Some New Yorkers will soon start to see their medical debt forgiven under a city-funded initiative, months after the program was set to go into effect.
In the final days of 2024, the city inked an $18 million contract with Undue Medical Debt, a Long Island City-based nonprofit that buys medical debt from hospitals, health systems and third parties and wipes it clean. The money was meant to be used beginning early last year to buy $2 billion worth of medical debt for up to 500,000 New Yorkers living in or near poverty and erase it, Mayor Eric Adams said when he announced the plan in January 2024.
Adams lauded the program as a way to reduce medical debt, which he said was a leading cause of bankruptcy among some of the city’s poorest residents. But what was intended to begin in early 2024 will now start in a couple of weeks, according to Health Department spokeswoman Chantal Gomez, adding that necessary due diligence and unsettled details in how the program would operate contributed to the delay. The contract with Undue Medical Debt was awarded on Dec. 30, according to the City Record.
Despite the delayed rollout, medical debt forgiveness could be one of the key initiatives Adams touts on the campaign trail for reelection this year amid multiple corruption scandals facing him and his administration. Adams hailed the program at a town hall in Parkchester in early December, weeks before the contract was finalized, and again in a recent interview with Politico about his 2025 reelection bid.
Undue Medical Debt buys debt from health care providers and on the secondary debt market in bundles for a fraction of what the debt is worth. Starting at the beginning of 2025, city residents will be eligible for debt forgiveness if their household income is at or below 400% of the federal poverty line or if they have medical debt equal to 5% or more of their annual household income.
The company, whose revenue totaled $28.2 million in 2023 according to its most recent tax filings, has close ties to the city. Dr. Oxiris Barbot, president of United Hospital Fund, a health care advocacy group, and the city’s former health commissioner, and Dr. Ram Raju, former CEO of New York City Health + Hospitals, serve on its board. The organization’s CEO and president, Allison Sesso, was previously the executive director of the Human Services Council of New York, an influential trade group representing 170 human services nonprofits.
Of the $18 million contract, 85% will go towards buying debt, said Undue spokesman Daniel Lempert and the remaining $2.7 million will go to Undue for overhead.
Some experts questioned whether the program will provide meaningful relief for debtholders, despite the large figures. For one thing, many of the worst consequences of medical debt have been reduced through reforms in Albany over the past four years, said Elisabeth Benjamin, vice president of health initiatives at Community Service Society, a research and advocacy group that focuses on medical debt.
In 2022, the state banned home liens and wage garnishments for unpaid medical bills for hospitals and doctors’ practices, and a 2023 law prohibits providers from reporting medical debt to consumer credit reporting agencies. The statute of limitations to sue for medical debt was cut from 6 to 3 years in 2020 and a cap on interest rates was reduced from 9% to 2% the following year.
The number of lawsuits brought by hospitals against patients to recover debt dropped from 13,886 in 2019 to 2,732 in 2024, according to an analysis from Benjamin’s nonprofit. That number is expected to fall to around 180 next year, following a new 2024 state law prohibiting hospitals from suing patients earning up to 400% of the federal poverty level – the same group eligible for forgiveness under the city’s program.
One clear winner is hospitals, which will receive a windfall from debt payments that were unlikely to be cleared otherwise. The boost will bolster their balance sheets, potentially improving their bond ratings and thus making them more attractive to lenders, Benjamin said.
“We get why the hospitals do this,” Benjamin said. “Where is the win-win-win for the patients though?”
