Personal Finance

Is your city helping you pay off your medical debt?

Somerville, Massachusetts, is looking to use funding from the American Rescue Plan to help residents pay off medical debt.

Is your city helping you pay off your medical debt?
Matt Slocum / AP
SMS

When it comes to medical debt in this country, there is hardly a ZIP code or area code not impacted. Which is why some communities are now looking at ways to use federal funding to help pay off residents' medical debt.

"Everyone right now, we're at a crossroads when it comes to affordability," said Willie Burnley Jr., a city council member in Somerville, Massachusetts. 

This city just outside of Boston, home to 79,000 people, is about to do something about its residents' medical debt. Councilman Burnley Jr. is leading a legislative charge, helping to pass a resolution recently that would spend $200,000 of the city's $77 million from the American Rescue Plan to help pay off medical debt for city residents.

Because of the way medical debt is bought and sold by debt collectors, that $200,000 might wipe out as much as $4.3 million in medical debt for Somerville residents. As many as 5,000 residents could benefit from the plan. 

"It allows us to say, 'What can we be doing to help everyday people, directly?'" Burnley Jr. noted. "We could afford to do that every year. We could be a community that doesn't have medical debt anymore."

Report: More than 100 million adults are paying off medical bills
Report: More than 100 million adults are paying off medical bills

Report: More than 100 million adults are paying off medical bills

More than 70% of people reported having bills directly with hospitals, which typically means a substantial balance.

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Six percent of U.S. adults, or nearly 16 million people, owe more than $1,000 in medical debt.

It's why, in large part, many politicians are trying to get creative about the problem.

"These last few years specifically, there's been a national awakening, I think, to the crisis of medical debt," said Daniel Lempert with the nonprofit RIP Medical Debt

RIP Medical Debt has been contacted by Somerville to help with its debt payoff efforts — outside-the-box thinking that other communities are already doing. That includes Cook County, Illinois, which encompasses Chicago and is home to 5 million people. The county is already deploying the initiative. Cook County reserved $12 million in American Rescue Plan funds for medical debt. That $12 million has wiped out more than $25 million of debt to date.

According to the White House, New Orleans, Pittsburgh, and Toledo, Ohio, have also used American Rescue Plan funding to wipe out medical debt for residents. 

"I think municipalities are attracted to this thinking outside the box because they are listening to their constituents and seeing this is an issue that really hurts people," Lempert said.