Exemption Policy: Sometimes it Doesn’t Pay to be Debt Free

We have two married 60-something friends who are artists in Santa Fe and own a very simple home with a rental house in the front. The house is tiny by all but New York City standards, and since their income is always in flux (some months several grand, many months nothing at all), they live very close to the bone. No credit card debts, no car payments, no mortgage.  The only fixed expenses they have are their $1,000 a month health care policy and a few utility bills. Generally, they get along just fine, but last month, when he ended up in the hospital for 5 days for literally swallowing wrong. 

Somehow, they now allegedly owe $30,000, despite the expensive health care policy. I know, there is supposed to be a $5,000 deductible limit per person, but there is something about a pre-existing condition etc. etc. She called to ask:  “they can’t take our house to pay a hospital bill, can they?” Given its location, this property is worth a lot, so we all know the answer. 
Now I know that no one exemption scheme can work for everyone, but these people have done everything right. They have lived a Dave Ramsey debt-free life, and while they could have saved more in traditional retirement vessels, they relied on Santa Fe’s outrageous real estate values to set them up for life. So I ask you, are our exemption policies out of sync with reality? Do they work for most people most of the time? I am suddenly dubious.