Efforts to erase medical debt are gaining momentum as more healthcare systems and municipalities seek to relieve patients from billions of dollars in bills.
Local governments from Los Angeles to Columbus, Ohio, are partnering with providers and others to establish debt relief plans, with some municipalities taking advantage of one-time federal assistance from the $1.9 trillion American Rescue Plan Act of 2021. In addition to short-term solutions, they also are looking for ways to prevent future debt and assessing how the programs can maintain momentum once federal dollars run out.
Providers say the partnerships are a win for all involved. They can be paid a portion of what's owed for healthcare services rendered, and debt-free patients are more likely to return for necessary care and avoid more costly medical conditions in the future.
“Most of us have been patients ourselves and probably have had the stress of wondering how much a medical bill was going to cost,” said Nicole Fountain, vice president of revenue cycle at UChicago Medicine. “[Patients] may defer or delay or just not seek medical care at all, and that’s not good for them, and it’s not good for the community.”
Medical debt is any money owed for healthcare services, including surgeries, clinic visits, dental procedures and prescriptions. It disproportionately affects low-income and/or uninsured patients, but insured patients also can face debt due to the upfront costs of high-deductible health plans.
More than 100 million people in America, or 41% of adults, have medical bills they cannot pay, according to a 2022 investigation from KFF Health News, NPR and CBS News. A quarter of those have debt totaling more than $5,000, the investigation found.
Medical debt as a public health issue
For some municipalities, the American Rescue Plan sparked conversations on debt elimination. As of February, local governments were using or planning to use $16 million in available funds to address nearly $1.5 billion in medical debt, according to the White House.
Municipalities can use the funding to cover administrative costs and work with providers and partners to eliminate the debt.
Municipal leaders are starting to see medical debt as more of a public health issue, with heightened awareness due to the COVID-19 pandemic, said Dr. Naman Shah, director of the division of medical and dental affairs at the Los Angeles County Department of Public Health. Officials in Los Angeles County, where an estimated 1 in 10 adults face medical debt, saw gaps in state and federal responses to debt issues and decided to step in at a more local level, he said.
“It is not like other forms of debt," Shah said. "It’s not something anyone chooses. To be sick, often not being able to work because of a major illness, and then have the debt, is just a vicious spiral."
In early October, Los Angeles County’s Board of Supervisors unanimously approved a motion to develop a plan within 90 days for purchasing residents’ debt and determine potential funding sources.
Partnerships with RIP Medical Debt
Recent partnerships have often focused on residents with incomes at 200% to 400% of the federal poverty level and who do not qualify for charity care (the eligibility threshold can vary).
Officials in Columbus, Ohio, were encouraged to take action after seeing other municipalities implement programs, said Rob Dorans, Columbus City Council president pro tem, who is leading the city’s efforts.
Area providers are retiring $335 million in debt for unpaid accounts from 2015 to 2020. The city is reimbursing the providers -- OhioHealth, the Ohio State University Wexner Medical Center, Mount Carmel Health System and Nationwide Children’s Hospital -- up to $500,000 for the administrative costs to determine eligibility and notify patients.
Dorans said the program could impact 1 in 3 Columbus residents.
“Why wouldn’t we want to make sure that this is something that wasn’t hanging over residents’ heads long term?” Dorans said. “I think [providers] also looked at this as a once-in-a-generation kind of opportunity.”
Columbus officials consulted with RIP Medical Debt, a nonprofit that screens patient accounts for eligibility, buys the debt from health systems and hospitals at a substantial discount and notifies patients when the debt is expunged. However, the city decided to create its own program, and the providers voluntarily agreed to wipe the debt upfront instead of selling it.
Hospitals in Franklin County, which includes Columbus, have not collected more than $1 billion in the last five years due to outstanding debts and charity care, said Jeff Klingler, president and CEO at the Central Ohio Hospital Council, which represents the four health systems.
Providers viewed the outstanding accounts as money they were unlikely to receive, and notifying patients that their debts have been erased is an important factor in encouraging people to seek care, he said.
In Los Angeles County, officials hope to wipe out more than $2 billion in outstanding debt. The coalition leading the effort is discussing eligibility requirements, and Shah estimates a program could benefit hundreds of thousands of residents.
A key part of the county's plan is increasing transparency on providers' financial assistance programs, which will help officials coordinate a better response and better inform patients about the programs.
In Cook County, Illinois, where Chicago is, a program funded by $12 million in federal assistance has eliminated $281.3 million in debt for close to 159,000 county residents since last year. RIP Medical purchased the debt. To qualify, residents must have an income up to 400% of the federal poverty level or have medical debt that is at least 5% of their income.
As part of the county program, UChicago Medicine recently wiped out $173.7 million in medical debt for Cook County residents, and is in conversations with RIP Medical about future debt elimination plans, Fountain said.
Shah said an important part of relieving medical debt is preventing additional problems through education on financial assistance and legal resources. Providers should also ensure income-verification policies are in place to catch all patients who may be eligible for assistance, he said.
“If we do a one-time relief and then end up in this situation again just a couple years from now, that’s incomplete,” Shah said. “We can do a lot about it. It’s completely preventable, modifiable.”