Some lucky Ohio residents could be getting some good news about their medical debt.
On Wednesday, the council of Toledo approved a proposal giving $800,000 to wipe out the medical debt of its residents. The measure was approved after the city was joined by commissioners from Lucas County, which includes Toledo, who said the county would contribute $800,000 to the debt forgiveness effort. That brought the total to $1.6 million, which is expected to eliminate up to $240 million in medical debt for residents, Toledo councilwoman Michele Grim told Fortune.
“Medical debt can happen to anyone,” said Grim, who spearheaded the measure. “It is the leading cause of bankruptcy and research finds it harms housing and food security and worsens health outcomes. Our initiative will help some of our most vulnerable residents as well as working class and middle class families.”
Toledo is using $800,000 they’re getting from the American Rescue Plan Act, President Joe Biden’s economic plan geared toward providing emergency funding and relief for those recovering from the pandemic, to buy their residents’ debt through RIP Medical Debt, a New York-based nonprofit group that specializes in exactly these types of purchases.
Buying medical debt at a discounted rate and then forgiving an individual’s debt has gained some traction over the past few years. Debt is often sold for pennies on the dollar due to a person’s inability to pay. Around 41% of U.S. adults have some medical or dental debt, according to the Kaiser Family Foundation, a health care nonprofit, in a report from July of this year. Various organizations have engaged in buying and forgiving medical debt, but the method is less often seen from a city or state government.
Cook County in Illinois, which includes Chicago, has also partnered with RIP Medical Debt using $12 million of its federal funds, so that the nonprofit could negotiate the purchase of over $1 billion in medical debt for the county’s residents and cancel it.
“Because of our model, and the way medical debt is bought and sold in the U.S., we’re positioned to stretch government funds even farther,” Allison Sesso, RIP Medical Debt’s CEO and president, told Fortune. “One dollar into the program abolishes on average $100 of medical debt.”
“Toledo is the first city to approve a community-scale medical debt relief initiative, partnering with the national charity RIP Medical Debt,” Grim told Fortune.
But Ohio’s county-wide debt forgiveness isn’t a done deal yet, and residents’ medical debt won’t disappear overnight.
Moving forward, Grim said that once Toledo and Lucas County officially enter into a contract with RIP Medical Debt, it will use the funds to purchase debt from local healthcare providers. And once the debt is purchased, letters will be sent to those who qualified, informing them their debt has been canceled. She did not clarify further which residents will qualify.
“Washington may not have a plan for medical debt relief but Toledo, Ohio does. I hope our effort will become a model for other communities across the country,” Grim said.
