Above photo: Dzulhaidy Abdul Rahim.
More and more local governments are using federal funds to relieve residents’ medical debt.
It’s a simple, straightforward way to meet our communities’ needs.
We all deserve the right to access life-saving medical care without being trapped by staggering costs that leave us unable to pay for our housing, food and other basic needs.
Over the next year, 43,000 residents of Saint Paul, Minnesota will receive a letter in the mail telling them that their medical debt – the crippling hospital bills that have been hanging over their head for years – have been paid off.
Using federal pandemic relief funds, left over from the city’s response to COVID-19, to erase medical debt for our low-income neighbors is not a move without controversy: Critics, including some residents and elected officials, have argued that dealing with residents’ medical debt isn’t the role of government. But isn’t our goal to implement policies and programs that actually work for the people we serve? It’s hard to get more relevant to people’s everyday lives than this.
While we’re still very early in the process, we know that our investment will have a life-changing impact on residents across the city. We’re confident about the future impact of this investment because the strategy has proven effective elsewhere.
Several U.S. cities and counties – including Cook County, New York City, Cleveland and Orange County – have already used American Rescue Plan Act (ARPA) funds to erase medical debt for their residents. These local efforts have been so successful that we’re also seeing states follow suit – including Arizona, New Jersey, Connecticut, Pennsylvania and Rhode Island. Even the Biden-Harris administration is encouraging more states and local governments to further reduce the burden of medical debt as they have vowed with the Consumer Financial Protection Bureau that zero Americans will have medical debts reported on their credit reports.
Here in Saint Paul, our neighbors are the most important aspect of our community. We know there are folks in every neighborhood, across every zip code of our city, who are struggling with medical debt. In Ramsey County, about 2% of our residents have medical debt in collections, most of whom are families of color. We also know residents with debt are disproportionately people of color, low-income households and immigrants – that is, communities who have been historically disinvested in, who have had the odds stacked against them from the start. And we know medical debt typically results from unexpected illnesses and accidents – things no one can control or plan for.
This debt creates an untenable cycle of poverty and sickness. Staggering medical bills mean less money for necessities like housing, food or other medical care. When you’re so saddled with medical bills that you can’t afford a safe place to live or enough high-quality food to eat, your health declines further, you accumulate more medical debt, and the cycle continues.
Medical debt also dissuades people from going to the doctor to access life-saving care. That endangers them and others in our city. We have witnessed over the last few years, amid the COVID-19 pandemic, how sickness can put entire communities at risk. That’s why our governing institutions must take the lead in addressing this cycle of poverty and sickness.
Erasing medical debt is a key first step in breaking this cycle. To be sure, paying off our neighbors’ medical debt is an intervention, not a solution. Our country’s healthcare system is broken, so as we intervene to forgive medical debt, we will also continue advocating for structural changes like guaranteed access to healthcare regardless of income, cost-control measures for services and prescriptions, greater access to preventative care and expanded care in underserved communities.
So how did we make this happen? How does a community tackle medical debt?
In Saint Paul, we took advantage of unused pandemic relief money from the federal government – specifically, the Coronavirus State and Local Fiscal Recovery Funds program authorized by the ARPA. We invested $1.1 million of the funds and leveraged that to pay off $100 million of medical debt owed by 43,000 residents.
How did our $1.1 million investment stretch to $100 million? It’s actually pretty simple. We worked with the nonprofit Undue Medical Debt (previously known as RIP Medical Debt), which buys medical debt in large, bundled portfolios nationwide – beginning with the debt of those most in need. They negotiate with hospital systems to buy the debt in batches at a steep discount and then forgive it.
To select these 43,000 residents, we collaborated with all of our city hospitals to specifically identify low-income residents who have outstanding medical debt. To be eligible for medical debt relief, residents must have a household income that is at or below 4% of the federal poverty level, or have medical debt that is 5% or more of their annual income. This ensures that we’re erasing medical debt for our most vulnerable neighbors. There is no application, tax consequences or penalties. Selected residents will simply receive a letter in the mail letting them know that their medical debt has been forgiven.
This may sound like some convoluted, newfangled process, but it isn’t. In fact, private sector companies buy debt every day for pennies on the dollar — that’s how each $1 donation can erase about $100 of medical debt. In Saint Paul, we are collaborating with Undue Medical Debt to do the same thing that private companies do all the time, but we’re using it to improve the lives of our residents.
As local leaders, we are closest to our communities. We know intimately the everyday issues our residents face – and we have tools to help them directly. Let’s use them.