Arizona cancels medical debt for almost half-a-million residents
Another more than $200 million in medical debt has been wiped out for Arizonans.
And the recipients are going to know who to thank: Gov. Katie Hobbs.
The new figure was announced Monday by Allison Sasso. She’s the president and CEO of Undue Medical Debt, a company that agreed earlier this year to use some $10 million in state American Rescue Plan COVID relief dollars to buy up medical debt from hospitals and doctors for a few pennies on the dollar, eliminating a negative mark on the credit reports of those who racked up the bills.
All totaled, according to the governor’s office, the program has so far erased $642 million owed by more than 485,000 Arizonans.
And under a deal the state cut with Undue Medical, the beneficiaries all get letters crediting not just United Medical but also the governor.
What’s behind all this is a program that United Medical has been offering across the nation.
Established in 2014, it uses government funds and private donations to acquire portfolios of medical debt from health care providers or debt buyers.
What makes the money go farther, according to company officials, is the debt has reached the point where those holding the rights are willing to sell them for pennies on the dollar.
People can’t actually apply. Instead, Undue Medical has to find them.
It starts with eligibility.
The program is aimed at those whose medical debt whose income is less than 400% of the federal poverty level. That is currently $128,600 for a family of four.Also eligible are those whose debt is 5% or more of their annual income. That would aid those who have higher income levels than the cutoff—but much higher debt than they may be able to handle.
Undue Medical works with a credit reporting agency, buying what it calls “relevant income data” from them. That’s how it gets the names of individuals who owe money.
That is then compared with the information it gets from medical providers and others who are the holders of past-due debts.
Once the bills have been paid off, the patient gets a letter in an Undue Medical envelope informing for the first time that the obligation has been wiped out and the credit bureau has been notified.
But the recipients do get some inkling at that time of who to credit.
The deal Hobbs cut with the charity when she first signed the deal in 2024 requires that beneficiaries know that the financial relief is happening because governor’s action: It spells out that any fliers, advertisements, press releases or other marketing materials to include “logos or insignia as required by the governor’s office and approved by the governor’s office before publication.”
Gubernatorial press aide Christian Slater, in defending that provision when the program was announced in July, said that is appropriate. He said the letters are designed to tell people not just that their medical debt was relieved but “how it happened.”
And why do they need to know that the governor gets credit?
“The medical debt relief would not be possible without the governor’s leadership and focus on lowering costs and delivering economic opportunity for every Arizonan,” Slater said.
Undue Medical said what’s also crucial is that the patient starts from scratch.
Generally speaking, when a debt is forgiven, it can be considered income for tax purposes. But Courtney Story, the charity’s vice president of government initiatives, said in July that doesn’t apply when the money comes from a “disinterested third party.”
“Because we’re a nonprofit, we’re not part of the health care system, we count as a disinterested third party, as does the government,” she said.
Ditto, Story said, with private donors, though they have the option of remaining anonymous or disclosing their names to recipients.
In the press release Monday, Hobbs included the anonymous comments of three Arizonans who said they were thankful that the debt had been wiped out.
She got them because the contract the state has with Undue Medical said that “patient stories and related insights shall be shared with the governor’s office on a regular basis.”
As to what the governor can do with those testimonials, a company spokesman said when the program was announced that, “to my knowledge, there isn’t a restriction on how they can be used.”
In unveiling the plan in 2024, Hobbs insisted that there’s nothing illegal about the state using money it has received from the federal government to pay off the medical debts of private Arizonans.
A provision of the Arizona Constitution makes it illegal to “make any donation or grant, by subsidy or otherwise, to any individual, association or corporation.”
“I can assure you we would not be taking this action if we weren’t fully confident in the legality of it,” Hobbs said.
Anyway, she said, Arizona wouldn’t be the first jurisdiction to use COVID dollars from the American Rescue Plan Act in this way.
Undue Medical has provided press releases from other jurisdictions that have taken advantage of the program, with recent press releases from Delaware Gov. Matt Meyer, Gov. Ned Lamont of Connecticut, Illinois Gov. JB Pritzker, and one from the Los Angeles County Board of Supervisors for a local program.
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