One city’s effort to cancel $2B in residents’ medical debt
The sun sets on the Statue of Liberty in front of the Empire State Building in New York City on Jan. 13, 2024, as seen from Bayonne, New Jersey. Gary Hershorn/Getty Images
New York City joins a growing number of local governments looking to purchase and eliminate residents’ medical debt in a bid to improve communities’ health and economic outcomes.
The Big Apple is launching the nation’s biggest medical debt relief program in the country, officials announced.
Over the next three years, New York City will invest $18 million to cancel more than $2 billion in medical debt for up to half a million working class residents, Mayor Eric Adams said Monday.
New York City is partnering with RIP Medical Debt, a patient advocacy nonprofit based in the city, to buy and forgive patients’ medical debt from participating health care providers and debt collectors. Under the initiative, residents will be notified when their debt has been canceled without having to register.
The program only requires city residents with medical debt to have a household income at or below 400% of the federal poverty level or have medical debt equal to 5% of their annual household income. The program will launch early this year, officials said.
Medical debt impacts more than 100 million Americans and is a leading cause of bankruptcy. Unpayable bills can stymie individuals’ ability to pay for essentials such as groceries and rent. It can also have long-term consequences as debt can block people from obtaining housing or employment.
“Not only do you hold your breath when you go into a hospital or a doctor's office and wait for a diagnosis, you continue to hold your breath when you see the bill and what it costs, particularly for low income New Yorkers,” Adams said.
A 2022 KFF Health News survey of 2,375 adults, for instance, found that 48% of respondents said they used up all or most of their savings to pay off health care debt. For low-income adults, that figure increased to 55%, indicating that medical debt disproportionately burdens disadvantaged populations and may discourage them from seeking future medical or dental care.
“The benefit of debt relief is more than financial. It gives patients peace of mind and ensures they seek the medical care they need,” said Oxiris Barbot, president and CEO of the United Hospital Fund, a health policy research nonprofit, and RIP Medical Debt board member. “As we strive collectively toward a health system that promotes health equity, I encourage all New York City hospitals not only to participate in this partnership but commit to further enhancing their robust financial assistance policies so that patients don't have to incur unnecessary medical debt in the first place."
New York City joins a growing band of municipalities looking to eliminate residents’ medical debt. In December, officials in St. Paul, Minnesota, announced they would use $1 million in American Rescue Plan Act funding to purchase and cancel residents’ outstanding debt in partnership with RIP Medical Debt. In 2022, Cook County, Illinois, became what officials there believe was the first local government to launch a medical debt cancellation initiative.
Besides saddling individuals with huge hospital bills, mounting medical debt in a community can chip away at public dollars as responsibility for unpaid health care bills often falls to taxpayers, St. Paul Mayor Melvin Carter told Route Fifty last month.
Some state governments are also addressing medical debt. In October, Colorado became the first state to approve legislation to prohibit consumer credit reporting agencies from including an individual’s medical debt history on their credit report. New York state was quick to follow in December, when Gov. Kathy Hochul signed bills to restrict hospitals, health care professionals and ambulances from reporting medical debt to credit agencies.
Whether medical debt cancellation programs are effective is yet to be determined, Lori Tremmel Freeman, CEO of the National Association of County and City Health Officials, told Route Fifty in a recent interview.
Governments should consider, for instance, if data shows that residents’ credit scores recovered or if they had more disposable income post-debt cancellation, she said. Officials should also track residents’ health outcomes such as improved mental and physical health conditions.
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