Local government plans to pay off millions of residents’ medical debts

Cook County, Illinois, plans to use $12 million of its American Rescue Plan Act federal pandemic assistance to launch a new program that will pay off medical debts for local residents.

Because medical debt can be purchased at discounted rates, it’s thought the $12 million could eventually be stretched to pay off hundreds of millions of dollars people owe health care providers.

“There’s a real multiplier effect,” Cook County Council Chairman Toni Preckwinkle said in an interview with Road Fifty at a meeting of the National Counties Association in Denver.

County leaders believe the initiative is the first of its kind. It seeks to tackle a major source of financial pressure for many Americans, one that tends to weigh most heavily on racial and ethnic minorities, low-income families, and people with chronic health conditions.

Preckwinkle explained that a notable aspect of the initiative is that residents won’t have to apply. Instead, the program will go directly to hospitals and debt collectors to pay people’s bills, then send notices to residents letting them know their debt has been cleared.

The county council is expected to approve a contract at a meeting next week with a non-profit organization, RIP Medical Debt, which will work with local government to design and administer the scheme. RIP Medical Debt generally uses donations to purchase and clear bundles of medical debt.

Urban Institute data updated in June indicates that about 13% of Cook County residents have medical debt in collection, and the median amount of money they owe is $587. For areas of the county where at least 60% of residents are people of color, those metrics add up to 19% and $617.

A Kaiser Family Foundation study released in March estimated that nearly one in 10 American adults, or about 23 million people, owe medical debt, 11 million of whom owe more than $2,000. People with poor health and people with disabilities were among those most likely to have to pay.

Research has shown that Americans’ collective medical debt in 2019 was approximately $195 billion.

“Transformative” initiatives

Cook County’s Medical Debt Reimbursement Program is one of three “transformative” initiatives the county is using to pay ARPA funds, Preckwinkle said.

Another is a $42 million guaranteed income program that will pay monthly payments of $500 to about 3,000 households for two years. The third involves increased investments in behavioral health programs, including a new office within the county health department, to help people with addictions and mental health issues.

Preckwinkle credited direct county assistance from ARPA, which amounted to approximately $1 billion, with enabling him to launch the new programs.

“They are outside of what we normally did, or what we would have even considered because we didn’t have the resources,” she said. “The federal government hasn’t invested as much in local government and our residents since the Great Depression,” she added. “It gives local government an opportunity to try different things.”

A first step in the medical debt program will be to determine how much medical debt exists in the county and how much. It is unclear at this stage whether the program will attempt to pay more smaller debts or less larger debts.

The income eligibility requirements for the program are expected to be 400% of the federal poverty level, an amount that equates to about $111,000 for a family of four this year.

“It’s basically something for working families,” Preckwinkle said.