How an Ohio town is tackling the 'only American problem' of medical debt

How an Ohio town is tackling the ‘only American problem’ of medical debt

As lawmakers were elected and voters voted on key ballot measures this month, an Ohio city council passed a measure that could have a huge financial impact on its community: buy out and relieve debt. health of its inhabitants.

Toledo City Council voted 7-5 in early November to use $800,000 of US bailout funds to buy out medical debt for eligible residents.

The Lucas County Board of Commissioners, of which Toledo is the county seat, also agreed to match that pledge, bringing the funds to $1.6 million.

The move was spearheaded by Toledo City Councilwoman Michele Grim (D), a longtime public health advocate who was recently elected to the Ohio House of Representatives. About $240 million in debt should be erased.

“An estimated 41% of Americans have some kind of medical debt and it’s the #1 reason for bankruptcy,” Grim said.

“And Toledo has been hit hard by the pandemic. It has also been hit hard by inflation, rising house prices and rising rents. Our poverty rate is higher than the national average…and our wages are stagnating.

As part of the move, Toledo and Lucas County will enter into a contract with RIP Medical Debt, a nonprofit organization founded in 2014 to redeem and abolish medical debt. The organization will work with area hospitals to buy off patient debt using funds put forward by the city and county.

Grim was inspired to pursue the measure after seeing a similar measure passed in Cooke County, Illinois, which also partnered with RIP Medical Debt. The local government of Toledo will be the second with which the organization will partner.

Since its inception, the organization claims to have eliminated more than $7 billion in debt for more than 4 million people.

“The reason we’re able to do this is because there’s a for-profit debt market that we kind of take advantage of,” said Allison Sesso, president and CEO of RIP Medical Debt.

Sesso’s organization operates a proprietary method it calls a “debt engine.” It buys out existing debt from participating hospitals for pennies on the dollar and analyzes debt records to determine who qualifies for debt relief.

Patients are eligible if their income is 400% of the national poverty line or if they have medical debt that totals more than 5% of their annual income.

According to Sesso, around 80-90% of the patients the organization sees in debt cases are eligible for its debt relief.

Individuals cannot apply to RIP Medical Debt for relief. Eligible patients are unaware that they are being considered and simply receive a letter in the mail informing them that their debt has been redeemed and will never be collected.

Among his constituents, Grim said about 41,000 people would be eligible for debt relief.

“Medical debt is a uniquely American problem,” Grim said. “And I really can’t think of any better way to use our bailout US dollars than to help with the economic recovery of our constituents.”

The Consumer Financial Protection Bureau (CFPB) said in a report released earlier this year that medical debt is the most common type of collection on credit reports. Although this does not necessarily mean that medical debt is the most common in collections, it is disproportionately represented in credit reports compared to other common forms of debt.

“In 2021, 58% of all third-party debt collection business lines were for medical debt, making medical debt the most common debt collection business line in credit files. The second most common commercial line of collection was telecom debt, with only 15% of commercial lines,” the agency said in the report.

According to the CFPB, the amount of US medical debt currently in collection ranges from $81 billion to $140 billion. The exact amount is difficult to determine because not all medical debt recoveries are made available to consumer reporting companies.

As the agency noted, tactics for collecting these debts have long been criticized for being aggressive and convoluted, with some patients being sued by hospitals or others being mistakenly contacted by medical professionals. collection agencies when they actually had no outstanding charges.

Since the Toledo City Council voted to pass the measure, Grim and Sesso said they have been contacted by lawmakers around the country interested in possibly doing the same for their own constituents.

Sesso said RIP Medical Debt is actively reaching out to a handful of other local governments, though his organization is unlikely to move forward with all of them. According to Sesso, partnerships depend in part on whether medical providers are genuinely interested in having a conversation about buying out patients’ medical debt.

As Grim heads to the Ohio State Legislature, she says she would like to introduce a similar measure at the state level, although she acknowledges that what was passed in Toledo is not just a small step towards solving a much bigger problem.

“As a local legislator or even as a state legislator, I cannot fix our broken healthcare system. It’s a national problem,” Grim said. “This is just the first step. This is something small and simple that we can do to help the economic recovery of the people of Toledo and Lucas County. And, you know, Washington, DC, don’t has no plan to eliminate medical debt, but Toledo, Ohio does.

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