Illinois Erases Over $1.1 Billion in Medical Debt for Hundreds of Thousands
Illinois has taken a significant step toward easing the financial burden on its residents, erasing more than $1.1 billion in medical debt for over 500,000 individuals. The program, launched less than a year and a half ago, is providing substantial relief, with the average person seeing approximately $1,200 in debt eliminated.
The initiative, spearheaded by Governor J.B. Pritzker, aims to address the growing crisis of medical debt, which can have devastating consequences for individuals and families. As Governor Pritzker stated, “No one should be forced to choose between life-saving care and feeding their families, which is why we launched the Illinois Medical Debt relief program.”
How the Program Works
The Illinois Medical Debt Relief Program partners with the nonprofit organization Undue Medical Debt. This organization purchases bundles of medical debt – typically from hospitals and healthcare systems – for a fraction of their face value and then forgives that debt. The state has spent roughly $10 million on the program to date, with $5 million remaining for the current fiscal year. Remarkably, for every dollar spent by Illinois, over $100 of medical debt is eliminated.
Eligibility for debt forgiveness is automatic. Residents do not need to apply. To qualify, individuals must have household incomes at or below 400% of the federal poverty level – $63,840 annually for a single person, or $132,000 for a family of four – or have medical debt that constitutes 5% or more of their annual income. Those who benefit receive a letter notifying them of the debt cancellation.
Impact on Individuals
The impact of this program is already being felt by Illinois residents. Lori Lighthall of Algonquin, for example, received a letter informing her that $2,300 of her medical debt had been erased, stemming from expenses related to a liver transplant seven years ago. Despite having insurance, the ongoing costs of transplant follow-up care created a financial strain. “The bills just kept coming,” Lighthall said, adding that the debt relief provided a welcome sense of financial ease.
Broader Efforts in Illinois and Beyond
Illinois is not alone in addressing medical debt. Cook County has also implemented a separate program, which has terminated over $664,000 in medical debt for 556,815 residents since 2022, funded by American Rescue Plan Act funds. More than a dozen states and local governments are now collaborating with Undue Medical Debt to provide similar relief.
The Growing Problem of Medical Debt
The rise of medical debt is linked to increasing healthcare costs and the prevalence of high-deductible health insurance plans. These plans require patients to pay significant out-of-pocket expenses before their insurance coverage kicks in. A 2022 survey by KFF, a nonprofit organization focused on health policy, found that approximately one-quarter of adults in the United States had medical or dental bills they were unable to pay or were past due.
The financial consequences of medical debt are far-reaching. The same KFF survey revealed that 63% of adults with medical debt had cut back on essential expenses like food, clothing, and household items to manage their bills.
Effectiveness of Medical Debt Relief: A Complex Picture
While the intent of medical debt relief programs is clear, their overall effectiveness remains a subject of debate. Recent research offers a nuanced perspective. A working paper from the National Bureau of Economic Research found that erasing medical debt did not demonstrably improve mental health, physical health, healthcare utilization, or overall financial well-being.
Neale Mahoney, director of the Stanford Institute for Economic Policy Research and an author of the study, explained that the impact of debt erasure may be limited when dealing with very old debt. Individuals may have already adjusted to ignoring collection attempts. He emphasized that addressing the issue proactively – by preventing debt accumulation in the first place through financial assistance programs at hospitals – may be a more effective strategy. “The more they’re combining those downstream measures with upstream things to address the issue at the source, I think the greater the prospect of having a real impact,” Mahoney said.
research indicates that medical debt is associated with increased rates of depression and anxiety, and disproportionately affects Black and Latino adults.
Federal Efforts and Future Considerations
At the federal level, the Consumer Financial Protection Bureau finalized a rule in that would have removed medical debt from many credit reports. However, this rule was subsequently set aside by a court following a reversal of course by the administration of President Donald Trump.
The Illinois program, and similar initiatives across the country, represent a growing recognition of the need to address the burden of medical debt. While the long-term impact of these programs is still being evaluated, they offer a crucial lifeline to individuals and families struggling to navigate the complexities of healthcare financing.
