If approved, the city would donate $1.9 million from its more than $511 million in American Rescue Plan coronavirus relief funding to RIP Medical Debt, a national nonprofit that uses donations to buy up medical debt in large bundles “for pennies on the dollar,” then wipe it, according to a Monday news release.
Elsewhere in Ohio, officials have already used coronavirus relief funding this way or are at least looking at it, according to Policy Matters Ohio. Toledo and Lucas County have spent $1.8 million in ARPA funding to relieve between $190 million and $240 million in residents’ medical debts; Columbus city council members are considering spending $2 million; and officials in Cincinnati and Akron have also “expressed interest in the idea.”
“Council is constantly looking for innovative ways to improve life outcomes and the financial well-being of Clevelanders,” Cleveland council member Charles Slife, Ward 17, is quoted in a news release. “The introduction of this ordinance is just one way we are working to represent our constituents and put government resources to work for them. Unlike other APRA proposals that may become administratively burdensome, medical debt forgiveness can be achieved in a relatively short span of time and bring tangible support to Clevelanders.”
Read the council’s draft resolution below:
Each day, 1 in 2 Americans are forced to choose between paying medical bills and covering basic needs, according to the nonprofit’s website. Nearly half of Americans have “delayed or skipped medical care” due to cost and two-thirds of Americans who have filed for bankruptcy cited medical debt “as a leading cause.”
Medical debt is “especially high in low-income and Black and brown communities,” according to Policy Matters Ohio. In Ohio ZIP codes whose residents are mostly people of color, 21% of residents have medical debt that’s gone to collections, compared to 14% in white communities, the institute reported, citing census data from Urban Institute.
To date, RIP Medical Debt has relieved more than $8.5 billion in medical debt for more than 5.5 million families, according to its website.
How it works
1. Donors give to RIP Medical Debt. The nonprofit buys debt in great bundles on the secondary market, millions of dollars at a time, so donations go about 100 times further. Cleveland’s donation of $1.9 million will cover about $190 million in Clevelanders’ medical debt. Though the nonprofit works nationwide, the city’s donation will only be used for Clevelanders, a city spokesperson clarified.
2. The group looks at credit agency records to identify those most in need: households whose debts are 5% or more of their annual income or who earn less than four times the federal poverty threshold, which is $30,000 per year for a family of four in 2023. The nonprofit selects the debt to buy. There is no application process, and debtors don’t need to do anything.
3. Once the debt is erased, the former debtors receive a letter letting them know. The payment is treated as a gift and is not taxable, according to Policy Matters Ohio.
“They have no tax consequences or penalties to consider,” according to RIP Medical Debt. “Just like that, they’re free of medical debt.”
The resolution’s co-sponsors include council President Blaine Griffin, Ward 6; and council members Kris Harsh, Ward 13; Charles Slife, Ward 17; and Kevin Conwell, Ward 9; Rebecca Maurer, Ward 12; Jasmin Santana, Ward 14; and Richard Starr, Ward 5. Other members are expected to support it, according to the release.
“This ordinance would impact every neighborhood in our city,” Harsh is quoted in the release. “By forgiving medical debt, Council will support Cleveland households by decreasing their debt obligations and increasing discretionary dollars.”
The legislation will head for consideration from the Committee on Health, Human Services and the Arts and the Committee on Finance, Diversity, Equity and Inclusion then go before Mayor Justin Bibb, a city spokesperson said. The next committee meetings have not been set.
It’s been drafted as an emergency measure, so if it’s approved by a two-thirds council vote, it’ll take effect immediately, once approved by the mayor. Otherwise, it will take effect as early as allowed by law.