Los Angeles County Approves Medical Debt Relief for Residents

LOS ANGELES — Los Angeles County supervisors voted unanimously Tuesday to buy up and forgive millions of dollars in medical debt as part of a comprehensive plan to tackle a $2.9 billion burden that weighs on almost 800,000 residents.

The measure, authored by supervisors Janice Hahn and Holly Mitchell, allows the county to enter into a pilot program with Undue Medical Debt, previously known as RIP Medical Debt, a national organization that relieves patients of what they owe by purchasing their medical debt for pennies on the dollar then retiring it.

“Medical debt is largely out of people’s control, but it is devastating families across L.A. County, especially for people living on the brink of poverty,” Hahn said before the vote. “Luckily for us, this is low-hanging fruit. I think we have a moral obligation to seize this opportunity.”

The debt purchase measure is part of a larger county initiative that includes efforts to prevent the debt from accumulating in the first place, such as boosting hospital financial assistance programs and tracking hospital debt collection practices.

Los Angeles County Supervisor Holly Mitchell is shown on a TV screen in the court room. A screen below the TV shows in text that she is saying, "So I urge my colleages to vote aye and we allocate the requested $5 million in the Department of Publi[c]..."
Los Angeles County Supervisor Holly Mitchell speaks in support of an initiative to spend $5 million in public health funds to retire $500 million in medical debt for 150,000 residents. (Molly Castle Work/KFF Health News)

The Hospital Association of Southern California raised objections to the county’s overall plan in a letter to the Board of Supervisors, saying it unfairly singled out hospitals and citing a study that said one-time debt relief programs did not improve patient mental well-being. The hospital association declined to speak with KFF Health News further about the debt forgiveness pilot program.

Hahn’s office estimates the county’s $5 million public health investment will help 150,000 residents and eliminate $500 million in debt. The public health department said it hopes to launch the pilot in the coming months and provide Angelenos relief this year. According to Mitchell’s staff, more money could be allocated in the future if the pilot goes well.

Health care debt burdens 4 in 10 adults in the U.S., according to a KFF Health News investigation, and disproportionately affects people of color, low-income people, and families with children. In January, LA County found such debt weighed on 785,000 adults in 2022 and at least doubled the likelihood that patients would delay or forgo health care or prescriptions. The county labeled it a public health issue on par with diabetes and asthma.

Los Angeles County is part of a growing wave of local governments addressing medical debt. Cook County, home to Chicago, invested $12 million with Undue Medical Debt in 2022 to erase $1 billion in debt for its residents. In March, Arizona announced it would commit up to $30 million to medical debt relief.

“This is not a miracle that’s going to relieve all of this burden,” said Allison Sesso, CEO of Undue Medical Debt. “But it’s a worthwhile effort, given the amount of money and how relatively inexpensive it is to relieve a lot of these debts.”

While the program provides immediate relief, the county acknowledged it’s a short-term approach that doesn’t prevent residents from incurring more debt in the future. Mona Shah of Community Catalyst, a national health equity and policy organization, endorsed LA County’s approach of pairing one-time debt forgiveness with other efforts to tackle the root causes of medical debt.

“We don’t want to ever deny that relief, but we really need to focus on preventing medical debt from happening in the first place,” Shah said. “Otherwise, it just ends up being this vicious cycle where you’re relieved, and then the next day you can be back in the same situation again.”

A projector screen says, "Tuesday, June 25, 2024 / Board of Supervisors / County of Los Angeles / Current Agenda Item(s): 21 / 21. Pilot Program to Eliminate Medical Debt in Los Angeles County Revised recommendation as submitted by Supervisors Hahn and Mitchell: Direct the Chief Executive Officer, as part of the Fiscal Year (FY) 2024-25 Supplemental Budget phase, to identify and allocate $5,000,000 in one-time funding for the Department of Public Health for the costs of the proposed medical debt pilot program; subject to the Board's allocation of funding in the FY 2024-25 S..."
The Los Angeles County Board of Supervisors voted unanimously Tuesday to retire millions of dollars in medical debt for its residents as part of its comprehensive plan to tackle the $2.9 billion burden. (Molly Castle Work/KFF Health News)

Shah said she also has concerns that these programs let hospitals off the hook for the failures of their legally required financial assistance programs for low-income patients. Nonprofit hospitals, which are exempt from most taxes, are required to provide charity care, and in California it is required of all hospitals.

Undue Medical Debt typically partners with hospitals or physician groups to identify people who make below 400% of the federal poverty line or whose debt is shown by hospital financial records to be more than 5% of their annual income. They then negotiate a purchase price, acquire the debt, and retire it.

Sesso thinks most of these patients would likely have been eligible for hospital financial aid in the first place. However, many patients don’t know these programs exist or are put off by cumbersome approval processes.

Sesso said her organization uses patient eligibility reviews as an opportunity to engage hospitals on how they could improve their policies.

Yolanda Vera, health and wellness senior deputy in Mitchell’s office, said the county understands that a one-time debt relief program isn’t a cure-all but sees value in providing immediate relief.

“We have to try every tool we can to improve the economic well-being in our community,” Vera said. “And this is one of them.”

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. 

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