D.C. officials plan to cancel as much as $90 million in residents’ medical debt, in an effort to ease a burden that data shows disproportionately impacts people of color and has ramifications for employment, housing and physical and mental health.
Mayor Muriel E. Bowser (D) announced the program on Wednesday as part of her budget proposal.
“It will be one of the most important early Christmas presents that residents in the city would receive because you would go from having a really damaging bill … to having it completely wiped out,” Wayne Turnage, D.C. deputy mayor for health and human services, said in an interview. “If you believe, as I do, that this burden falls disproportionately on people of color, then this is very consistent with efforts to address racial equity that we see across the country.”
D.C. joins a growing wave of governments and nonprofit groups targeting the nation’s ballooning medical debt since a 2020 federal advisory opinion cleared the way for a nonprofit to purchase debt to abolish a person’s liability. The debt cancellation will be automatic and District residents will be notified by mail when their burden has been eliminated, officials said; the city expects to award a grant to a third-party debt purchaser in late April or early May.
Connecticut Gov. Ned Lamont (D) last month floated a plan to cancel up to $2 billion in medical debt. New Orleans; Toledo; Cook County, the county that includes Chicago; and other jurisdictions have leveraged federal pandemic relief dollars to cancel nearly $1.5 billion in medical debt, according to the White House.
The local governments are working with RIP Medical Debt, which acquires qualifying medical debt from local providers such as hospitals and physician groups, chief executive Allison Sesso said in an email Wednesday. Sesso said the nonprofit probably will apply for the D.C. grant.
Philanthropist MacKenzie Scott has donated $80 million to RIP Medical Debt to do this work nationally.
“There’s been an increase in consciousness around the country through covid around the health equity and racial and economic justice imperative that are tied up in our medical debt systems and burdens,” said Ariel Levinson-Waldman, founding president of Tzedek DC, a nonprofit that advocates for the legal rights of low-income residents in debt.
Health policy experts say the practice will help people in the short term but does not address the structural factors driving the nation’s increasing debts. Nearly 18 percent of people in America had medical debt in collections as the coronavirus pandemic set in, according to JAMA research.
In the District, residents of color are three times as likely to hold medical debt as White residents, echoing a national trend, according to data presented by the Urban Institute. And Black residents in the District are more than five times as likely as White residents to be uninsured, the Urban Institute reports.
Of the 90,000 District residents with medical debt, Tzedek estimates that more than 40,000 residents have debt in active collections, which can damage an individual’s credit score and hurt their job and loan prospects and rental housing applications. One in 3 jobs in D.C., where many work for the federal government or contractors, requires a background check, which involves a credit check, Levinson-Waldman said.
“The medical debt harms people financially, but, in addition, medical debt makes people have worse health because we know that people with medical debt often don’t seek care at all, or if they seek care, seek less care than they need because of the anxiety of expenses,” he said.
Though the vast majority of D.C. residents have health insurance coverage — many through public insurance such as Medicaid — more than half of D.C. residents have private insurance, which often charges significant co-pays and cost-sharing, Turnage said.
Stephen B. Jefferson Sr., the community outreach coordinator at Tzedek DC, has experienced firsthand the impact of medical debt.
Diagnosed in 2009 with Stage 4 Hodgkin lymphoma and then a slow-growing form of bone marrow cancer, Jefferson said he is on a payment plan for $1,000 in bills from the Cancer Treatment Centers of America.
Jefferson, 56, who was born in D.C. but lives in Upper Marlboro and is not eligible for the debt cancellation, said he is fortunate to have private insurance but said medical bills received weeks and months after a doctor’s visit or test can derail the uninsured and underinsured.
“To your surprise, you may owe,” he said. “‘But you said I didn’t have to pay anything’ . . . you hear that a lot from the community. ‘All the sudden I get a bill for $50. Fifty dollars for what?’”
Americans have at least $195 billion in medical debt, according to a 2019 analysis of federal data by the Kaiser Family Foundation. An estimated 100 million people hold this debt, Kaiser found, which is the leading cause of personal bankruptcy.