Chicago’s Cook County hopes to eliminate $1 billion in medical debt

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by AD Quig

Credit: Pixabay/CC0 Public Domain

Beginning this fall, hundreds of residents across Cook County will receive a message with a simple message: Your medical debt is settled.

Debtors do not have to file an application to receive the relief, nor does this debt relief count against them when filing their taxes.

Picking up the bill: The Cook County government, which will pay nonprofit group RIP Medical Debt $12 million over the next three years, to settle medical debt accumulated in hospitals across Cook County for pennies to buy dollars.

Instead of attempting to collect this debt, the group will forgive it and work to have this debt erased from credit reports. Because medical debt can often be bought for pennies on the dollar compared to the original fee, the county hopes to eliminate $1 billion in medical debt that could be years old.

The money comes from the county’s pool of $1 billion in American Rescue Plan Act funds. The program has yet to be approved by the Cook County Board and local hospitals must agree to participate, but County Board President Toni Preckwinkle and the project’s partners expect both to happen.

So does the White House: Preckwinkle, along with other government officials, will be recognized for their creative use of ARP dollars at a Thursday event with Gene Sperling, the ARP coordinator and senior adviser to President Biden.

In addition to the county’s $42 million Guaranteed Income program and plans to fund new behavioral health offerings at county hospitals and clinics, Preckwinkle told the Tribune she hopes the medical debt elimination program will help the improve long-term economic security for families and encourage people to seek medical care free from the worry of being prosecuted for overdue bills.

Eligible persons are Cook County residents who received medical care on or after March 30, 2020, have a household income less than four times the state poverty line, or have medical debt that is 5% or more of their annual income. Debt accounts are between 18 months and 7 or more years old. Account balances have been written off to bad debts and hospitals consider the accounts dormant. RIP plans to buy this debt in bundles directly from hospitals.

Creditors like hospitals, ambulance operators, or private doctors write off their debts after a few years and put them up for sale to outside collection agencies, who can buy millions of dollars in fees at a fraction of the original cost in hopes of collecting at least some overdue bills. The older the debt, the cheaper the purchase. Instead of collecting this debt, RIP Medical Debt uses donations to forgive it.

Medical debt is a persistent problem across the country: it is the leading contributor to personal bankruptcies. According to the Consumer Financial Protection Bureau, between 17% and 35% of American adults have medical debt, and Black and Hispanic, young adults, and those on low incomes have rates higher than the national average.

“Medical debt can also cause people to avoid medical care, develop physical and mental health problems, and face adverse financial consequences such as lawsuits, garnishment of wages and bank accounts, liens on property, and bankruptcy,” the CFPB’s latest report said. “With the widespread impact of COVID-19, addressing medical debt is an urgent priority.”

RIP, which was founded by two former collections executives, previously operated in Chicago. In 2019, a network of area churches tapped them to help pay off more than $5.3 million in debt for nearly 6,000 residents in Englewood, Roseland, Auburn-Gresham, Washington Heights and West Pullman.

Cook County is the only government to our knowledge to be using its federal COVID-19 aid money in this way, said county officials and RIP President and CEO Allison Sesso. Aside from a $50 million donation from McKenzie Scott, the billionaire philanthropist, this is the largest single donation her organization has received.

Sesso said her group is working with hospitals to get their debtors’ files, which are then “put into our debt machine. We combine them with data we buy from an accreditation agency like TransUnion. That gives us the information as to whether people are eligible or not,” she says. This can then be further narrowed down to zip codes within Cook County. “What I like most about our model is that it’s really blind to other attributes of the individual. It’s really just focused on his income and whether or not we have access to his debt.”

The group made national headlines in 2016 when TV host John Oliver partnered with them after buying $15 million in medical debt. Oliver’s stunt followed a lengthy segment on the predatory nature of many debt buyers, who can attempt to collect overdue bills long after customers or patients are legally responsible for them.

By 2021, RIP had eliminated $2.7 billion worth of debt for 1.3 million people and purchased debt directly from 12 healthcare providers, according to its annual report.

The two hospitals Cook County operates — Stroger and Provident — are not eligible to participate in the county’s program due to ARPA spending restrictions, county officials say. But RIP will use privately raised dollars “to support any debt relief” associated with Cook County’s hospitals, Sesso said.

“We’re targeting late fall to get this out,” said Preckwinkle’s deputy chief of staff, Otis Story. “So good news is on the horizon.”


Large credit agencies will remove most medical debt from reports


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Citation: Chicago’s Cook County Hopes to Eliminate $1 Billion in Medical Debt (2022, July 22) Retrieved July 22, 2022 from https://medicalxpress.com/news/2022-07-chicago-cook-county -billion-medical.html

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