New York City announced in October that it has canceled nearly $135 million in medical debt for more than 75,000 New Yorkers. It’s part of a program launched last year that sees the city aiming to relieve medical debt for half a million working class people, according to a release from the mayor’s office (1).
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The city partnered with Undue Medical Debt, a national nonprofit that buys and forgives overdue medical bills at a fraction of their face value. Under the program, eligible residents include those with household incomes at or below 400% of the federal poverty level, or anyone whose medical debt equals 5% or more of their annual income.
Recipients aren’t required to apply. Once their debt is purchased, they receive notice that it’s been erased, with no tax penalty or strings attached.
The initiative earmarked $18 million over three years toward the partnership with Undue Medical Debt, a nonprofit that purchases medical debt from collections agencies, hospitals and health care providers in order to relieve it. The program will ultimately relieve more than $2 billion in debt for 500,000 people, on a one-time basis.
Here’s how New York’s effort fits into a growing national movement to tackle medical debt and what individuals can do to manage their own bills.
The scale of America’s medical debt problem
Medical debt isn’t just a financial issue, it’s a public health crisis.
According to the NYC mayor’s office, more than 100 million Americans hold some amount of medical debt, and the total amount in the U.S. exceeds $220 billion. The release also notes that, nationwide, “Black and Latino communities are 50% and 35%, respectively, more likely to hold medical debt than their white counterparts” (2).
Even people with health insurance aren’t immune. A 2023 survey by The Commonwealth Fund found that many struggle to afford health care costs (3), including:
- 43% of those with employer-sponsored plans
- 57% of those with marketplace or individual plans
- 45% of Medicaid recipients
That financial strain has far-reaching effects. More than a third of respondents said their medical debt forced them to delay or skip needed care, while nearly 40% said they had to cut back on essentials like food, heating, or rent. A quarter of respondents said they worked extra hours or took a second job to keep up with medical payments, and 37% had to dip into or exhaust their savings.
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Cities and states taking action
According to a 2024 report from the Institute on Race, Power and Political Economy, at least 26 state and local governments have launched programs to tackle this crisis. (4)
Cook County, Illinois, was the first to launch a medical debt relief program, using $12 million in funding from the American Rescue Plan Act to cancel “up to $1 billion in medical debt,” the report says.
The report says that in June 2023, Connecticut became the first state to spearhead a medical debt relief initiative. Michigan, Arizona, New Jersey, North Carolina, Illinois, and Rhode Island have also launched similar programs.
The combined efforts of these governments promise to eliminate $15.6 billion in medical debt for more than 6 million low- and moderate-income Americans, according to the Institute on Race, Power and Political Economy report.
Governments partnered with Undue Medical Debt for all of these programs, except for a program in Columbus, Ohio, the report says. People with medical debt cannot apply to the programs; Undue Medical Debt’s program design looks at medical debt portfolios and identifies people who qualify, those being “low and moderate-income people affected by medical debt, households with incomes at or below 400% of the current Federal Poverty Guidelines or with medical debts that are 5% or more of their household income are eligible for debt relief.”
What to do if you are struggling with medical debt
Aside from creating a budget that allows room for debt payments, there are practical steps you can take to ease the pressure of medical bills:
Negotiate with your provider. Hospitals and clinics often have financial assistance policies or are willing to lower your bill if you ask. You can also request an itemized bill to spot and dispute potential errors.
Ask for an income-based payment plan. Many providers will agree to a monthly plan with little or no interest. Just be sure it fits comfortably within your budget. Seek out charity care or forgiveness programs. Nonprofits like Undue Medical Debt and some hospitals’ community benefit programs may offer partial or full relief depending on your income level.
Avoid putting medical bills on credit cards. Credit card debt accrues interest quickly and can damage your credit faster than unpaid medical bills.
Work with a certified credit counselor. A legitimate nonprofit counselor, often affiliated with a credit union, university, or Cooperative Extension Service, can help you set up a debt management plan or contact creditors on your behalf.
If your debt feels unmanageable, you can also reach out to your state’s attorney general or consumer protection office to verify credit counseling agencies and avoid scams.
While programs like New York City’s are limited in scope, they offer insight into how governments and nonprofits can work together to ease the medical debt burden. For now, most Americans still need to manage medical debt on their own, but growing public attention to the issue could pave the way for broader reform.
Whether through policy or personal planning, understanding your options is the best step toward reducing the weight of medical debt and protecting your finances from future health costs.
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Article sources
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Office of the Mayor (1), (2); The Commonwealth Fund (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.