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How does this medical debt relief plan work?

Monday, Apr 15, 2024 - Posted by Rich Miller

* From an organization called Undue Medical Debt

We acquire debt in large bundles from providers like hospitals and physician groups, as well as from collection agencies and debt buyers, millions of dollars at a time for a fraction of the face value. This means your donation relieves about 100x its value in medical debt. Due to industry standard debt prices anyone can be an impactful philanthropist.

That would be about a penny on the dollar.

The group claims to have erased nearly $12 billion in medical debt for more than 7.45 million people.

* It appears to work as advertised. Cook County has already used the program to eliminate nearly $350 million in medical debt for about 200,000 residents. So, Gov. Pritzker decided the state should also give it a go. From Pritzker’s February 21st budget address

It’s also time to help those who have suffered financial harm, often through no fault of their own, from past failures of a broken health insurance and healthcare billing system. Treating a health emergency is not an optional expense. But too many Illinoisans have had their credit ruined or have been pushed into bankruptcy when they had one unexpected accident or one prolonged illness.

So today, I propose that over the next four years we eliminate $4 billion of medical debt for over 1 million Illinoisans. Working with a national non-profit called RIP Medical Debt, it costs on average one penny to buy back and eliminate every dollar of medical debt, and we can start this year with a $10 million dollar appropriation to relieve nearly $1 billion in medical debt for the first cohort of 340,000 Illinoisans. County Board President Toni Preckwinkle has already done this for residents of Cook County. Let’s make this a reality for all of Illinois.

* Pritzker and Preckwinkle held a press conference today to highlight the proposal as the spring legislative session starts to heat up. From the press release…

Undue Medical Debt acquires medical debts belonging to: individuals four times or below the federal poverty level or those whose medical debt is 5% or more of their annual income. Debt is acquired in large portfolios for a fraction of their face value and then recipients of debt relief are notified with a branded envelope letting them know the good news: some or all of their medical debt has been erased.

Beginning in FY25 with a $10 million appropriation, the State can provide nearly $1 billion in medical debt relief for the first cohort of 340,000 Illinois residents. Loyola Medicine also recently announced they are joining the State’s efforts and forgiving over $112 million in medical debt for past and current patients, which will impact more than 60,000 Illinoisans. […]

In Illinois, 14% of the population has medical debt in collections. However, communities of color are disproportionately impacted, with nearly 20% of the Illinois population in communities of color having accumulated medical debt in collections. Those struggling with the weight of medical debt face unique challenges, including an increased risk of bankruptcy, difficulties affording basic needs, and even pressure to forgo needed medical care.

Beginning in FY25 with a $10 million appropriation, the State can provide nearly $1 billion in medical debt relief for the first cohort of 340,000 Illinois residents. Loyola Medicine also recently announced they are joining the State’s efforts and forgiving over $112 million in medical debt for past and current patients, which will impact more than 60,000 Illinoisans.

       

12 Comments
  1. - Donnie Elgin - Monday, Apr 15, 24 @ 2:05 pm:

    Debt relief - that is one side of the coin - profitability for hospitals and physician groups will suffer - they will be short for payment for treatments and doctors that already happened. Also sets up a moral hazard in that some folks will use the new law to simply not pay medical bills since they will eventually be “erased”


  2. - In the Sticks - Monday, Apr 15, 24 @ 2:07 pm:

    RIP Medical Debt is a charity that also buys delinquent medical debt & forgives it


  3. - Rich Miller - Monday, Apr 15, 24 @ 2:08 pm:

    ===RIP Medical Debt is===

    They changed their name to Undue Medical Debt.


  4. - Rich Miller - Monday, Apr 15, 24 @ 2:09 pm:

    ===profitability for hospitals and physician groups will suffer ===

    Much of that debt has already been sold off, or written off as uncollectable.

    === a moral hazard===

    C’mon. “individuals four times or below the federal poverty level or those whose medical debt is 5% or more of their annual income”


  5. - Dan Johnson - Monday, Apr 15, 24 @ 2:18 pm:

    This is likely the highest return on investment in wealth generation of any public expenditure.

    It’s like 50 or 100 to 1 in impact.

    It’s s if spending $2 billion for the Bears (as an example) made Illinois $200 billion wealthier.

    Congrats to President Preckwinle for implementing this and to Governor Pritzker for doubling down.

    Medical debt is really gross the more you think about it.


  6. - Demoralized - Monday, Apr 15, 24 @ 2:27 pm:

    ==they will be short for payment ==

    They’re not receiving any payment now. Something is better than nothing.

    ==moral hazard==

    You want to know what else is a moral hazard? People drowning in medical debt. Getting sick shouldn’t destroy you financially.


  7. - Ebenezer - Monday, Apr 15, 24 @ 2:33 pm:

    Perhaps surprisingly, it may not have much effect on the beneficiaries.

    From the NYT on 4/8/24:
    Paying Off People’s Medical Debt Has Little Impact on Their Lives, Study Finds
    A nonprofit group called R.I.P. Medical Debt has relieved Americans of $11 billion in hospital bills. But that did not improve their mental health or their credit scores, a study found.


  8. - Unionman - Monday, Apr 15, 24 @ 4:14 pm:

    Maybe Biden should discuss this avenue for student loan debt


  9. - Excitable Boy - Monday, Apr 15, 24 @ 5:00 pm:

    - This is likely the highest return on investment in wealth generation of any public expenditure. -

    It’s also phenomenal politics. Can you imagine one of your loved ones who had a terrible illness getting another shot at fiscal stability because of this?

    It’s good to see Democrats acting like they used to.


  10. - Da big bad wolf - Monday, Apr 15, 24 @ 6:44 pm:

    === From the NYT on 4/8/24:
    Paying Off People’s Medical Debt Has Little Impact on Their Lives, Study Finds
    A nonprofit group called R.I.P. Medical Debt has relieved Americans of $11 billion in hospital bills. But that did not improve their mental health or their credit scores, a study found.===

    I’m guessing the damage has already been done, as far as stress and credit reports. But new damage is prevented, people can fell free to see the doctor again and they don’t have to worry about garnished wages.


  11. - Rich Miller - Monday, Apr 15, 24 @ 6:50 pm:

    === But new damage is prevented===

    Correct. That study is a farce.


  12. - Leslie K - Monday, Apr 15, 24 @ 7:06 pm:

    ==Correct. That study is a farce.==

    Thank you–I thought I was missing something when my reaction to the “finding” was “um, that’s not necessarily the point?”. I’m guessing relieving their medical debt also didn’t make them taller or younger either. But it can be a huge weight off their shoulders that puts a brake on additional damage.


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