Los Angeles County is moving forward with a pilot program to alleviate the medical debt of struggling residents, setting aside $5 million for a planned agreement with a national nonprofit to purchase and eliminate such debt.
County supervisors voted Tuesday to fund county agreements to implement the new program. The effort, expected to begin later this year, will focus on debt incurred for hospital care and target Los Angeles County’s “lowest-income residents.”
“No one should be forced into poverty because of illness,” Superintendent 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 for us, we have an opportunity to make a change.
Hospitals stuck with unpaid bills can bundle the debt and sell it at a discount to collection agencies, which try to collect what’s owed to make a profit. Instead, excessive medical debt purchases discount debt and forgives it. The nonprofit says that for every $1 donated, an average of $100 of debt is eliminated.
“Five million dollars can really make a difference,” said Daniel Lempert, the company’s vice president of communications and marketing. County officials estimate the funding could eliminate $500 million in debt for 150,000 residents.
Nationally, Undue Medical Debt has partnered with local governments including Cook County, Illinois, and Toledo, Ohio. Provide funding for such efforts. Under such agreements, Lempert said, nonprofits typically contact local hospitals and other health care providers to identify and purchase medical debt affecting financially disadvantaged patients, with the local government then reimbursing the cost of the debt affecting its residents.
Under its guidelines for financial hardship, Excessive Medical Debt works to relieve the debt of people whose household incomes are no more than four times the federal poverty level — calculated at $124,800 this year for a family of four — or their medical care. Debt reaches 5% of income or more.
Los Angeles County is still determining who qualifies for its pilot program, but its overall goal is to reach “our lowest-income residents and the working poor who carry significant medical debt,” said county director Dr. Naman Shah .
Shah said the Los Angeles County pilot program will specifically focus on medical debt for hospital care. Local residents cannot directly apply for forgiveness of their medical debt, but will be notified if some or all of their outstanding medical debt has been forgiven.
“You’ll get a letter out of the blue that says, ‘Debt X, Y, or Z has been forgiven. You no longer owe them. Consider this your receipt,” Lempert said.
In Los Angeles County, public health officials estimate total medical debt will exceed $2.9 billion by 2022, affecting 1 in 10 adults in the county, a higher rate than those with asthma rates. The analysis found that more than half of people who said they had medical debt used credit card debt to pay for medical expenses.
The public health department said the problem persists even as more Los Angeles County residents gain coverage, highlighting the need for a targeted approach.
County officials estimated earlier this year that it would cost $24 million to use agencies to eliminate nearly $3 billion in medical debt among Los Angeles County residents. Other cities have turned to the American Rescue Plan Act for funding to relieve debt, but Los Angeles County had “fully allocated” the funds as of January, according to the 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 would be rolled out in phases, starting with the “most vulnerable residents.” Shah said his hope is to raise enough additional funds so that struggling residents don’t have to be prioritized.
A study released earlier this year cast doubt on the effectiveness of medical debt purchases: A National Bureau of Economic Research working paper looked at medical debt relief for more than 83,000 people between 2018 and 2020, concluding that , on average, there is no financial impact. The study was conducted in partnership with Undue Medical Debt (then known as RIP Medical Debt).
The researchers wrote that while the results were “disappointing,” “it is still possible that medical debt relief targeted further upstream or to different populations could have meaningful benefits.” Neal Mahoney, an economics professor at Stanford University, said buying the most Cheap debt often dates back five years or more.
By that time, “many of these people have a lot of other problems and are solving their one problem without help… all the other financial problems they have are not enough to drive this process,” he said. One solution is to “move upstream” and provide debt relief early on, “before people are too harmed by the debt collection process.”
Mahoney praised the nonprofit’s response, saying it “took this study to heart.” Improper Medical Debt President Allison Sesso said in April that the company has made some changes since the period covered by the study, including purchasing medical debt directly from hospitals and then handing it over to debt buyers or collection agencies.
Sesso also said her team is “working with local governments across the country to focus debt relief in specific areas to deepen our impact.”
Focusing such efforts on targeted areas can increase the chances of eliminating multiple debts for a single patient, Lempert said.
Shah added that the study did not show what would happen if debt relief was paired with other preventive measures. In Los Angeles County, “there’s a larger medical debt agenda — this is just one part of it.”
Under a broader plan to address medical debt in Los Angeles County, the public health department also wants to collect data on how hospitals collect debt and assist struggling patients, create an online portal to apply for financial help and expand legal aid services ,etc.
Public Health Director Barbara Ferrer told county supervisors on Tuesday that the goal is to stop medical debt “at the source” before it starts piling up among Los Angeles County residents.
“We don’t want to be trying to pay off medical debt again in five years,” Ferrell said.
