A Kentucky town this week became the first in the state to cancel millions of dollars in medical debt for more than 6,000 residents.
Lexington Vice Mayor Dan Wu announced on Tuesday that over $12.6 million in medical debt has been erased for 6,484 people in Fayette County, following the lead of a growing number of cities and states that have carried out similar efforts in collaboration with Undue Medical Debt.
“Medical debt relief in America is a huge and growing problem, and that problem is especially acute here in Kentucky, as we are one of the poorest and sickest states in the nation,” the mayor said during a press conference. “Folks who carry the burden of unpaid medical debt suffer financial hardship, mental strain, poor credit scores, and worst of all, often do not seek much-needed medical care.”
The revelations mark the first phase of the city’s three-year plan to eliminate around $90 million in debt for residents through working with Undue Medical Debt.
The national nonprofit group is the same debt relief organization that has collaborated with a stream of cities to resolve medical debts, including Pittsburgh and Chicago. New York City last year erased $135 million in medical debt, after Mayor Eric Adams made an $18 million investment into Undue Medical Debt over a three-year period. Connecticut Gov. Ned Lamont (D-CT) has worked with the group to forgive over $130 million in debt for 123,000 residents thus far.
The partnership in Lexington launched last year after the Urban County Council invested $1 million into Undue Medical Debt under Wu’s leadership. The project predicts the sum will cancel approximately $100 of medical debt for every dollar the city contributes by acquiring medical debts in bulk at a fraction of their face value from medical providers and negotiating with local hospitals.
The partnership has now allowed the city to cancel over $12 million in debt for residents who earn up to 400% of the federal poverty level, or those whose debt represents 5% or more of their annual household income, according to Wu.
“You’re never going to get that kind of return on investment on hardly anything else we do with public dollars. So for me, I think it was a very responsible use of our city dollars,” Wu said, according to WEKU.
Undue Medical Debt estimates 11% of Fayette County residents have medical debt on their credit reports.
This week, Wu said he doesn’t believe forgiving medical debt is a long-term solution to improving affordable access to healthcare. But his plan for Lexington works as a way to spread awareness about financial burdens residents face across the country, the mayor told the Lexington Herald-Leader.
“My intention was never to say, ‘Let’s do medical debt relief, cut some checks, and walk away,’” Wu said. “To me, the attention that we’re going to get from this first wave of medical debt [relief] is a way to put a spotlight on this issue.”
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In recent months, the issue of healthcare affordability has become a matter of intense debate in Washington.
Obamacare, which provides government healthcare to millions, has been criticised by Republicans as a “broken” system beset with mounting costs and inefficiencies. Congressional leaders have promised to negotiate healthcare reforms in the coming weeks, although progress is likely to be stalled over stark partisan differences on the matter.
