Medical debt impacts at least 1 in 5 New Jerseyans, state officials have said, leaving some of them — many of whom are people of color — struggling to pay for food, heat and other necessities or hesitating before they seek other health care.
To reduce that burden, Gov. Phil Murphy has proposed using $10 million to build a New Jersey-based program with a grant to a national nonprofit that buys and retires the medical debt for low-income Americans. The model is now being deployed with public dollars in a growing number of communities nationwide and Murphy said the initiative could help tens of thousands of New Jersey residents clear their charges with hospitals and other medical providers. If approved as part of the budget process, it could be the first statewide publicly funded program of its kind.
Medical debt is “another barrier” to affordability and is impacting many families, Murphy said, an issue that took center stage during his late-February budget speech in Trenton. “It has stopped many cold in their tracks, led others to consider bankruptcy as the only option, and prevented countless people from seeking critical medical care,” he said. “Literally, for pennies on the dollar, we can remove a crushing weight holding down many families to get them back on track. No one should go broke simply because they were ill.”
Murphy’s $53.1 billion budget proposal — which lawmakers must approve before July 1 — calls for the state health department to partner with RIP Medical Debt to design a plan to help New Jerseyans facing heavy health-care cost burdens. The Long Island-based company, founded in 2014, has helped 5.5 million people and extinguished $8.5 million of their debt, according to its website.
Budget documents suggest the New Jersey program will target residents with debt who earn less than 400% of the federal poverty level — nearly $79,000 for two people — or those whose debt equals 5% or more of their annual income. Money for the new program will come from the state’s remaining $1.4 billion share of federal COVID-19 pandemic relief aid, something Cook County, Illinois has successfully done. Nine other cities and counties are now looking to use federal pandemic funding for similar programs, according to a spokesman for the company, plus Pennsylvania, which is prepared to invest $15 million.
Regional campaigns
Like other debt-collection companies, RIP Medical Debt purchases these bills for pennies on the dollar from collection agencies, which take over the tab when hospitals are unable to get paid. But instead of trying to collect from the patients, RIP retires the debt, clearing them of further financial responsibility.
Cook County invested $12 million in its partnership with RIP, in hopes of retiring $1 billion in medical debt for local residents, reports show. Toledo hopes to clear $240 million in debt with a $1.6 million commitment; New Orleans (offering to spend $1.3 million to clear $130 million in debt) and Pittsburgh ($1 million for $115 million in debt) have also budgeted public dollars to partner with the firm, the New York Times reported in December.
“Hospitals are not going to collect it anyhow,” state Health Commissioner Judith Persichilli told members of the Assembly Budget Committee early last week. New Jersey has budgeted $342 million for the next fiscal year to help hospitals cover the cost of uncompensated care for patients who are uninsured or unable to pay their bills.
RIP Medical Debt now has regional campaigns in Arizona, Florida, Michigan and Texas funded by local faith-based organizations, health care advocates or wealthy donors and several national campaigns supported by philanthropy. Persichilli said the New Jersey program does not envision soliciting private contributions.
‘Literally, for pennies on the dollar, we can remove a crushing weight holding down many families to get them back on track. No one should go broke simply because they were ill.’ — Gov. Phil Murphy
According to a September 2022 report from the Healthcare Value Hub, created by the consultant firm Altarum with philanthropic funding from groups including the Robert Wood Johnson Foundation — which also supports NJ Spotlight News — nearly 3 in 10 New Jersey residents with medical debt owe more than $5,000; 1 in 10 owe at least twice that.
The report also found that almost all New Jersey residents with debt had some form of health insurance, but the plans failed to cover certain procedures that led them to owe money to the medical provider. The burden impacts short- and long-term financial decisions, from preventing people from paying bills to saving for the future or enjoying a night out.
Altarum also found racial disparities in these impacts. Nearly half of the Hispanic residents with medical debt said the burden keeps them or a loved one from seeking health care services, versus 1 in 4 for Black residents and 36% of white residents in the same situation. White people with debt are less likely than their racial counterparts to invest in their retirement, the study found, while Hispanic and Black people in this situation find it harder than white people to save money for a home.
