NYC program could wipe out medical debt for 500,000 residents in need, officials say

A half-million New York City residents may soon see upward of $2 billion in medical debt forgiven thanks to a “pioneering medical debt relief program” city officials announced Monday.

Billed as the largest municipal initiative of its kind in the country, Mayor Eric Adams said New York City will partner with the city-based nonprofit RIP Medical Debt, investing $18 million over a three-year period to wipe out the medical debt, on a one-time basis, for the most-vulnerable New Yorkers: the uninsured, underinsured and those in low-income households.

The program will begin later this year.

Officials said no application is required, with RIP Medical Debt's president and CEO saying the nonprofit will use “data analytics” to identify those most in need — and cancel their debt.

Calling the program “a great investment,” Adams said the tradeoff makes fiscal sense.

“If you are able to save $2 billion in debt, that $2 billion trickles down to households that are not going to fall into our safety net,” Adams said. “They're not going to fall into our homeless system, they're not going to fall into the lack of providing for their basic care. They're not going to be a reactive care, they're going to be a proactive care … This is a huge win.”

Founded in 2014, RIP Medical Debt, a 501(C) (3) nonprofit said, on its website, it has been able to eliminate “billions” in medical debt for millions of individuals and families nationwide.

According to its website, the organization targets households that earn at or below four times or, 400% of the federal poverty level or those whose debts are 5% or more of their annual income.

RIP Medical then buys that debt “in bundles” from hospitals and medical providers, using funding it receives to retire that debt at what the nonprofit describes as “pennies on the dollar.”

Beneficiaries receive a letter from RIP Medical explaining their medical debt has been bought by a third party and “erased” — all, the nonprofit said, with “no tax consequences or penalties.”

The nonprofit RIP Medical Debt claims to have benefited 7,118,023 individuals and families since 2014, eliminating what it said was $10,426,439,009 in medical debt.

Calling medical debt “a failing of the system,” Allison Sesso, president and CEO of RIP Medical Debt, said: “By making future care more accessible, this initiative aligns well with hospitals and health systems' community benefit and health equity efforts.”

The announcement comes little more than a year after Gov. Kathy Hochul announced a change in state law that means patients with medical debt no longer can have their wages garnished or have liens placed on their homes, debt collection practices she called “harmful and predatory.”

Announced in November 2022, state officials said that during the prior five years more than 50,000 New Yorkers faced lawsuits due to medical debt.

The nonprofit Community Service Society of New York said then that the practice of placing liens was “punitive” to patients.

City officials estimated Monday that more than 100 million Americans hold some degree of medical debt, amounting to debt in excess of $195 billion.

“Carrying medical debt can undermine financial stability and mobility,” the mayor's office said in a statement announcing the program.

The mayor's office said Black and Latino communities are 50% and 35%, respectively, “more likely to hold medical debt” than white community counterparts.

In a statement Monday, Northwell Health president and CEO Michael Dowling hailed the mayor's announcement, saying: “For more than a decade, we have offered financial assistance to patients based on incomes 500 percent above the federal poverty level and we will continue to support any measure that helps us do more … “

Dr. Ashwin Vasan, the city's health commissioner, said in a statement: “No one in New York City, or in America, in 2024, should have to chose between getting the health care they need and paying their rent or buying food to feed their families … This city is stepping up to say that the people deserve better.”

By John Valenti

john.valenti@newsday.com

John Valenti, a reporter at Newsday since 1981, has been honored nationally by the Associated Press and Society of the Silurians for investigative, enterprise and breaking news reporting, as well as column writing, and is the author of “Swee'pea,” a book about former New York playground basketball star Lloyd Daniels. Valenti is featured in the Emmy Award-winning ESPN 30-for-30 film “Big Shot.”