“We Have A Broken Healthcare System”: An Ohio County Is Trying To Erase Up To $240 Million In Medical Debt

“Washington might not have a plan for medical debt relief, but Toledo, Ohio does.”

Usually local councils are focused on issues like parks and recreation, but one Ohio city council is determined to use its limited powers to change people’s financial lives by wiping away millions in medical debt.

Toledo City Council, along with commissioners of the wider Lucas County, passed a new proposal on Wednesday that is expected to forgive up to $240 million in medical debt for residents.

“Medical debt is the number one reason why people go into bankruptcy,” Toledo councilperson Dr. Michele Grim, who led the effort, told BuzzFeed News. “A lot of people who have medical debt struggle to put food on the table, avoid going to the hospital, or pay their utilities. I hope it’ll help give people the boost they need to go back to the doctor, to pay their rent or mortgage.”

Stethoscope, credit card and laptop.

The money came from President Biden’s COVID-19 Stimulus Package, which gave $800,000 to Toledo for emergency funding and relief. The city council approved a proposal this week to allow that money to go towards medical debt relief. The commissioners of Lucas County, which Toledo is a part of, said the county would then contribute an additional $800,000, bringing the total to $1.6 million.

The way it works is that the city government buys medical debt through the nonprofit RIP Medical Debt, an organization that specializes in purchasing “bundled medical debt portfolios on the secondary debt market, and then forgives that debt at pennies on the dollar,” according to their website.

Toledo is not the first place in the US to follow this model. Grim said the idea was formed after seeing a medical debt relief plan passed by Chicago and the wider Illinois Cook County in July. The Illinois plan hopes to erase $1 billion in debt with RIP Medical Debt, using the $12 million in federal funding provided to them.

Bundle-buying medical debt has also been a trend on the rise. In 2018, two New York-based women raised $12,500 and then sent it to RIP Medical Debt, which used the money to purchase a $1.5 million portfolio of old medical debts.

Google Maps rendering of Toledo City Council.

And while Grim said she doesn’t think there’s anything particularly worse than average about Toledo’s medical debt landscape, she knows the issue is nationally pressing — 41% of American adults have some kind of medical or dental debt, according to a 2022 study by the Kaiser Family Foundation, and she believes the debt removal could be a game-changer for the residents.

“We have a broken healthcare system,” Grim said. “We let people suffer, avoid medical care because they can’t pay, and that’s really unfortunate. As a local legislator I can’t fix that system, but I can help people get food on the table again.”

RIP Medical Debt will buy debt if two distinct criteria are met: the debtor earns less than four times the federal poverty level, and the amount of the debts are 5% or more of their annual income. The nonprofit also only focuses on debt that has been pre-qualified by its partners, meaning it works with certain hospitals and healthcare networks, so not every single practice may be eligible for forgiveness. Residents whose debt qualifies will receive letters stating the amount that has been forgiven after local officials sign their contracts with the organization.

Grim also hopes this will aid the economic recovery of Toledo and Lucas County. “Medical debt has been going on since our healthcare system has been in existence,” she said. “Washington might not have a plan for medical debt relief, but Toledo, Ohio, does.”

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