CLEVELAND — On Monday evening, Cleveland City Council approved legislation that could have a huge impact on the lives of thousands of residents who deal with debt due to medical expenses.
The legislation calls for the use of $1.9 million in American Rescue Plan Act (ARPA) funds to eliminate the medical debt of nearly 50,000 Cleveland residents.
The city plans to purchase the debts through the nonprofit organization RIP Medical Debt, who specialize in buying “bundled medical debt portfolios on the secondary debt market, and then forgives that debt at pennies on the dollar.”
"Once a hospital realizes they are probably not going to collect on the debt, they make it available in a secondary market," explained Cleveland City Councilman Kris Harsh, who introduced the legislation. "The organization we're working with (RIP Medical Debt) collects the bet from the same secondary market and just forgives it, notifying people that their debt has been erased."
RIP Medical Debt does have three eligibility requirements for the program:
- Patient (or guarantor) household income between 0% and up to 400% of Federal Poverty Guidelines (The city says the 400% figure means about 80% of Cleveland residents are eligible)
- The medical debt being assessed represents 5% or more of annual household income
- Recipients must be city of Cleveland residents
City leaders say a one-person household making up to $54,360 is eligible, as is a six-person household making up to $148,760.
When the bill was introduced to council in January, preliminary estimates showed that using the $1.9 million in American Rescue Plan Act (ARPA) funds would remove more than $190 million in medical debt.
"We have stressed that if you have an outstanding debt in the city of Cleveland, this program is what's going to be in place to help you," said Cleveland City Council President Blaine Griffin at a news conference on Monday. "People that we've talked to in the neighborhoods are excited about this. We believe that this is an 'everyday people' issue in the city of Cleveland that council is addressing."
The $1.9 million being allocated for the medical debt relief is part of the recent agreement by Griffin and Cleveland Mayor Justin Bibb on how to spend the remaining $163 million in ARPA funds available to the city. Griffin explained the $1.9 million was moved into the city's general fund, giving leaders more flexibility to use the money. "These are your tax dollars at work," he added.
"We're very pleased to bring this program to the city of Cleveland," said RIP Medical Debt's Keith Hearle at the news conference. "Since 2014, we've canceled more than $9 billion in medical debt for almost five and a half million families.
So how does it work?
"We acquire the accounts that have reached bad debt status, typically medical bills that are 12 to 18 months old and in some cases up to ten years old," explained Hearle. "The hospitals and providers have completed their collections work and it's just sitting there, called 'terminal bad debt.' We step in and offer those that owe that debt relief, if they meet the income criteria or the medical debt burden criteria."
Residents who qualify need not apply for the program. Instead, residents will be notified via a "branded RIP Medical Debt letter" in the mail that their debt has been eliminated and is off their credit report.
"Nobody should call us, nobody has to fill anything out, nobody has to take any action," added Allison Sesso, president and CEO of RIP Medical Debt. "We will work directly with the hospitals, we will evaluate their bad debt portfolios, we will leverage the funds allocated by the local government."
Hearle says RIP Medical Debt is currently negotiating with area hospitals. "If they want to sell medical debt, they can sell it to a commercial debt buyer who tries to collect on it, or they can try to sell it to us. We don't collect on it at all, we cancel the medical debt. So we're giving hospitals a choice: they can do something wonderful for their patients, or sell their debt on the commercial market and it goes through another round of collections."
University Hospitals provided the below statement to 3News about RIP Medical Debt:
"UH has been in contact with RIP Medical Debt and is open to their proposal. In 2021, UH provided $50 million worth of charity care to patients who couldn’t afford to pay for treatment. UH will never deny or delay emergency or medically necessary care because of a patient’s inability to pay for services. If patients meet established financial eligibility requirements, their bill for emergency medical or medically necessary care at a UH hospital facility may be discounted or waived under the UH Financial Assistance Program."
You can watch Monday's Cleveland City Council medical debt news conference below: