Two Denver city council members have a simple proposal to put more money in their constituents’ pockets: pay off their medical debt.
Council members Shontel Lewis and Sarah Parady want to use $3m in city funds to hopefully pay off $300m in medical debt, much of it accrued when residents got sick and visited a local hospital.
“Indebting ourselves for healthcare is unfortunately an American reality,” said Lewis. “The time has never been better to push policy.”
Denver is now among more than two dozen cities, states or counties that are either actively abolishing their residents’ medical debt or in talks to do so, all working with the nonprofit RIP Medical Debt.
“It’s a $195bn problem,” said Allison Sesso, president and chief executive of RIP Medical Debt. “It’s a problem that’s very common to the American experience right now, which is very unique from other places across the world.”
Founded by two former debt-collection executives, the non-profit is singular – no other group buys medical debt only to pay it off. RIP Medical Debt works directly with hospitals and debt collectors to purchase debt at a steep discount. For every $1, the non-profit is able to buy about $100 in debt. However, no one can apply. The debt must be selected as part of a campaign, such as the one proposed in Denver.
The idea to “retire” medical debt comes as the issue is increasingly urgent for US policymakers. Around 100 million Americans, or around 41% of adults, have medical debt, a recent study by Kaiser Family Foundation (KFF) News found. Nearly one-in-five people in the US have medical debt in collections, according to a study from the Journal of the American Medical Association.
That has pushed multiple jurisdictions – from New Orleans to Toledo, Ohio, to Cook county, Illinois – to buy debt generated by their own local healthcare institutions, especially hospitals. The states of New Jersey and Connecticut are considering debt relief, as are a number of cities across Ohio, such as Cincinnati, Columbus and Cleveland.
Sesso said: “People have the perspective that hospitals create this medical debt,” but she believes that’s an incomplete understanding of the problem. From the trenches of debt, she sees “the system that’s creating medical debt” as “an inherent part of how we finance healthcare”.
Even Americans who have health insurance can find themselves in medical debt quickly. Here’s a common scenario: a patient visits an emergency room after a car accident. Depending on what kind of insurance they have, they could either leave with thousands of dollars in medical bills, or none at all.
About half of people in the US have private insurance, usually sponsored by an employer. Private plans don’t kick in until after patients meet the “deductible”, a portion of the bills paid by the patient. On average, a single person in the US pays $1,763 before insurance kicks in. It’s more for families. Then, there is co-insurance. Patients have to pay a percentage of their care after the deductible is met – around 20% is common. Suddenly, a person who might feel they have “good insurance” from their job has thousands of dollars in bills.
Employers stuck with high health insurance bills are also pushing them onto their workers. Around one-third of firms, more than ever before, now offer employees “high-deductible” plans, a survey from the Kaiser Family Foundation found. On average, health insurance for a single person with this kind of private insurance plan won’t kick in until after $2,925 is paid. Then, there will still be co-insurance. Even more bills.
Another 15% of Americans who are disabled or older than 65 rely on Medicare, a public health insurance program sponsored by the federal government. But even health insurance from the government will not protect you from medical debt. On average, Medicare beneficiaries spend $6,557 per year on their care, or around 15% of their total income, according to KFF.
Around one-in-five Americans get health insurance through Medicaid, a health insurance program for the poor and disabled run jointly by states and the federal government. While it’s great that people on Medicaid likely won’t get a bill during an emergency, they face other healthcare challenges. Many doctors refuse to accept Medicaid because they argue it does not pay enough and millions of people across the US south may need to be effectively destitute to qualify. For example, for adults in a family of three to qualify in Alabama, the household would need to earn less than $4,474 per year, according to a survey by the Kaiser Family Foundation.
Lewis herself fears medical bills, and even after becoming a city councilwoman.
“I came into the office and I was absolutely sick,” said Lewis about one day early in her career as a public servant. She said she went to an urgent care clinic, “I was in so much pain, they were like, ‘We cannot help you, you have to go the emergency room.’”
They offered to call her an ambulance but Lewis said: “Nope, can’t afford that, I’ll drive.”
