I'm Argentinian and while we might be a country lagging behind in so many things these kind of ripoffs do not happen.
How come the US government allows this? From other stories sometimes posted, the US seems to be one of the worst countries in the world to either die or get sick.
Allows? The government works for the wealthy and powerful. That includes the masses, who (if they organize) have their own power, but it also includes every other powerful group or individual.
Why would the government want to stop this? It's the average person who would want to disallow this, and they'd have to pressure the government enough that the pain of popular opposition outweighs the brazillions of dollars they're making.
So the hospital is still getting paid something, and the billee has the option to take a bigger credit hit or to negotiate down