Two communities find a cure for medical debt: pandemic stimulus funds

Local governments in Ohio and Illinois are using American Rescue Plan Act funds to provide relief to residents struggling with medical debt by working with a debt-buying organization that wipes debt clean for debtors.

It’s a strategy that proponents say could be duplicated across the country to fix a multibillion-dollar problem.

On Nov. 9, the Toledo, Ohio City Council passed a measure to pay off eligible residents’ medical debt using $800,000 allocated to the city through the American Rescue Plan Act (ARPA), an act signed by President Joe Biden Federal law March 2021 aimed at helping the country recover from the economic problems caused by the COVID-19 pandemic.

Commissioners in Lucas County, which includes Toledo announced They would also contribute $800,000 in ARPA funds. The combined $1.6 million will go to RIP Medical Debt, a New York-based nonprofit that buys medical debt from hospitals in bundles at a much lower price than the actual debt, allowing the money to keep flowing.

This means that parishioners’ debts of between US$190 million and US$240 million will be paid off. corresponding Michele Grim, the Toledo City Council member who championed the proposal. RIP Medical Debt only has an estimate at this time as the organization will not know the exact amount until they have made arrangements with local hospitals.

Residents must earn a household income of less than four times the federal poverty line reaches from $13,590 for a one-person household to $46,630 for an eight-person household for most states and have medical debt greater than 5% of their income to qualify.

Grim, a Democrat and newly elected member of the Ohio Statehouse, said she would consider introducing a similar proposal to the legislature. “I would like to explore this in the house. Medical debt is a crisis for everyone and would help the economic recovery of many Ohioans, she said in an email to States Newsroom.

“I’ve had several local governments approach me to do the same. I hope they can take the Toledo model and roll it out nationwide. Washington DC has no medical debt elimination plan, but Toledo, [Ohio] does.”

Many Americans have medical debt, and it can take a toll on their finances. according to a Report of the Kaiser Family Foundation published in June, 4 in 10 adults in the United States have some type of healthcare debt, and 1 in 5 of those with healthcare debt do not believe they will ever be able to pay off their debt.

That Consumer Financial Protection Agency (CFPB) estimates the total amount of medical debt in the US at $81 billion based on data from credit bureaus, but acknowledges that the total is likely understated because “not all medical debt in collection agencies is paid to consumer reporting firms.” .

A Kaiser Family Foundation analysis of data from the Census Bureau’s Survey of Income and Program Participation found a much higher total of $195 billion when including people who had more than $250 in medical debt.

Medical debt is also more common in certain areas of the country, particularly the southeast and southwest, according to the CFPB. For example, about 22% of Louisiana’s population has medical debt, compared to 2.25% in Minnesota, the CFPB report shows. A 2021 to learn analyzing consumer credit reports from 2009 to 2020 found that medical debt was most prevalent in low-income communities in the South.

About 8.7% of Iowans on the CFPB Consumer Credit Panel had medical debt on their credit records, with individuals owing an average of $1,880.

In some cases, medical expenses have bankrupted people. A study published by This was shown by the American Journal of Public Health in 2019 66.5% of bankruptcies were either due to a person’s illness affecting their ability to work or their medical care being prohibitively expensive.

Grim said she was inspired to do something about medical debt after seeing what Cook County, Illinois, was doing to save its residents from their medical debt. In July the Cook County Board approved unanimously expenditure 12 million dollars of ARPA funds to effectively get rid of $1 billion in people’s medical debt. Grim said she modeled Toledo’s plan closely on Cook County’s.

Allison Sesso, president of RIP Medical Debt, said after learning about Toledo and Cook County’s efforts, more local governments have reached out to the group about using ARPA funds to pay off medical debt.

“I think it was a no-brainer for anyone focused on health equity and post-COVID recovery in their communities to get that medical debt burden off of people as quickly as possible,” she said.

RIP Medical Debt was founded in 2014 by former collections executives Craig Antico and Jerry Ashton. Sesso said the pandemic has drawn renewed attention to medical debt and problems with the US healthcare system in general.

“Part of the equation when you, as politicians, think about solving these problems for individuals is that we see the cost of living going up, all this inflation and all these other things that are making it harder and harder for families to make ends meet,” she said . “…It’s an American experience for you to go to a healthcare provider and think about how you’re going to fund that healthcare. And even if you can afford a payment plan and it doesn’t turn into debt, that still means you’re doing so at great sacrifice.”

Brady Chalmers, an administrative analyst in the office of Cook County Chief Executive Toni Preckwinkle, said Preckwinkle took this approach because she wanted to focus on measures to alleviate poverty and promote public health. RIP Medical Debt was the organization that seemed best placed to implement this policy to the extent Cook County needed. Chalmers added that one of the benefits of the action was how much further the money could go when it cost pennies on the dollar to buy the debt.

“$12 million buying a billion dollars worth of debt is a really good bang for the taxpayer,” he said.

Chalmers said this might make economic progress a little easier for people.

“Hopefully they get a credit boost and that gives them access to financial tools they wouldn’t otherwise have,” he said. “We also want them to feel comfortable using the hospital system. We don’t want to live in a world where people have to choose between renting and seeing a doctor when they need both because of old debts. By doing this, we can relieve these people of this burden.”