New Jersey To Erase $100M Of Medical Debt

An article from

Dive Brief:

• Nearly 50,000 patients in New Jersey will see $100 million worth of medical debt forgiven under a plan announced Tuesday by Gov. Phil Murphy.
• The state is partnering with nonprofit Undue Medical Debt to buy and erase debt from nearly 18,000 New Jersey residents who owed nearly $62 million to Prime Healthcare hospitals. 
• Another 32,000 New Jerseyans will have more than $38 million worth of debt forgiven that’s owed to other providers through the secondary debt market, largely collections agencies, according to a press release. Patients who qualify are either four times or below the federal poverty level or with medical debts that equal 5% or more of their annual income. 

Dive Insight: 

New Jersey continues to make moves to alleviate medical debt. Earlier this summer, Murphy signed a bill into law that prevents creditors or debt collectors from reporting new medical debt to credit ratings agencies and charging interest rates of more than 3% per year, among other protections.

“New Jerseyans should not have to scrimp and save to ensure their basic health care needs are met, or to pay down lofty medical debts resulting from tragic accidents or devastating diagnoses,” Murphy said in a statement Tuesday.

Nearly 1 in 12 adults in the U.S. owe medical debt, according to an analysis published early this year by health policy research firm KFF and the Peterson Center on Healthcare.

People in worse health and those living with disabilities, Black Americans and those living in rural areas or the South are more likely to have medical debt, according to the report.

Low- and middle- income adults and those without health insurance are also more likely to be affected. But being enrolled in coverage doesn’t always protect patients from racking up bills, given cost-sharing arrangements like deductibles or coinsurance and the risk of denied claims or out-of-network care, the report found. 

Those saddled with medical debt say they cut spending on food or other household items, drain their savings or increase credit card debt to pay non-healthcare expenses, KFF found in 2022. More people with medical debt delayed or avoided other healthcare services too.

Other states and local governments — as well as federal regulators — have taken steps to lessen the burden of medical debt.

Early this year, Connecticut said it would cancel around $650 million in medical debt for 250,000 residents. Illinois recently passed two laws that would allocate about $10 million to purchase outstanding medical debt and make debt ineligible to include in a credit report. 

North Carolina revealed a plan last month that will offer enhanced Medicaid reimbursements to hospitals that forgive debt and adopt policies aimed at preventing more from accruing. 

The federal government has also pushed for policies to lessen the financial burden associated with medical debt. In June, the Consumer Financial Protection Bureau proposed a rule that would wipe medical debt from credit scores. 

Vice President Kamala Harris has also said she wants to forgive medical debt for millions of Americans if elected president this fall.