This article is shared with LebTown by content partner Spotlight PA.

By Stephen Caruso of Spotlight PA

HARRISBURG โ€” Up to $400 million in medical debt held by Pennsylvanians would be cleared under Gov. Josh Shapiro’s new budget proposal, with relief targeted at the stateโ€™s poorest and most underwater residents.

The Democratโ€™s pitch calls for $4 million in taxpayer money to be used to buy up obligations accrued by people who couldnโ€™t afford necessary care such as MRIs and ambulance trips, and to forgive those unpaid bills.

Such debt, Shapiro said in his Tuesday speech before the Pennsylvania General Assembly, is โ€œan anchor holding those families and communities back.โ€

โ€œWhen you canโ€™t afford to pay it off, your credit score suffers and it makes it harder to reach financial stability,โ€ he added.

Wiping out $400 million in debt using just 1% of that amount is possible because of Americaโ€™s peculiar market for medical debt.

2022 study found that 23 million Americans owed a โ€œsignificantโ€ amount of medical debt โ€” defined as more than $250 โ€” and that people with disabilities, those in worse health, and low-income adults were most likely in that group.

When a patient does not pay their doctor or dentist bill, the provider can do two things: try to collect the outstanding obligation themselves, or sell it to someone else who can try, said Allison Sesso, president and CEO of RIP Medical Debt, a Boston-based nonprofit that relieves such burdens.

The usual buyers of medical debt are for-profit companies that purchase the debt for pennies on the dollar. If the collector gets even a fraction of the money back, they can turn a profit, while the provider gets some recompense without resorting to legal action.

But unlike the for-profit companies, RIP Medical Debt approaches hospitals, ambulance services, and other health care providers, and buys the debt of qualifying individuals using money from donors. Eligible individuals donโ€™t apply for relief, Sesso said; patients are informed of the debtโ€™s absolution after RIP Medical Debt pays it off.

The group, established in 2014, has relieved $10.4 billion worth of medical debt across the country, according to its website.

Shapiroโ€™s proposal mirrors a bill introduced by state Rep. Arvind Venkat (D., Allegheny), a practicing emergency room doctor.

Both would direct the state Department of Health to contract with a medical debt relief coordinator, such as RIP Medical Debt, to find and buy outstanding bills. A debtor would qualify if their annual income is at 400% or less of the federal poverty limit, or the amount owed is 5% or more of their income. These are the same standards used by RIP Medical Debt.

Venkat became aware of the issue when a woman came into his practice with late-stage breast cancer. The patient had avoided seeking aid because of outstanding medical debt, and by the time she did, it was too late. She died.

A relief program, Venkat added, would help patients like her lose debt and access care, let providers recoup costs, and reduce bills for every other patient because providers fold unpaid bills into their pricing for everyone’s services, meaning โ€œwe all pay a higher cost for uncompensated care.โ€

โ€œThis is a way to reduce a driver of health care inflation,โ€ he said.

Venkatโ€™s bill would also require hospitals to provide information on, and screen patients for, eligibility for charity care, preventing more individuals from building up new debt.

RIP Medical Debt estimates that there is potentially $3.3 billion of qualifying medical debt belonging to 1.4 million people held by commonwealth health care providers. Shapiroโ€™s $4 million proposal wouldnโ€™t get rid of every eligible Pennsylvanianโ€™s debt, Sesso said, but would be a start.

The proposal is backed by advocacy groups, including the stateโ€™s cancer society and the Pennsylvania Health Access Network.

The medical relief program, โ€œif combined with new protections that prevent medical debt from happening in the first place, this would be a game-changer for families struggling with medical costs,โ€ PHAN Executive Director Antoinette Kraus said in a statement. The organization surveyed Pennsylvanians last year and found that one in four had at least one overdue medical bill and that one in three carried some debt from health care services.

Another group, the Hospital and Healthsystem Association of Pennsylvania, told Spotlight PA that hospitals provided patients with a little more than $750 million in uncompensated care in the 2022 fiscal year.

The group, it continued, does not have a stance on the proposal. It also added that hospitals work to notify patients when assistance is available.

Venkat said he hasnโ€™t heard from any medical industry stakeholders who oppose the proposal, โ€œwhich is unusual in any sort of health care fight.โ€

The one group he said he hadnโ€™t checked in on were the debt collectors, โ€œbut somehow I think thatโ€™s a group we should not sympathize with in this struggle,โ€ Venkat added.

Venkatโ€™s bill passed the state House 114-89 without a specific price tag attached but hasnโ€™t advanced in the GOP-controlled state Senate. The future of Shapiroโ€™s proposal is tied up in the coming budget debate.

Following Shapiroโ€™s pitch Tuesday, state Senate Republican leadership slammed the high spending in the proposed budget. But they also noted that they could compromise on some issues.

โ€œThis is divided government,โ€ state Senate Majority Leader Joe Pittman (R., Indiana) said.

To win support for the medical debt program, Shapiro and legislative Democrats could agree to make changes to the proposal as it currently stands. The governor hinted at one such possibility during his speech Tuesday: focusing the program on rural communities, which Shapiro said are disproportionately affected.

Rural hospitals have closed at high rates in recent years, leaving swathes of Pennsylvania without ready access to health care. Buying up that debt would help struggling rural health care providers clear their books and provide an infusion of cash, while also aiding patients in those regions.

Citing a recent survey sponsored in part by RIP Medical Debt, Sesso argued that Americans โ€œdo not blame individuals as much for medical debt as they do for other kinds of debt.โ€

โ€œThat’s on the right and the left,โ€ Sesso said. โ€œRepublicans and Democrats both see it as an issue that is a systems issue, and one that they think government needs to solve.โ€

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