An Organization’s Bold Move To Wipe Out $30 Billion In Medical Debt

A nonprofit organization is wiping out $30 billion in medical debt for 20 million Americans, but some question if this approach treats the systemic illness or just its symptoms.

Quick Takes

Undue Medical Debt is erasing $30 billion in unpaid medical bills affecting 20 million people at a cost of $36 million.
Half of the forgiven debt will benefit residents of Texas and Florida, with the average debt being about $1,100.
The massive debt forgiveness package still only addresses about 30% of America’s total medical debt crisis.
Despite this effort, Americans borrowed approximately $74 billion last year to pay for healthcare costs.
Critics argue that while debt forgiveness provides immediate relief, it doesn’t solve the underlying problems in healthcare pricing and accessibility.

Unprecedented Debt Forgiveness Deal

In what represents one of the largest medical debt relief efforts in American history, the nonprofit organization Undue Medical Debt has struck a deal to forgive $30 billion in outstanding medical bills. The arrangement was made possible through negotiations with Pendrick Capital Partners, a debt collection firm that is now closing its operations. The average debt being forgiven is approximately $1,100 per person, primarily benefiting lower-income Americans who have been struggling with healthcare costs. For qualifying individuals, this debt forgiveness could mean the difference between financial solvency and bankruptcy.

The $36 million transaction will be funded through a combination of private philanthropy and taxpayer dollars. Approximately half of the debts are over seven years old and have been donated by Pendrick, while the remainder were purchased at pennies on the dollar. To qualify for debt relief, patients must have incomes at or below four times the federal poverty level or medical debts exceeding 5% of their annual income. The nonprofit plans to spend an additional $40 million to process these debts and notify affected individuals of their debt cancellation.

Texas and Florida Receive Major Benefits

Residents of Texas and Florida stand to gain the most from this debt relief program, with nearly half of all forgiven debt concentrated in these two states. This geographic concentration reflects both the high population of these states and their policy decisions regarding healthcare access. Neither state expanded Medicaid under the Affordable Care Act, leaving many working families in a coverage gap where they earn too much to qualify for traditional Medicaid but not enough to afford private insurance. This gap has contributed significantly to the accumulation of medical debt in these regions.

Undue Medical Debt chief executive Allison Sesso said, “We don’t think that the way we finance health care is sustainable. Medical debt has unreasonable expectations…the people who owe the debts can’t pay.”

The substantial relief provided to these states demonstrates the severe impact that healthcare policy decisions can have on citizens’ financial well-being. For many families, medical debt represents an unexpected financial burden that occurs during times of health crisis when they are least equipped to handle additional financial stress. The removal of this debt offers these families a chance to recover financially without the ongoing burden of healthcare costs they cannot afford to pay.

A Drop in the Healthcare Debt Ocean

Despite the impressive scale of this debt forgiveness effort, it addresses only a fraction of America’s medical debt crisis. An estimated 100 million Americans currently struggle with medical debt, with Americans borrowing approximately $74 billion in the past year alone to cover healthcare costs. This reality highlights the magnitude of the problem facing American families who often must choose between seeking necessary medical care and avoiding financial hardship. Even after this significant debt forgiveness, many families will continue to face similar challenges.

Elisabeth Benjamin, of the nonprofit Community Service Society of New York, said, “The approach is just treating the symptoms and not the disease.”

Undue Medical Debt’s CEO, Allison Sesso, acknowledges that while their work provides crucial relief, it doesn’t solve the underlying issues. “This was a really great opportunity to get a debt buyer out of the market,” Sesso noted, emphasizing the dual goals of providing immediate relief while advocating for systemic change. The organization uses charitable donations to buy and forgive medical debt, and has expanded to purchasing debts directly from hospitals while collaborating with state and local governments to broaden their impact.

The Path Forward: Policy Solutions Needed

Medical debt advocates argue that while debt forgiveness provides immediate relief, comprehensive policy changes are necessary to prevent the accumulation of medical debt in the first place. Some state leaders are implementing measures to prevent medical debts from affecting credit scores, but these piecemeal approaches lack the scope needed for nationwide impact. The Trump administration has suspended regulations that would have barred credit reporting of medical debt, and congressional Republicans are moving to revoke these rules, highlighting the political dimensions of this healthcare challenge.

“Turning off the tap is what’s really important in the long run,” said Naman Shah, a physician at the Los Angeles County Department of Public Health.

The current healthcare system’s complexity leaves many Americans vulnerable to unexpected and unaffordable medical bills. Without addressing the fundamental issues of healthcare pricing transparency, insurance coverage gaps, and access to affordable care, debt forgiveness efforts, while significant and life-changing for recipients, can only provide temporary relief. A sustainable solution requires thoughtful reform that balances quality healthcare delivery with affordability and accessibility for all Americans regardless of income or employment status.