Millions of Americans with medical debt face tough financial decisions every day — paying off debt or paying rent, utilities, and groceries. Some may even forgo essential health care for fear of sinking deeper into debt.
To address the issue, a growing number of city, county, and state governments are planning to spend federal coronavirus pandemic relief funds to eliminate residents’ medical debt and ease their debt burden. there.
Related: 18% reduction since 2020 in reported medical debtors
The city council in the Boston suburb of Somerville last month unanimously passed a resolution to spend $200,000 of the city’s $77 million in funding for the American Rescue Plan Act that could write off the debt. health care amounted to $4.3 million, said Willie Burnley Jr., one of the City Council members. city councilor behind the effort. About 5,000 of the city’s 80,000 residents could benefit.
Cook County, Illinois, which includes Chicago, and Pittsburgh, New Orleans and Toledo, Ohio, are among more than a dozen communities that have either begun acting or are considering similar plans. Connecticut Democratic Governor Ned Lamont last week proposed spending $20 million in ARPA funds to eliminate $2 billion in medical debt owed by state residents.
Advocates say that, unlike credit card debt or loans, medical debt is not an option.
“Medical debt is something people can’t help with and it’s not their fault,” Burnley said. “No one chooses to get hurt or get sick.”
Virginia Faust, of Somerville, has health insurance, but she’s still several thousand dollars in debt in 2021 when a mental health emergency requires a week-long hospital stay. The debt took a toll on her credit, and in a cruel irony, added stress to her mental health.
Faust, 25, said of Burnley’s plan: “This will have a marked effect on my life and relieve a lot of stress. That means I’ll be more likely to go to the doctor and have regular check-ups.”
In Toledo, a total of $1.6 million from the city and Lucas County will eliminate $240 million in medical debt for about 41,000 residents, according to Ohio Rep. Michele Grim, who pushed the effort. force when she was a Toledo city councilor.
“It’s a great return on investment,” she said. “I really can’t think of a better way to use dollars to support the economic recovery of our citizens.”
Cities and states are partnering with RIP Medical Debt, a New York-based nonprofit that since 2014 has used donations to buy massive amounts of debt from hospitals and other health care providers in dollars and pay off. One dollar donated will erase an average of $100 in debt.
Allison Sesso, president and CEO of the nonprofit, says more than 40% of American adults with medical debt and about two-thirds of personal bankruptcies nationwide consider medical debt a problem. leading cause.
The money comes from the federal government’s $1.9 trillion United States Rescue Plan Act, which includes $360 billion for local, state, territorial, and tribal governments to provide economic relief.
“This is one of the most direct and impactful ways we can use this money, and it will have incredible and quantifiable benefits,” Burnley said.
Eligibility requirements may vary, but to qualify in Somerville for debt relief through RIP Medical Debt, individuals or families can have household incomes up to 400% of the poverty level. federal government — that’s $111,000 annually for a family of four according to federal statistics — or have medical debts in excess of 5% of their annual income.
No need to apply. Medical debt RIP determines eligibility and beneficiaries receive a letter stating that their debt has been collected and cancelled. Not everyone will benefit. Those whose debt continues to be held by for-profit collection agencies may miss out.
Unlike federal student loan forgiveness, medical debt forgiveness has broader support and is supported by bipartisanship. According to a recent survey by Tulchin Research, more than 70% of Americans support medical debt forgiveness, while only about half of Americans support student loan debt forgiveness. The survey of 1,500 adults had a margin of error of plus or minus 2.5 percentage points.
Since its inception, RIP Medical Debt has raised enough money to clear more than $8.5 billion in debt for nearly 5.5 million people. But that’s hardly a dent in the total number of people facing tough money choices.
A 2021 study appearing in the Journal of the American Medical Association determined that Americans have $140 billion in unpaid health care bills at collection agencies alone, and that debt affects big to the poor.
While it’s a good cause, using ARPA funds to pay off medical debt doesn’t solve it, said Ray Kluender, an assistant professor at Harvard Business School and one of the study’s co-authors. solve the underlying system problem.
“Medical debt is a by-product of the patchy way we pay for health care,” he said.
“While writing off the debt after they have gone through the supplier collection process will not solve the problems that led to these unpaid bills in the first place, it can,” he said. can help people who are having trouble paying their bills.
