Policy- Local governments received billions of dollars under Biden's 2021 American Rescue Plan Act.
- Some are putting that money toward buying up people's medical debt and canceling it.
Americans owe about $195 billion in medical debt, a 2022 analysis by the Kaiser Family Foundation found, with almost one in 10 owing "significant debt."
Roughly 3 million borrowers owe more than $10,000. And $88 billion in medical debt is in collections, meaning it's lingering unpaid, according to the Consumer Financial Protection Bureau.
It's the most common debt on Americans' credit reports, according to the CFPB, and can lead to debtors coming up against "financial consequences like lawsuits, wage and bank account garnishment, home liens, and bankruptcy."
"We let people go bankrupt in this country because they can't pay their medical bills, and that's not typical of any other country in the world," Michele Grim, an Ohio state representative, told Insider.
Toledo, Ohio, is one place trying to change that.
With $800,000 in funds from the 2021 American Rescue Plan Act, along with $800,000 from Lucas County commissioners, 41,000 Ohioans are set to have around $240 million in medical debt relieved once negotiations with healthcare providers are complete.
"It's a one-to-100 return on investment. It's a really good bang for your ARPA dollars," Grim said.
It's one of the myriad ways that communities are quietly using their American Rescue Plan Act money to improve lives. When President Joe Biden poured $1.9 trillion into the economy in 2021 to try to ease the country through the the pandemic, local governments received an influx of cash earmarked for helping their communities.
For some, that meant new pipes to finally bring clean water. For others, it meant new fire trucks and equipment for small towns. Some decided to use their windfalls on something that produces a high return on investment for the economy and is life-changing for beneficiaries: relieving medical debt.
Communities across the country have allocated at least $16 million toward relieving medical debt, according to the White House.
Last April, Grim — then a Toledo city council member at large — reached out to Cook County, Illinois, about its medical-debt-relief program, also enacted via ARPA funding. That program, which is allocating $12 million of federal funding toward medical-debt relief, could cancel up to $1 billion in debt. Already, nearly 73,000 residents of Cook County have had their debts canceled, according to the local news outlet WBEZ.
Cook County officials connected Grim with RIP Medical Debt, a nonprofit that buys up medical debt across the country and wipes it out completely.
There's no application for relief. Grim said that RIP Medical Debt works with hospitals to figure out the sales of the medical debt, which can often be bought for pennies on the dollar since it's not very valuable as it lingers unpaid.
Once the debt is purchased, individual beneficiaries will get a letter in the mail telling them their debt has been canceled. The only criteria for potential recipients is that they're at or below 400% of the federal poverty level or have medical debt that equals or exceeds 5% of their income.
"Especially with COVID and other things, people have medical debt looming over their heads and they're afraid to go back to the doctor," Grim said. "If you have your medical debt relieved, they can go back to the doctor again, they can put food on the table."
Other parts of the state are undertaking their own initiatives to eliminate medical debt, so many Ohioans are still waiting to hear whether their debts have been wiped. While that news has been met with excitement, the existence of the situation itself begs larger questions, Grim said.
"Why do we have a charity that relieves medical debt — that they could purchase old debt pennies on the dollar that otherwise someone in the secondary market would purchase, and then try to collect and get wealthy off of? Why do we let people go bankrupt for medical debt in this country?" she said. "I hope that with this, that larger conversation continues. We're doing a good thing in the short term, but I think we need to get a lot more serious about it."
Do you have medical debt, or have received medical debt relief? Contact this reporter at jkaplan@insider.com.