Eliminating Medical Debt, No Strings Attached

Why this investment?

Nationwide, four in 10 adults are saddled with medical debt due to insufficient health care coverage; Black adults are 50 percent more likely and Latinx adults are 35 percent more likely to hold medical debt than white adults. Medical debt can cause families to forgo necessities, including health care, face higher risks of food insecurity and eviction, and are squeezed financially and suffer from reduced credit scores.

In Toledo, former City Councilperson Michele Grim, who now represents Toledo in the Ohio House of Representatives, spearheaded the effort to dedicate ARPA funds to relieving Toledo residents of their medical debt. She’d first heard about the idea in 2016 when late-night talk show host John Oliver created a company to buy $14.9 million in medical debt for less than $60,000 and partnered with Undue Medical Debt to eliminate the debts of nearly 9,000 people. In May 2022, after learning that Cook County was dedicating ARPA funds to medical debt relief, she began working to bring this solution to Toledo. Grim saw medical debt relief as a perfect ARPA investment: it would tangibly reduce economic distress for thousands of residents, disproportionately low-income people and people of color, and stretch the public resources far, delivering “a one to 100 return on investment.”

Grim contacted Undue Medical Debt, conferred with the mayor and other city leaders, and introduced a proposal to City Council in September 2022. There wasn’t enough support on council for a $1.4 million investment, which led Grim to build a partnership with Lucas County. This ultimately resulted in a larger program backed by a broader political alliance when council passed the ordinance seven to five in November 2022.

What is this investment

Toledo contracted with Undue Medical Debt to implement its medical debt relief program in May 2023. Founded in 2014 by former debt collection executives, Undue Medical Debt is a nonprofit charity with the sole purpose of eliminating medical debt. The group negotiates with healthcare providers to purchase large portfolios of medical debt held by people facing financial hardship—living at or below 400 percent of the federal poverty level or having medical debt totaling 5 percent or more of their household income—at pennies on the dollar. Undue then cancels the debt, sending out letters to the individuals explaining that their debt has been abolished. 

Once Undue was on board, they began communicating with Toledo’s two major healthcare providers, Mercy Health and ProMedica, with the goal of purchasing some of their medical debt. Mercy Health was the first to collaborate with Undue, announcing their partnership in October 2023, followed by ProMedica in February 2024.

Centering equity in the program

Undue’s program is broadly targeted. Beyond the financial hardship criteria described above, there is no selection process to decide whose debt is relieved–the program reaches all qualifying debt holders. The model is quite different from most government programs, which lack sufficient funding to reach everyone in need and therefore seek to target the funds precisely to reach specific populations in need. As a charity, Undue Medical Debt has received grants from MacKenzie Scott and other donors and is able to leverage those funds to ensure that all possible debt is cleared, according to Undue CEO Allison Sesso.

Another way in which Undue’s program stands apart is that there is no application process or paperwork on the part of the debt holder. “I can't think of a more equitable program than buying medical debt in bulk and sending a letter that says your debt has been canceled,” Grim says. “We make poor people jump through a lot of hoops. I feel like sometimes we don't trust people who need assistance.” There are no strings attached to the relief, and no tax obligations. 

The main risk in terms of equitable debt relief relates to hospital participation in the program, specifically whether the hospitals serving low-income communities of color participate. In Toledo’s case, Mercy Health and ProMedica are the largest healthcare providers; both serve low-income populations, particularly Mercy Health, which is the safety net hospital serving Toledo’s downtown area.

Outcomes to date

As of April 2024, Toledo’s medical debt program has eliminated $72 million worth of medical debt for 35,000 Toledo residents, and a total of $230 million in medical debt for 113,000 residents of Lucas County and the broader metropolitan region served by Toledo’s hospital systems. 

Mercy Health was the first hospital system to participate in the program and in October 2023, Undue Medical Debt began sending letters out to 4,917 Toledo metro residents notifying them that their medical debts had been eliminated—a total of $7.22 million in debt relief. ProMedica came on board in February 2024, eliminating $222 million in medical debt for 108,000 residents. Within Toledo, the debt relief was covered by ARPA dollars, while in Lucas County, the relief efforts were supported by county dollars. No city or county funds were used outside their respective jurisdictions; Undue’s philanthropic resources covered the rest of the medical debt in the surrounding counties, allowing for a wider impact beyond Toledo.

Recipients describe feeling relief after carrying the weight of the debt. One Mercy Health patient told Undue Medical Debt, “The debt you relieved was for care that my daughter received when she was diagnosed with polycystic kidney disease. We racked up $1,500 in debt from just a treatment or two. For years I was worried about paying this bill.” Amber Clapsaddle, a social worker, told NPR that receiving the letter notifying her that a $1,500 bill from three years ago had been wiped clean led her to negotiate with her doctor’s office and insurance company to prevent additional debt.

Toward transformative change

Ohio is at the forefront of a national movement for medical debt cancellation. The Ohio cities of Columbus (see our case study), Cleveland, Barberton, and Akron are all devoting some of their ARPA resources toward medical debt elimination. Grim would like to see a statewide program that could reach smaller cities as well, and as a Democrat in a Republican-dominated legislature, believes bipartisan support is possible since medical debt affects such a broad swath of the population across political lines. Eliminating medical debt helps people tangibly and immediately, but ultimately, more systemic change is needed to stop medical debt from accruing in the first place. As Grim puts it, “I really want this to lead to a continued conversation about why does Undue Medical Debt—a charity that buys medical debt–even exist? Why does our healthcare system look like this?”