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Debt in Health Care: New York City Takes Bold Step in Erasing Billions in Medical Bill

(Photo from: HealthLeaders Media)

In a groundbreaking move echoing a growing trend, New York City has joined the ranks of local governments committed to alleviating the persistent burden of medical debt for its residents. The city’s $2 billion pledge follows the innovative approach initiated by Cook County, Illinois, in 2022, introducing a transformative solution to the pervasive issue of debt in health care.

Debt in Health Care: New York City Takes Bold Step in Erasing Billions in Medical Bill (Photo from: HealthLeaders Media)

Debt in Health Care Emerges as a Local Government Responsibility

Cook County, home to Chicago, laid the foundation for erasing debt in health care by partnering with RIP Medical Debt, a nonprofit organization. The novel approach uses federal pandemic rescue funds to purchase and forgive patient debt, challenging traditional debt collection methods.

RIP Medical Debt’s model uniquely addresses the challenge by identifying unpaid hospital bills for individuals making up to four times the federal poverty level. Instead of pursuing collections, the nonprofit acquires the debt at a fraction of its original value, subsequently forgiving it—a strategy that has resonated with several local governments.

The success of Cook County’s initiative has inspired seven other local governments, including Ohio cities Akron, Cleveland, Toledo, New Orleans, Wayne County, Michigan, and Washington, D.C., to follow suit. New York City, recognizing the disproportionate impact on Black and Hispanic communities, announced its commitment on January 22.

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The Ripple Effect of Debt in Health Care Mitigation

Mayor Eric Adams of New York emphasized the pressing need to address medical debt, mainly as it disproportionately affects minority communities. For low-income residents, grappling with medical debt becomes an unavoidable reality, forcing difficult choices between essential needs and bill payments.

RIP Medical Debt engages with 30 other municipalities and states, indicating a potential widespread adoption of this innovative debt-erasing strategy. While the initiative has proven impactful in retiring substantial amounts of debt, it underscores the broader challenge of tackling Americans’ $195 billion estimated medical debt.

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