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An Ohio city and county plan to put federal pandemic-relief dollars toward erasing locals’ medical debt, chipping away at a problem that’s worth at least $195 billion to consumers nationwide.
The Toledo City Council voted Wednesday to put $800,000 toward eliminating medical debt in the northwest Ohio city through a partnership with the organization RIP Medical Debt, a New York City-based charity that purchases unpaid medical bills just to erase them. Commissioners in Lucas County, where Toledo is located, intend to match that with their own $800,000, bringing the total to $1.6 million, according to the Toledo Blade.
Because RIP Medical Debt uses fundraised dollars to purchase debt in bulk at severely marked-down prices and will source the debt directly from local hospitals, the $1.6 million deal could potentially result in an erasure of $190 to $240 million in past-due medical bills, according to an initial assessment, said Daniel Lempert, a spokesperson for the nonprofit. However, the total amount will only be clear once the organization reaches deals with area hospitals.
“Because of our model, and the way medical debt is bought and sold in the U.S., we’re positioned to stretch government funds even farther,” RIP Medical Debt president and CEO Allison Sesso said in a statement. “One dollar into the program abolishes on average $100 of medical debt.”
In working with local hospitals, Lempert said that RIP Medical Debt will analyze past-due accounts to find out who is eligible, since people qualify only if they earn 400% or less of the federal poverty level (up to $111,000 for a family of four this year) or if the medical debt for purchase accounts for 5% or more of their gross annual income. After RIP Medical Debt makes its purchases, people will find out via letter that their debts have been wiped.
The city is funding the debt relief with money from the American Rescue Plan Act (ARPA), the $1.9 trillion stimulus bill Congress passed in 2021 that, among many other initiatives, gave billions of dollars to state, city, and tribal governments to help them recover from the COVID-19 pandemic. Lempert said Lucas County is also using ARPA dollars.
“‘We let people go bankrupt; we let people miss doctor’s appointments — or avoid going to the doctor — because they don’t want to pay those co-pays because they can’t afford it.’”
Toledo City Councilwoman Michele Grim, a Democrat who led the initiative and won a seat in the Ohio state House of Representatives in last week’s elections, said the model was based on the Cook County, Ill. plan to abolish up to $1 billion in medical debt using $12 million in federal funds, also in partnership with RIP Medical Debt.
“Medical debt is the No. 1 reason why people go into bankruptcy,” Grim told MarketWatch. “And a lot of people were affected by the pandemic; they were having difficulty putting food on the table, difficulty paying their rent, difficulty paying their mortgages, difficulty paying their utilities.”
“It’ll help aid in the economic recovery of many Toledoans,” Grim added.
A number of cities have devoted their ARPA funding to innovative initiatives that are most likely to benefit low-income residents. Some cities, for example, have used the money to kickstart guaranteed-income pilots, fund affordable housing and the weatherization of low-income and middle-income homes, and provide grocery-store gift cards.
But medical debt is a particularly pernicious problem, especially in the midst of a pandemic that has saddled some patients with extra bills. About 23 million people, or nearly one in 10 adults, owe “significant medical debt,” and census survey data indicates people in the U.S. owe at least $195 billion, according to KFF and the Peterson Center on Healthcare.
Medical debt is also the most frequently reported debt to consumer reporting companies, according to the Consumer Financial Protection Bureau, and disproportionately affects young adults, Black and Hispanic people, and low-income people. Many counties with the highest levels of medical debt are located in states that have not yet expanded Medicaid, a government health-insurance program for low-income people, the center-left Urban Institute has found.
Though Ohio is a Medicaid expansion state, there are other factors that could make Toledoans vulnerable to debt: Toledo has a poverty rate of 25.6%, compared to the national rate of 11.6%, for instance. And this is an opportunity to provide struggling residents of Toledo and Lucas County with some serious relief.
For many local governments, Grim noted, ARPA provided flexible once-in-a-lifetime funding, offering them opportunities to get creative and find new ways to help locals outside the boundaries of typical government programs. She said she has been in touch with “folks from all over the country” who want to do this in their communities too.
“I see this as a national movement because we’re the richest country, but we don’t have universal healthcare,” Grim said. “We let people go bankrupt; we let people miss doctor’s appointments — or avoid going to the doctor — because they don’t want to pay those co-pays because they can’t afford it.”
“Washington, D.C., may not have a plan to eliminate medical debt,” she added, “but Toledo, Ohio, does.”
