Governments can erase your medical debt for pennies on the dollar — and some are

Medical debt is the leading cause of bankruptcy in the United States, with more than two in five American adults having some form of debt.

In many cases, people are forced to cut back on food and utilities, forego other medical care, or take on more debt because of the money they owe health care providers. Medical debt can make it impossible to buy a home, pay for college, or save for retirement.

To address this issue, connecticut, new jersey And a growing number of counties and cities are using public funds to buy up and forgive millions of dollars in residents’ medical debt. Earlier this month, Pennsylvania Democratic Governor Josh Shapiro said: announced the budget proposal This would set aside $4 million to purchase and repay the debt of low-income Pennsylvanians. Of the 1 million people in the state who owe money to health care providers, a disproportionate number live in rural areas, Shapiro said.

“Combined with soaring prices in stores, this debt is an anchor holding families and communities back,” Shapiro told Congress. budget address. He noted that relatively small state investments can make a big difference, as hospitals sell their debt for pennies on the dollar.

Such programs “have the potential to be truly life-changing,” said Gabriela Elizondo Craig, project leader for Innovation for Justice, a research program at the University of Arizona and the University of Utah. Her research has focused on national policies that impact medical debt.

“They didn’t choose to get sick. [and] They did not choose to make an expense that could have a devastating impact on their lives,” she said.

Americans owe at least $195 billion in unpaid medical bills, according to a 2022 analysis of U.S. Census Bureau data by KFF, a health policy research organization. Black residents, residents of southern states (many of which have not expanded Medicaid), and people with chronic illnesses and low incomes are most likely to owe money to health care providers. almost a quarter family with children compared to 17% of those without children who have unpaid medical bills.

Berneta Haynes, senior attorney at the National Consumer Law Center, said that even people with health insurance may not be able to afford the deductible or copay, or seek treatment outside their insurance company’s network. He pointed out that if you are receiving medical treatment, you may end up incurring medical debt.About half of adults with medical debt say they have medical debt. less than $2,500according to KFF.

Unlike other types of consumer debt, people rarely plan for medical debt.a temporary or short-term expenses According to the Consumer Financial Protection Bureau, medical debts due to hospitalizations account for about two-thirds of total debt. Even those who want to shop for the best-value care are hampered by opaque pricing, limited insurance networks, too few providers, and a lack of options in emergencies. It is being

“Medical debt is a systemic problem, and this is where the government is located and expected to address it,” he said, accepting donations and purchasing medical debt from providers and providers. said Allison Sesso, president and CEO of RIP Medical Debt, a national nonprofit organization used to Even if the collection agency offers a deep discount, we will forgive it. The organization has become a popular partner for state and local governments looking to eliminate medical debt.

“This is an area ripe for public engagement and publicly funded solutions,” Sesso said. “Because the fact is that medical debt is not a personal choice. It is the result of a broken system.”

What YouGov’s 2022 poll reveals two-thirds of Americans It supports government relief for medical debt and is more popular than relief for other types of debt, such as student loans.

In May, the city of New Orleans set aside $1.3 million from the federal American Rescue Plan Act to establish the RIP Medical Debt medical debt forgiveness program.

The city of New Orleans will use that $1.3 million to support residents with incomes below 400% of the federal poverty level (about $124,000 for a family of four) and residents with medical debt equivalent to at least five people. The company plans to purchase and cancel an estimated $130 million in debt owed by the company. % of household income.

Jeannie Donovan, deputy director of the New Orleans Health Department, said it makes sense to use the new one-time pandemic funding. More than 1 in 5 adults in Louisiana The rate of medical debt is among the highest in the nation. City leaders believed they could save up to 80,000 New Orleanians by eliminating medical debt.

“The lack of access to health care can be costly and deadly,” Donovan said, noting that New Orleans had heard about similar incidents and acted. Initiatives in Cook County, Illinois, including Chicago. “We also know that there are issues of inequality and that nationally Black and Brown people are more affected by medical debt and are more likely to incur medical debt, especially That’s a problem in the South.”

New Orleans residents are not required to sign up for the program. Those who qualify will receive a letter in the mail notifying them that their debt has been paid.

Last month, New York City joined the following cities and counties in entering into a similar partnership with RIP Medical Debt: michigan, Ohio and pennsylvania. New York City is Eliminate $2 billion worth of medical debt for city residents.

Connecticut, New Jersey, and Pennsylvania are also considering partnering with RIP Medical Debt. In Connecticut, Democratic Gov. Ned Lamont announced this month that the state would spend $6.5 million in federal pandemic aid to eliminate up to $1 billion in medical debt for residents.

In response, Rep. Vincent Candelora, Republican leader of the Connecticut House of Representatives, said: shared on social media He worries that medical debt relief will draw attention away from other budget issues and leave people who don’t qualify for debt relief disappointed.

New Jersey’s current state budget allocates $10 million to cancel medical debt in partnership with RIP Medical Debt. Last month, Democratic New Jersey Governor Phil Murphy asked lawmakers to increase that amount For next year.

Many municipalities, like New Orleans and Cook County, are using federal pandemic relief money to pay for the programs. With that money gone, it remains to be seen whether local and state officials will find other funds to pay off residents’ medical debt, Sesso said.

“This is not a permanent solution to the medical debt problem. It is something [state and local governments] We can do it today,” Sesso said. “But they should think about the broader solutions that can be achieved” and start a dialogue with stakeholders on how to address medical debt.

State-level consumer protections for medical debt are patchy. Elizondo Craig studied this issue. Medical Debt Policy Scorecarda research project by the University of Arizona and the University of Utah.

Eliminating medical debt is “really a band-aid solution, because the root cause of the problem is that a portion of the population is uninsured or underinsured, and health care providers are “Essentially, you can charge as many things as you want to different payers at different amounts,” she said. ”

“Prices for all health services are way too high for people to afford. We need pricing transparency to make informed health care decisions,” she said. Ta.

Democrats have promoted debt reduction efforts. But other medical debt relief measures are bipartisan in some areas.

North Carolina State Treasurer Dale Falwell, a Republican, said: defended the bill Last year in North Carolina, Medical Debt Disarmament Act It would cap the interest allowed on medical debt, require transparency in medical billing, and add additional consumer protections. The bipartisan bill stalled in committee, but the main sponsor was a Republican.

illinois and Oregon The law last year required hospitals to take a more active role in limiting medical debt by screening patients to determine whether they qualify for financial assistance. And in August, Colorado became the first state in the country to enact a law banning the disclosure of medical debt information. Appears on consumer credit report.its main sponsor There were two Democrats and one Republican.

Haynes and colleagues at the National Consumer Law Center said they’re seeing much more interest in medical debt relief at the state level. She predicted future state actions to remove medical debt from credit reports and increase eligibility for financial aid.

Other changes could include a ban on aggressive medical debt collection tactics such as wage garnishments and liens. Increased pricing transparency. Requirements for health care providers to notify people who may be eligible for charity treatment or debt relief.

However, Elizondo Craig emphasized that universal health coverage is “the most effective tool.”

He said expanding Medicaid under the Affordable Care Act would significantly reduce medical debt in the 10 states that have not yet done so. If you live in a state that hasn’t expanded Medicaid, 40% more likely to have medical debt than those living in expansion states, according to the 2022 study.

Elizondo Craig said Medicaid expansion would not only extend insurance coverage to more people, it would give the government more influence in negotiating pricing with health care providers, and would “lower the cost of health care in the first place.” It can even be reduced.”

This article was first published state line. Like the Alaska Beacon, Stateline is part of States Newsroom, a nonprofit news network supported by a coalition of grants and donors as a 501c(3) public charity.