The St. Louis Board of Aldermen this week unanimously approved a bill that would spend $800,000 of federal coronavirus relief funds to pay residents’ medical debts.
Proponents say the bill would cancel millions of dollars in unpaid bills, freeing residents of a heavy financial and emotional burden.
“In the conversations we've been having with residents as his bill has been moving, they're happy that the Board of Aldermen of the city of St. Louis is using some ARPA funds to directly impact them,” said Alderman Rasheen Aldridge, who represents the 14th Ward.
The city would work with the organization Undue Medical Debt, formerly known as RIP Medical Debt, to buy bundles of debt at a reduced cost and pay it off, Aldridge said. Cook County, Illinois, Toledo, Ohio and other governments have used coronavirus relief funds to pay off resident’s medical bills by partnering with the organization.
Mayor Tishaura Jones is considering the bill, a spokesman said. Aldridge said the mayor has been supportive of the idea and he expects her to sign the legislation.
Undue Medical Debt uses donations, and increasingly government funds, to buy large amounts of medical debt at a low cost. The organization pays off the balances, and then send a letter to people informing them their debt has been taken care of.
Erasing medical debt for poor residents has become an attractive way for cities to spend ARPA funds, said Allison Sesso, the organization's president and CEO. The initiative can be a one-time investment, and local officials often consider it a logical way to use the temporary influx of federal coronavirus relief funds, she said.
“I think that there's increased pressure and recognition by leaders across the country that medical debt is hurting their constituents,” she said.
The Board of Aldermen’s approval comes weeks after a report from a group of economists found Undue Medical Debt’s way of buying and paying off balances did not have the expected positive effects its backers expected.
The study, which was done with the cooperation of Undue Medical Debt, studied the credit scores and collections records of thousands of recipients between 2018 and 2020. The data, along with a survey about mental health, showed buying up old medical debt that had gone to collections had no effect on finances or emotional well-being .
One possible reason is that Undue Medical Debt has in the past bought very old debt, because it’s the least expensive, said Neale Mahoney, a Stanford University professor and one of the study’s authors.
Mahoney said it’s unlikely the debt holders would have paid their medical bills anyway.
“Why is that depth so cheap? Because debt collectors, if they held onto it, wouldn't be able to collect that much from people,” he said. “If a debt collector was able to recover 90 cents on the dollar, there's no way they would sell the debt to a charity.”
Many with medical debt have other debt and problems that contribute to poor finances and mental health, Mahoney said.
“The low price makes the effects of debt relief smaller,” he said.
Medical debt forgiveness has been shown to be an effective way to improve finances and make people more likely to receive care, Mahoney said. But it’s effective when debt is forgiven very quickly after a person receives medical care.
Even relieving debt 15 months after a procedure may be too late for the forgiveness to have a measurable impact, he said.
“The type of debt relief that cities and states and private donors have been providing is maybe too late to really have a material impact,” he said.
Sesso, of Undue Medical Debt, said she was disappointed by the results of the study. Since the period outlined in the study, the organization had been working to buy debt more quickly and work with hospitals instead of collectors.
“We hope that there will be greater focus on the causes of medical debt,” she said. “We understand that what we're doing is only a band aid solution, and that there should be a greater conversation about what can be done to reduce the creation of medical debt in the first place.”
She said the organization has been discussing debt forgiveness with local health systems that were interested in cooperating on the project.
Aldridge said he had seen the study, but that its findings did not match what he had heard from constituents who had struggled with medical debt.
“I know this isn't the end-all be-all,” he said. “There's so many other obstacles that people face as food prices are going up, as gas goes up, as housing is going up in the city of St. Louis. So to be able to have this one release…I do think it will be a help.”
