BOSTON — Millions of Americans mired in medical debt face difficult financial decisions every day – pay off the debt or pay rent, utilities and groceries. Some may even skip necessary health care for fear of sinking further into debt.
To address the problem, a growing number of city, county and state governments are drawing up plans to spend federal coronavirus pandemic relief funds to eliminate residents’ medical debt and alleviate the debt burden.
The Boston suburb of Somerville City Council last month passed a unanimous resolution to spend $200,000 of the city’s $77 million in funding for the American Rescue Plan Act, which could clear up to $4.3 million in medical debt. said Willie Burnley Jr., one of the councilors behind the effort. Up to 5,000 of the city’s 80,000 residents could benefit.
Cook County, Illinois – which includes Chicago – Pittsburgh, New Orleans and Toledo, Ohio, are among more than a dozen communities that have initiated or are considering similar plans. Last week, Democratic Connecticut Governor Ned Lamont proposed spending $20 million in ARPA funds to eliminate up to $2 billion in medical debt for state residents.
Unlike credit card or loan debt, medical debt is not a choice, advocates said.
“Medical debt is something people can’t avoid and it’s not their fault,” Burnley said. “No one chooses to get hurt or sick.”
Somerville resident Virginia Faust has health insurance but still ran up several thousand dollars in debt in 2021 when a mental health emergency required a week-long stay in the hospital. The debt took a toll on her credit and, in a cruel irony, put additional stress on her mental health.
“It would have a tangible effect on my life and relieve a lot of stress,” Faust, 25, said of Burnley’s plan. “That would mean I would be more likely to go to a doctor and get regular checkups.”
In Toledo, a combined $1.6 million from the city and county of Lucas will eliminate up to $240 million in medical debt for up to 41,000 residents, according to Ohio State Representative Michele Grim, who led the effort when she served. as the city of Toledo. advisor.
“It’s a great return on investment,” she said. “I really couldn’t think of a better way to use dollars earmarked to help our citizens’ economic recovery.”
Cities and states are teaming up with RIP Medical Debt, a New York-based nonprofit that, since 2014, has used donations to buy huge debt packages from hospitals and other healthcare providers for pennies on the dollar and pay them off. them. A single donated dollar erases an average of $100 of debt.
More than 40% of American adults have medical debt, and about two-thirds of personal bankruptcies in the country cite medical debt as a leading cause, said Allison Sesso, president and CEO of the nonprofit organization.
The money comes from the federal government’s $1.9 trillion American Rescue Plan Act, which includes $360 billion for local, state, territorial and tribal governments to provide economic relief.
“This is one of the most impactful and direct ways to use this money and it would have incredible and quantifiable benefits,” said Burnley.
Eligibility requirements can vary, but to be eligible in Somerville for debt relief through RIP Medical Debt, individuals or families must have a household income of up to 400% of federal poverty – that’s $111,000 annually for a family of four people according to federal statistics — or have medical debt greater than 5% of their annual income.
No need to apply. RIP Medical Debt determines eligibility and beneficiaries receive a letter that their debt has been incurred and cancelled. Not everyone will benefit. People whose debt continues to be held by for-profit collection agencies may be left out.
Unlike federal student loan debt relief, medical debt relief has broader, bipartisan support. According to a recent poll by Tulchin Research, over 70% of Americans support medical debt relief, while only about half of Americans support student loan debt relief. The poll of 1,500 adults had a margin of error of plus or minus 2.5 percentage points.
Since its founding, RIP Medical Debt has raised enough money to eliminate more than $8.5 billion in debt for nearly 5.5 million people. But that’s just a reduction in the total number of people facing tough money choices.
A 2021 study published in the Journal of the American Medical Association determined that Americans have $140 billion in unpaid healthcare bills at collection agencies alone, and that debt disproportionately affects the poor.
While it’s a good cause, using ARPA funds to pay off medical debt doesn’t solve the underlying systemic problem, said Ray Kluender, an assistant professor at Harvard Business School and one of the study’s co-authors.
Medical debt is a “byproduct of the way we pay for health care,” he said.
“While relieving debts after they’ve gone through the provider’s billing process doesn’t solve the problems that lead to these unpaid bills accumulating, it can help people who are struggling to pay their bills,” he said.