Why some Ohio cities are buying, and forgiving, residents’ debt

Confusion gave way to relief, after Undue Medical Debt erased some of Michael Smith’s medical debt.

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May 14, 2024

Last year, Cleveland City Council member Kris Harsh proposed a different way to use some of the city’s American Rescue Plan funds: relieve medical debt.

“Medical debt is like a monkey on your back,” he said during an April 2023 press conference. “It never goes away. You think about it constantly. It interferes with your credit score when you go to buy that house or get a car.”

Harsh’s plan gained unanimous support and the city agreed to pay $1.9 million to a nonprofit called Undue Medical Debt, which used the money, along with private donations, to erase more than $200 million of debts owed by 290,761 patients to the hospital system MetroHealth. The city’s funds also helped relieve $33 million at another undisclosed hospital.

A mutually beneficial plan

Hospitals rack up millions of dollars of unpaid medical bills. When they lose faith that the indebted will pay, they can sell the debt in bundles to collection agencies for pennies on the dollar. Those collection agencies then hope they can make their money back through sheer numbers.

Undue Medical Debt also buys the large bundles of individual debt, but instead of trying to collect it, they simply forgive it.

The program uses credit agency reports to find people who earn less than four times the federal poverty level or have an amount of medical debt that equals 5% or more of their family’s annual income.

The nonprofit sends letters in the mail letting people know their debts have been cleared, no application needed.

South Euclid resident Michael Smith received a letter just like that in March, erasing his debt from MetroHealth. He almost threw it away, without opening it.

“I was kind of taken aback at first,” he said. “I assumed it was some sort of scam they were running. So I hopped on the internet and I was researching it to see what was going on.”

Smith was elated. He’s struggled with the weight of bills for a few years, after his health declined, and he had to quit his job to recover.

Even though some of his debt has been erased, Smith still receives letters from his hospital for overdue health care bills. He still owes $11,000.

But the letter didn’t solve all of his problems. Undue Medical had paid off about $600 of debt, but he had thousands of dollars of medical bills he still owed.

“I'm never going to look a gift horse in the mouth,” Smith said. “They took care of something for me, and I'm super grateful for that. It's just not like I can put my hands up and go, ‘Well, everything's taken care of now.’”

An incomplete fix

That sort of partial relief may be partly behind the results from a report published last month. A group of economists found thousands of people who had been helped by Undue Medical Debt did not, on the whole, see improvements in their mental health, credit scores, or sense of financial distress.

The nonprofit said the study did not reflect some recent changes that allowed them to relieve more debts, and made the program more accessible to the middle class.

The city of Barberton also gave Undue Medical Debt $100,000 to relieve its citizens’ debts. Councilmember Bebe Heitic is skeptical the one-time relief will address the root of the problem.

“It's more of sustaining the health care system by infusing it with the money it's losing,” he said. “But at the same time, it's not addressing why they're losing that much money. The hard fact is the people that can't afford health insurance, let’s face it, they’re not paying the medical debt anyway.”

Multiple approaches

Brandy Davis, with the Center for Community Solutions, a northeast Ohio nonpartisan think tank, said tackling the problem of medical debt will take more than one nonprofit.

“We need to have sort of a tandem approach, a multifaceted approach that combines federal policy actions, consumer protections, community engagement, and targeted relief,” she said.

But, Davis said even just the targeted relief can be a big help to low income people, who are disproportionately impacted by medical debt. And while it may be small, it can be a first step for people like Michael Smith.

He wants to pay back his medical bills when he can, but first, he’s focused on his recovery and on finding a job.

He can’t do one without the other: it’s just another example of how his physical health and financial health are inextricably linked.