Pandemic aid used to ease worries over medical debt

More state, local governments turn to federal funds to eliminate residents’ bills

Millions of Americans mired in medical debt face difficult financial decisions every day — pay the debt or pay for rent, utilities and groceries. Some may skip necessary health care for fear of adding more debt.

To address the problem, an increasing number of municipal, county and state governments are devising plans to spend federal coronavirus pandemic relief funds to eliminate residents’ medical debt and ease those debt burdens.

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 American Rescue Plan Act funding that could clear as much as $4.3 million in medical debt, said Willie Burnley, one of the city councilors behind the effort. As many 5,000 of the city’s 80,000 residents could benefit.

Cook County in Illinois, Pittsburgh, New Orleans and Toledo, Ohio, are among more than a dozen communities that have set into motion or are considering similar plans. Democratic Connecticut Gov. Ned Lamont this month proposed spending $20 million in ARPA funds to eliminate as much as $2 billion in state residents’ medical debts.

Unlike credit card or loan debt, medical debt is not a choice, advocates said.

“Medical debt is something that people can’t help, and it’s not their fault,” Burnley said. “No one chooses to get hurt or to get sick.”

In Toledo, a combined $1.6 million from the city and Lucas County will eliminate as much as $240 million in medical debt for as many as 41,000 residents, according to Ohio state Rep. Michele Grim.

The cities and states are teaming up with RIP Medical Debt, a New York-based nonprofit that since 2014 has used donations to buy huge bundles of debt from hospitals and other health care providers at pennies on the dollar and pay it off. 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 nation cite medical debt as a leading cause, said Allison Sesso, president and CEO of the nonprofit.

The money is coming from the federal government’s $1.9 trillion American Rescue Plan Act, which included $360 billion for local, state, territorial and tribal governments to provide economic relief.

Unlike federal student loan debt relief, medical debt relief has more widespread and bipartisan support. According to a recent survey by Tulchin Research, more than 70% of Americans support medical debt relief, while only about half of Americans support student loan debt relief.

Since it’s founding, RIP Medical Debt has raised enough money to eliminate over $8.5 billion of debt for nearly 5.5 million people. But that’s barely a dent in the number of people facing tough money choices.

A 2021 study that appeared 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 disproportionately affects the poor.