez with his public defender, Draznin-Nagy. “It’s not a good feeling, believe me.”

Khan had entered the criminal justice system shortly after returning from a stint as a Pashto interpreter at Guantanamo Bay, the controversial detention camp in Cuba where the U.S. military housed prisoners after 9/11. The violence he witnessed while working there left him traumatized, he said. In addition to suffering from post-traumatic stress disorder and depression, he was diagnosed with schizophrenia while in prison. His condition responded well to medication and treatment at the state hospital. He was discharged in 2018 and began the process of getting his life back on track. He moved in with his family. He started collecting disability benefits. He got a part-time job at a local grocery store.

He received the first bill two years later. The treatment team working with him in the county’s parole program sent the department proof of his inability to pay, he and Draznin-Nagy said.

A year passed before Khan received another letter from the ministry informing him that the ministry was changing its policy and that no collection would take place until that process was completed.

Nearly three years later, Khan received a third letter last May. If he did not contact the Patient Cost Recovery Section within 30 days to request financial assistance, the department would resume billing, it said.

Although he has contacted the state through his lawyer, Khan says the fear of the bill keeps him up at night. He thinks about it while he works and during walks in the local park, which used to help him clear his head.

“It’s like a weight on my shoulders,” he said. “It stays in my mind.”