Los Angeles County is moving forward with a pilot program Get rid of medical debt For struggling residents, $5 million will be set aside for a planned deal with a national nonprofit that would buy and erase such debts.
County supervisors voted Tuesday to allocate funds to county agreements with undue medical debt to implement the new program. The effort, expected to begin later this year, will focus on debt resulting from hospital care and target L.A. County’s “lowest-income residents.”
“No one should be pushed into poverty simply because they become sick,” Supervisor Janice Hahn, who introduced the proposal along with Supervisor Holly Mitchell, said in a statement.
“But medical debt remains a huge problem in this country, and it can be devastating to families and their financial well-being. Fortunately, we have an opportunity to make a change.”
Hospitals saddled with unpaid bills can sell the outstanding balance at a discount to collection agencies, which try to collect the outstanding balance for a profit. Instead, Undue Medical Debt buys the discounted debt and forgives it. The nonprofit said it can erase an average of $100 in debt for every dollar donated.
“Five million dollars could really go a long way,” said Daniel Lempert, vice president of communications and marketing. County officials estimated the amount could eliminate $500 million in debt for 150,000 residents.
Across the country, Undue Medical Debt has partnered with local governments, such as Cook County, Illinois. And Toledo, Ohio. to fund such efforts. Under such agreements, the nonprofit typically approaches local hospitals and other health care providers to identify and purchase medical debt affecting financially strapped patients, then reimburses the local government for the cost of the debts affecting their residents, Lempert said.
Under its guidelines for financial hardship, unpaid medical debt works to relieve debt for people in families with incomes more than four times the federal poverty level — a calculation Equal to That’s $124,800 this year for a family of four — or those whose medical debt is 5% or more of their income.
L.A. County is still working out who will be eligible under its pilot program, but its overarching goal is to “reach our lowest-income residents and the working poor who have catastrophic amounts of medical debt,” said Dr. Naman Shah, director of the division of medical and dental affairs at L.A. County Public Health.
Shah said the LA County pilot program will focus specifically on medical debt for hospital care. Local residents cannot apply directly to have their medical debt eliminated, but they will be notified if an unpaid medical debt waived by the program has some or all of their unpaid debt.
“You’ll suddenly get a letter saying, ‘X, Y or Z debts have been forgiven. You no longer owe them. Keep that as a receipt,'” Lempert said.
In Los Angeles County, public health officials have estimated According to the Department of Public Health, medical debt totaled more than $2.9 billion in 2022, burdening 1 in 10 adults in the county — a higher percentage than those with asthma. The analysis found that of those who said they were burdened with medical debt, more than half had taken on credit card debt to pay medical bills.
The public health department said the problem persists even as more L.A. County residents gain insurance coverage, highlighting the need for a targeted approach.
County officials’ estimates earlier this year It would cost $24 million to wipe out nearly $3 billion in medical debt for L.A. County residents through an intermediary. Other municipalities have turned to funds from the American Rescue Plan Act for such debt relief, but L.A. County had “fully allocated” that money by January, according to a staff report.
The public health department said it plans to use $5 million in one-time county funding for the pilot program, which it said will be rolled out in phases, starting with the “most vulnerable residents.” Shah said his hope is to raise enough additional funding so he doesn’t have to decide which struggling residents to help.
A Study A study released earlier this year raised questions about the effectiveness of buying medical debt: A working paper from the National Bureau of Economic Research examined medical debt relief for more than 83,000 people from 2018 to 2020 and concluded that it had no effect on financial distress or mental health, on average. The research was conducted in partnership with Undue Medical Debt, then known as RIP Medical Debt.
Despite the “disappointing results,” the researchers wrote, “there is still potential that targeted medical debt relief could yield meaningful benefits down the road or in different populations.” The cheapest loans to buy are often five years old or older, said Neil Mahoney, an economics professor at Stanford University.
By that time, “a lot of these people had a lot of other problems, and addressing one of those problems without helping them with … all the other financial problems they had wasn’t enough to move the needle,” he said. One solution is to “move more upstream,” and provide debt relief earlier, “before people get too scared of the debt collection process.”
Mahoney praised the nonprofit’s response, saying it was “taking the study seriously.” Alison Sesso, president of Undue Medical Debt, said april Changes have already been made since the period covered in the study, including buying medical debt directly from hospitals before going to debt buyers or collection agencies.
Seso also said his group is “collaborating with local governments across the country to focus on debt elimination in a specific locality to increase our impact.”
Focusing such efforts on a targeted area increases the likelihood of eliminating multiple debts for an individual patient, Lempert said.
Shah said the study didn’t look at what would happen if debt relief were in conjunction with other prevention efforts. In L.A. County, “there’s a larger agenda on medical debt — of which this is just one part.”
under a comprehensive plan To tackle medical debt in L.A. County, the Department of Public Health also wants to collect data on how hospitals collect debt and help patients in crisis, create an online portal to apply for financial assistance, and expand legal aid services, among other proposed steps.
Department of Public Health Director Barbara Ferrer told county supervisors Tuesday that her goal is to stop medical debt “at the source” before it starts accumulating for L.A. County residents.
“We don’t want to be coming back to you in five years to pay off medical debt,” Ferrer said.
