New York City to Cancel $2B in Debt for 500K People

New York City intends to wipe out more than $2 billion in medical debt for up to 500,000 residents, tackling a top cause of personal bankruptcy, Mayor Eric Adams announced Monday. The city is working with RIP Medical Debt, a nonprofit that buys medical debt in bulk from hospitals and debt collectors for pennies on the dollar. The group targets the debt of people with low incomes or financial hardships and then forgives the amounts. Under the program, the city will spend $18 million over three years, reports the AP.

The mayor said medical debt is the No. 1 cause of bankruptcy in the United States, disproportionately burdening low-income households and people with inadequate insurance. He called the debt relief program the largest municipal initiative of its kind in the country, though RIP Medical Debt has worked with other municipalities, beginning with Illinois' Cook County, which is home to Chicago, in 2022. NPR reports that county is in the process of wiping out $1 billion in debt at a cost to it of $12 million. Akron, Cleveland, and Toledo in Ohio; New Orleans; Michigan's Wayne County; and Washington, DC, subsequently followed Cook County's lead.

Allison Session, RIP Medical Debt's president and CEO, said there will be no application process for NYC's program. The New York Times reports the group is already coordinating with area hospitals, which will flag patients who fit RIP Medical Debt's general eligibility criteria: patients whose unpaid medical bills are equal to at least 5% of their yearly household income, or patients whose household income is less than four times the federal poverty line (set at $31,200 for a family of four). Relief recipients will be notified that their debt has been bought by a third party and erased.

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Though New York City is facing financial strains, Adams said the $18 million commitment over three years is a great investment for the city. "If you are able to ... save $2 billion in debt, that $2 billion trickles down to those households, who are not going to fall into our safety net," he said. "They're not going to fall into our homeless system." (Read how a dying woman wiped out others' medical debt.)