Thousands of low-income D.C. residents will soon see their medical debt erased. The District of Columbia is wiping nearly $42 million in debt from the books at local hospitals, the mayor's office said.
Mayor Muriel Bowser’s office announced Friday morning that the D.C. government is paying off the debt – buying it for pennies on the dollar and forgiving it.
"Residents will start to get notified today via letter from undue medical debt that their debt has been completely wiped off the books and their credit restored," D.C. Budget Director Jenny Reed told News4 early Friday.
The District worked with several medical providers to buy the debt.
"It is [not all medical providers]. And those that participated wish to remain anonymous, so that's why we will be notifying residents directly via letter starting today," Reed said.
The letters will be marked as coming from Undue Medical Debt, a nonprofit that D.C. worked with buy down the debt.
The District bought the nearly $42 million of medical debt for less than $225,000, officials said.
Health
Reed called it "a great investment" for the District to help residents move forward.
"So a lot of hospitals and providers, they have this debt on the books for decades, right? Because we know that for a lot of low income residents, they just can't afford to pay these really big bills, and it sort of follows them throughout their life, right? On their credit report, it makes it harder for them to do other things that they need to get out of debt and get on a pathway to the middle class," Reed said. "So we're able to work with them to buy it in bulk for pennies on the dollar."
Medical debt is one of the leading reasons that people go into bankruptcy in the United States, Reed said.
"So by wiping this off, we're giving people a fresh start," she said.
Nearly 63,000 people will benefit, according to the mayor’s office.
D.C. residents were eligible if:
- their income was less than four times the federal poverty level
- or if their medical debt was more than 5% of their annual household income
The debt relief effort is seeking to address "health inequities and racial disparities related to medical care," the mayor's office said.
A little more than half of the total debt relief ($26 million of that total $42 million) will apply to D.C. residents making $25,000 per year or less, the mayor's office said. While demographics information on the recipients was not immediately available, the mayor's office said that 80% of the recipients live in D.C. zip codes that are majority Black or Latino.
While the District has been facing some budget deficits, Reed said the money for the debt forgiveness is coming from surplus funds from last fiscal year.
The plan was part of the budget proposal submitted last year to the D.C. Council, which approved it.
"And again, $225,000 out of a $20 billion budget, we were able to just set this aside," Reed said.
