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Cities Are Canceling Medical Debt Thanks to Democrats’ American Rescue Plan

Local governments across the country from Chicago to New Orleans are using funds from the American Rescue Plan Act to cancel billions of dollars in medical debt.

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Medical debt is the largest driver of bankruptcy in the United States. More than 100 million American adults are saddled with health care debt or about 41% of people. Now, tens of thousands of Americans are about to have their debt forgiven. Local governments across the country from Cook County, Illinois – which includes Chicago – to Toledo, Ohio, and New Orleans, are using funds from the American Rescue Plan Act to cancel billions of dollars in medical debt through a partnership with the non-profit RIP Medical Debt. And your city could be next.

What cities/counties are canceling medical debt? 

Local governments across the country have teams up with RIP Medical Debt to cancel residents’ medical debt.

In Toledo, approximately 41,000 residents will have a whopping $240 million in medical debt canceled after the city council voted to invest $1.6 million into the effort. Cook County is aiming even higher, investing $12 million over 3 years to relieve $1 billion in medical debt for its residents.

Pittsburgh and New Orleans are planning similar actions to relieve residents of health care debt. Pittsburgh’s city council approved a plan in December that will eliminate $115 million in medical debt through just $1 million in expenditures.  New Orleans plans to erase $130 million in residents’ medical debt.

RIP Medical Debt says dozens of local governments across the country have reached out, and that they are in talks to roll out similar partnerships across the United States this year. 

Who is RIP Medical Debt? 

RIP Medical Debt was started by two former debt buyers who understood that medical debt could be purchased for pennies on the dollar. They decided to use this information for good.

The group buys millions of dollars of debt at a time at a fraction of the cost. Then people receive letters that their debt has been eliminated without any tax consequences or penalties.  

How is it funded?

The American Rescue Plan Act passed by Democrats in 2021 provided local governments with a one-time lump sum of money to spend on infrastructure, public services and economic relief programs during the pandemic. Canceling medical debt is just one of the ways cities and counties are using this money to improve the lives of residents. And since local governments can cancel $100 in debt with just $1 it is a great investment for local communities.  

“It’s a one time investment that puts the recipients of the program in a better place,” said Toni Preckwinkel, President of Cook County Board of Commissioners. 

Who qualifies for debt relief? 

Residents do not have to apply for this program. RIP Medical Debt works with the partner hospitals to identify residents who are earning less than 400% of the poverty line, or spending more than 5 percent of their income on medical debt. Once the debt is purchased and relieved, qualifying residents will receive a letter in the mail notifying them that their debt has been cleared. 

How can I bring this program to my city? 

To learn more, visit: https://ripmedicaldebt.org/campaigns/#start-a-campaign 

To inquire about working with RIP Medical Debt as a local government, contact Keith Hearle at [email protected]

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