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Los Angeles County Launches Ambitious Medical Debt Relief Program in Partnership with Undue Medical Debt

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In a groundbreaking move, Los Angeles County has announced plans to eliminate $500 million in medical debt for approximately 150,000 of its residents. The initiative, approved by the county board of supervisors, involves a $5 million investment to partner with the national nonprofit organization Undue Medical Debt.

The program, set to launch later this year, aims to address the staggering $2.9 billion in medical debts owed by L.A. County residents as of 2022. This effort comes at a crucial time, as recent data shows that 36% of Californians carry medical debt, which can lead to delayed or foregone necessary medical care.

Janice Hahn, a member of the L.A. County board of supervisors, emphasized the moral imperative behind the decision, stating, “No one should be driven into poverty because they got sick.” Hahn added that the county has a “moral obligation” to assist families burdened by medical debt.

The initiative places L.A. County among a growing list of jurisdictions implementing similar forgiveness programs. Other notable locations include the state of Arizona, New York City, New Orleans, and Washington, D.C. This trend reflects a broader recognition of the need to address the financial strain caused by medical expenses.

How the Program Works

The partnership with Undue Medical Debt leverages the nonprofit’s unique approach to debt relief. Unlike traditional collection agencies that purchase unpaid bills from hospitals to recoup money for profit, Undue Medical Debt buys the debt and cancels it entirely.

The organization claims it can erase an average of $100 in face value debt for every dollar donated. Based on this model, L.A. County officials project that their $5 million investment could potentially eliminate $500 million in residents’ medical debts, providing complete debt relief for 150,000 Angelenos.

This initiative is particularly significant given that approximately 800,000 county residents currently have medical debt. The program aims to target the poorest residents, offering a lifeline to those most affected by the burden of healthcare costs.

Broader Strategy and Future Plans

L.A. County officials emphasize that this debt relief program is part of a larger strategy to address medical debt comprehensively. The county plans to:

1. Collaborate with health insurance companies and hospitals to better understand their charging practices and debt calculation methods.

2. Expand legal aid services for residents struggling with medical debt.

3. Streamline the process for applying for financial assistance through the county.

Barbara Ferrer, L.A. County’s public health director, underscored the long-term vision behind these efforts. “We don’t want to be coming back to you in five years, trying to pay off medical debt again,” Ferrer stated at the board of supervisors’ meeting. “We want to pay it off and then we want to move forward — without people who don’t have economic means continuing to accrue this level of debt.”

Evaluating the Impact

While the initiative has garnered praise, it’s worth noting that research on the effectiveness of medical debt relief programs is still limited. A recent working paper published by the National Bureau of Economic Research found that medical debt relief didn’t significantly improve the mental health or credit scores of debtors on average.

However, Allison Sesso, executive director of Undue Medical Debt, contends that these findings contradict the feedback they’ve received directly from beneficiaries. Sesso also pointed out that the organization has refined its approach since the study period, now focusing on purchasing debt directly from hospitals rather than collection agencies. This change aims to erase debts sooner, potentially mitigating their long-term negative impact.

Looking Ahead

As L.A. County prepares to roll out this ambitious program, it joins a national conversation about healthcare affordability and the impact of medical debt on individuals and communities. The initiative aligns with recent moves by major credit reporting agencies to remove unpaid medical debts smaller than $500 from credit reports, as well as proposed rules by the Biden administration to eliminate medical bills from credit reports entirely.

The success of L.A. County’s program could potentially serve as a model for other jurisdictions grappling with similar issues. As the largest county in the United States, with nearly 10 million residents, L.A. County’s approach to tackling medical debt could have far-reaching implications for healthcare policy and debt relief strategies nationwide.

As the program unfolds in the coming months, stakeholders will be closely watching its implementation and impact. The initiative represents a significant step towards addressing the complex issue of medical debt, offering hope to thousands of residents and potentially paving the way for similar efforts across the country.

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